On 1 January 2007, the Panel Physicians Amendment Act (Vertragsarztrechtsänderungsgesetz or VÄndG) entered into force in Germany. It further advances the deregulation of the German health care service sector which commenced in 2004 with the Public Health Care System Modernization Act (Gesetz zur Modernisierung der Gesetzlichen Krankenversicherung or GMG).

Before 2003, ambulatory medical services could only be provided by physicians working alone or in local partnerships. Physicians were not allowed to form regional or country-wide partnerships with each other, or to establish any partnership or corporate link with any nonphysician. They were also prohibited from being employed by investors. Except for certain exceptions, hospitals were not allowed to render outpatient services.

Most of this changed in 2004 with the introduction of a new form of medical ambulatory service provider, the medical ambulatory service centre (medizinische versorgungszentren or MVZ). MVZs are allowed to provide ambulatory medical services through employed qualified physicians. An MVZ may be established in any legal form; it may be owned by any individual, groups of individuals and/or legal entities that are licensed by the public health care system.

This license does not have to entitle them specifically to render ambulatory services. An MVZ may therefore be formed by any physician, hospital, pharmacy, physiotherapist or retailer selling medical devices (or items such as wheelchairs) to patients. A license to sell medical devices to patients is not very difficult to obtain and does not require substantial financing. Any investor can therefore establish and run an MVZ and opt to be the sole shareholder or accept physicians as co-shareholders.

Until 2006, a license to provide ambulatory medical services only entitled its bearer to do so at a certain location. Physicians and MVZs were not allowed to apply for two licenses for two different locations. Following the VÄndG, MVZs and groups of physicians may now open branches and provide services in various regions and—theoretically—all over Germany. This possibility is still limited by a system of determination of need (Bedarfsplanung) under which regulatory health care bodies may decide that in certain areas a “market” need for general practitioners or physicians of certain specialisations does not exist and that further applications will be rejected. If the relevant health care body comes to this conclusion, any new applicant—be it a physician or an MVZ—has to buy the 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 hospitals were allowed to form MVZs and therefore offer outpatient services in 2004, they were not, according to the administrative practice of the relevant admission bodies (Zulassungsausschüssse), allowed to have the same physicians work in the inpatient and in the outpatient field. The VÄndG has changed this, and the change couldn’t have come soon enough. Because of the introduction of the Diagnosis Related Group system, hospitals are no longer allowed to charge individually for each service that they render. Rather, they can invoice inpatient services only in accordance with the rates for the relevant diagnosis-related groups. The VÄndG means hospitals can now expand fully into outpatient fields, thereby increasing revenue.

To summarise, Germany’s health care service system has opened up to new investment and structuring opportunities which would have been unthinkable only a few years ago. In its deregulation plans, the German Government is pursuing its objective to increase competition among various health care service providers and to allow for the realisation of greater synergies. The German health care system has nailed its intentions to the door and is actively seeking private investments.