Ownership change and the rise of a for-profit hospital industry in Germany

Abstract

The German hospital industry has undergone substantial changes in the past years and has experienced the rise of a for-profit hospital industry. This article recapitulates the evolution of a market-driven hospital industry, arguing that opportunities in hospital capital access explain much of the recent ownership changes. Although the recent financial crisis has shown the ambivalences of private welfare provision, an end of this trend is not yet recognisable in the German hospital sector. Quite to the contrary, it is to be expected that the financial crisis will foster the process of privatisation. The financial constraints of communities and the willingness of private investors to enter the market seem to hamper a revival of the public provision of hospital services.

Keywords:

• German hospital industry
• public and private ownership
• need for investment
• rise of a for-profit hospital sector

Notes

1. For a detailed description of the task sharing between the national and state levels in the German inpatient sector, see Simon (2000) and Böhm and Henkel (2009).

2. In fact, the share of hospitals not being part of the hospital plan is nominal. Only 3% of all German hospitals are excluded from the dual funding system (Ziehe 2009).

3. In 2008, all public subsidies according to §9 KJG (financial means for investment) amounted to €2.69 billion. This means a steady decline by –34.48% throughout the last decade (reference year 1998, see DKG 2009).

4. Another question is the political enforceability of selling public hospitals to private investors. In most cases, the process of privatisation is accompanied by strong public protests (Greer 2008).

5. In contrast to the other three enumerated companies, the Sana Klinken AG is run as a stock company, but is not publicly listed. It is owned by German private health insurance companies with the Deutsche Krankenversicherung AG, the Signal Krankenversicherung AG, and the Allianz Private-Krankenversicherungs-AG as the major shareholders (see http://www.sana.de/wir-ueber-uns/unser-unternehmen/aktionaere.html).

6. Cross-border leasing is a leasing arrangement where lessor and lessee are situated in different countries – in most cases in a European country and in the United States – in order to make use of differences in the tax laws of different jurisdictions. The transaction involves a city selling a public good, such as sewerage facilities, power plants, or municipality hospitals, to an investor. The municipality immediately leases back the asset from the investor, so that it is still a publicly operated service. However, since 2004 cross-border leasing has been effectively eliminated by the passage of the American Jobs Creation Act of 2004 (Pub. Law 108–357), which made the vast majority of cross-border leases unprofitable (Luksch 2009).