As Germany’s healthcare system faces yet another wave of austerity, hospitals find themselves once again at the centre of cost-cutting initiatives. The latest financial measures announced by the Federal Ministry of Health have reignited concerns about the sustainability of hospital funding, raising fears of a persistent ‘cold’ structural reform – one that could lead to further closures and service reductions cuts.
Austerity Returns to the Hospital Sector
According to the Verband der Krankenhausdirektoren Deutschlands (VKD), the recently proposed savings plan, approved by the Federal Cabinet on 16 October 2025, requires hospitals to bear the majority of a €2 billion shortfall in statutory health insurance (GKV). VKD President Dirk Köcher warned that the move will remove up to €1.8 billion from hospital budgets, despite previous assurances of full inflation compensation for healthcare facilities starting in 2024.
From Support to Cutbacks
The plan effectively reverses the so-called ‘Most Favoured Clause,’ introduced to offset inflation costs in 2022 and 2023. This decision follows a pattern of what many in the industry describe as ‘cold’ structural reform—a gradual, indirect downsizing of hospital capacity through financial pressure rather than legislative clarity.
Köcher argues that the approach is not new but rather a continuation of the policies introduced by former Health Minister Karl Lauterbach in 2022. His hospital reform proposals, initially aimed at strengthening preparedness and quality, have since been compromised by quiet legislative changes that limit hospitals’ ability to adjust state base case values (LBFW) and absorb cost pressures.
Hospitals Shouldering the System’s Burden
The VKD stresses that the mismatch between rising regulatory costs and inadequate financial compensation is unsustainable. Hospitals face increasing pressures from labour, energy, and compliance costs, while their capacity to recover these expenses through GKV reimbursement diminishes. This imbalance risks driving many hospitals towards insolvency or forced consolidation, with adverse effects across the healthcare system—from emergency departments to outpatient clinics.
The association also highlights the federal government’s outstanding €40 billion debt to the GKV, mainly due to insufficient contributions for Bürgergeld recipients. VKD urges the government to clear this debt instead of reducing hospital funding to cover insurance shortfalls.
Economic Strain and Bureaucratic Overload
Beyond funding cuts, the upcoming Hospital Reform Adjustment Act (KHAG) introduces new operational burdens. The VKD warns that detailed staffing regulations, mandatory process design rules, and the threat of sanctions are creating additional administrative burdens. These provisions, it argues, worsen rather than resolve the underlying financial issues.
‘Deregulation and bureaucracy reduction should be the order of the day,’ Köcher states. ‘Yet we are witnessing the opposite—growing interference in hospital management and duplicative data requirements, such as the continued maintenance of the outdated Hospital Atlas.’
A Call for Economic Safeguarding
The VKD reaffirms the principle outlined in § 1 of the Hospital Finance Act: that the law’s aim is the economic protection of hospitals. However, with increasing political and financial pressures, this aim is gradually being compromised. Unless policy priorities shift towards sustainability and operational flexibility, Germany’s hospital landscape may face an irreversible transformation.
Original Press Release: This is a translated version of the original German press release. To view the original text, Click Here (German).
Image Credit: VKD
