Today the Bundeskartellamt has published the final report on its sector inquiry into German hospitals. The outcome of the inquiry confirms the important role played by competition in ensuring the quality of health care for the population. The sector inquiry was launched with the aim to analyse in detail the competition conditions and scope of action for hospitals in Germany and to further develop the Bundeskartellamt’s merger control practice.

Andreas Mundt, President of the Bundeskartellamt: “As a consequence of competition in the hospital sector, hospitals are subject to permanent quality control throughout Germany. The hospital market is, of course, not like any other market. There is practically no price competition. What is decisive for patients and consulting physicians in their choice of hospital is the quality of the inpatient care provided. Hospitals compete with one another for treatment cases, i.e. patients. Each hospital strives to offer a better quality of treatment than neighbouring hospitals and to exceed the stipulated minimum standards. If all local hospitals are operated by the same company, quality competition will suffer as the hospitals will no longer face the risk of patients choosing a competing hospital. In this case there will be a greater financial incentive to save money by reducing the quality of treatment, i.e. the number of staff or the quality of medical equipment. This is why competition is an indispensable controlling mechanism in the hospital sector as well.”

Overview of the sector inquiry’s findings:

• Hospitals compete with one another at the local level
  Higher-quality hospitals attract more patients than other hospitals. Existing regulatory requirements such as hospital planning, fixed DRG (diagnosis-related group) rates and minimum quantity or quality provisions do not prevent hospitals from setting themselves apart from their competitors in terms of the services or quality they offer. Apart from the recommendations of the physicians established in the respective regions, the decisive competitive factor for patients is the quality of treatment. Almost 75 percent of the physicians recommend one or several hospitals - again mainly based on the quality of treatment. Approximately 75 percent of all patients follow these recommendations. At least 50 percent of all prescriptions are made by medical practitioners. Emergency services, self-admissions or patient transfers between hospitals play a significantly less important role. In geographic terms, more than 80 percent of all cases treated at a hospital occur within a radius of 35 kms around the hospital.
• Merger control and hospital planning go hand in hand
  Hospital planning defines the hospitals’ scope of inpatient treatment, but has no influence on their operators. Any decline in quality can only be sanctioned by redistributing the number of beds, provided that there are other operators in the region which can carry out the required treatment. Only merger control can safeguard operator diversity as it can influence ownership of or control over a hospital and prevent competing hospitals from falling under the control of the same operator or group of companies. In this way merger control ensures not only operator diversity but also the scope of action of the planning authorities.
• Further development of the Bundeskartellamt’s merger control practice
  The results of the sector inquiry highlight the importance of consistent merger control in the hospital sector.
  Andreas Mundt: “Most mergers in the hospital sector do not raise any competition concerns. However, critical cases require consistent merger control. The consequences of extensive concentration processes are irreversible. Once local operator diversity is eliminated, competition is harmed permanently and patients have less choice. The sector inquiry has helped us to further refine our methods of examining merger control cases.”
  It has expanded and consolidated the Bundeskartellamt’s knowledge regarding the definition of the product markets and the geographic markets. The criteria for taking into account the closeness of competition between the hospitals on a functional basis have been refined. Extensive data are essential to enable the authority’s effective merger control. Anonymised hospital data provided by the institute which oversees the hospital remuneration system (Institut für das Entgeltsystem im Krankenhaus GmbH, InEK) have to be evaluated in each individual case. However, the sector inquiry also shows that it would be useful for the Bundeskartellamt’s merger control work to also obtain the anonymised hospital data of InEK GmbH once a year for all hospitals, including the medical diagnosis data. This would help to further accelerate merger review.

The inquiry is based on a survey of all hospitals in a representative corridor across Germany from Saarland to Saxony. It covered approximately 22 percent of all hospitals in Germany and analysed anonymised data on all their treatment cases. In addition, approximately 600 registered physicians established in the Darmstadt region were surveyed by way of example.

The Bundeskartellamt had launched its sector inquiry into hospitals already in 2016 with the aim to gain a better understanding of the relevant competition parameters for examining the hospital mergers the authority has to review. The individual findings of the inquiry have been consecutively used in the authority’s merger control examinations. The report now provides an overall presentation of the inquiry's findings.

The full report on the sector inquiry into hospitals with numerous overviews, tables and graphic charts (in German only) is available here.

Additional FAQs about the sector inquiry as well as a graphic chart illustrating the incentives for hospitals operating in competition or without competition are also available at the Bundeskartellamt’s website.