The German health care market is in flux. Recent deregulation and market consolidations have resulted in new opportunities for investors—many hospitals are for sale, and private investors can now establish entities providing ambulatory medical services. The German health care service sector is likely to change dramatically within the next few years as new structures and entities emerge.

Currently, approximately 65 percent of Germany’s hospitals are owned by governmental entities, and 20 percent are owned by mainly church-held charities, but the private share is increasing rapidly. Governmental entities are selling their deficit-running hospitals to private investors, who have shown the ability to turn around these hospitals within a few years. Based on their success, market analysts expect the private share in German hospitals to rise to approximately 40 percent within the next five to 10 years. Additionally, prior to 2004, hospitals were largely prohibited from providing out-patient services but today can now fully expand into out-patient fields, thereby increasing revenues.

Medical Ambulatory Service Centers

Until recently, only physicians working in sole offices or in local partnerships with each other were allowed to provide any medical services that were not in-patient or emergency cases. This changed in 2004 with the introduction of a new form of medical service provider, the medical ambulatory service center (Medizinische Versorgungszentren or MVZ). MVZs are entitled to provide any ambulatory medical service through employed qualified doctors.

An MVZ may be established in any legal form. It may be owned by any individual, groups of individuals and/or legal entities that have any license within the public health care system. This license does not have to entitle them to render ambulatory services. Therefore, an MVZ may be formed not only by any physician but also by any hospital, pharmacy, physiotherapist or retailer selling medical devices (e.g., wheelchairs) to patients. A license to sell medical devices is not very difficult to obtain, creating new opportunities for investors to establish and operate an MVZ.

Until 2006, a license to provide ambulatory medical services was only valid in a certain location, such as a particular area of a town or community. Physicians and MVZs were not entitled to apply for two licenses for two different locations. However, under a new law that took effect January 1, 2007, MVZs and groups of physicians are now entitled to open branches and to provide services in various regions and—theoretically—throughout Germany. A system of determination of need still limits this possibility (regulatory health care bodies may decide that in certain areas a "market" need for general practitioners or physicians of certain specializations does not exist and then reject further applications). If such is the case, any new applicant, be it a physician or an MVZ, would have to buy a license from a retiring physician with comparable qualifications. According to current government plans, however, the entire system of determination of need may be abolished within the next three years.

Although the German health care service system is still highly regulated, these new laws have opened the market to many new investment and structuring opportunities that would have been unthinkable a few years ago.

Goals

The current German government has three major goals:

  • Inviting private investments in the German health care service system: It expects that private investment will render the system far more efficient and will increase competition in relation to price and quality.
  • Encouraging the emergence of larger, even conglomerate health care entities that provide in-patient and/or out-patient services, medical and non-medical services, medical devices, medications, etc. throughout the country: Such entities are expected to trigger an increase in competition.
  • Ending the strict delineation between in-patient services provided by hospitals and ambulatory services provided by physicians: It seeks to reduce the amount of in-patient services and the number of days of related stays. It expects hospitals to form entities (possibly in joint ventures with physicians) providing out-patient services and to increasingly outsource services now provided on an in-patient basis to those entities. Ambulatory surgery centers have by far not reached the importance yet that they have in the United States, but their growth in Germany in the future is widely expected.