Reform of hospital financing: Revenue-independent provision fees for acute maternity facilities

Since 2003, hospital services have been reimbursed through the case-volume-dependent, flat-rate reimbursement system of the G-DRG (German Diagnosis Related Groups) (Section 17b (1) Sentence 1 KHG/Reimbursement Institute 2023). Diagnosis, severity of the illness, and the operations and procedures performed, along with other parameters if applicable, are entered into the patient classification system for grouping (Reimbursement Institute 2023). Although other countries, such as the United Kingdom, Finland, and the Netherlands, also use DRG systems, Germany has a strong performance and volume incentive compared to other countries1. Despite the additional refinancing of nursing care through the nursing budget introduced in 2020 (Reimbursement Institute 2023), there is no case-volume-independent refinancing of necessary provision (Federal Ministry of Health 2023).

>> These effects cause high expenditures for acute inpatient care, which in 2020 amounted to 3.4% of gross domestic product. In comparable neighboring countries, the average was around 3.0% (Federal Ministry of Health 2023). The aDRGs are calculated based on calculation data provided by participating calculating hospitals to the Institute for the Hospital Remuneration System (InEK) (Federal Ministry of Health 2023). Reimbursement of costs is therefore not based on the actual costs incurred by the respective hospital (Reimbursement Institute 2023), but rather on calculated averages. Currently, there is no link between the remuneration for the respective care level and the minimum structural requirements to be met (Klauber et al. 2020).
The inadequate funding of investment funds by the federal states poses a further challenge. These funds currently account for only 3.4% of hospital revenues, while up to 8% must be invested annually to maintain the company's substance (Hospital Rating Report 2022). Hospitals must therefore close this investment gap from their own resources (Federal Ministry of Health 2023).
Refinancing of obstetric services

In Germany, approximately 98.5% of all births take place in a hospital and 1.5% of births take place out-of-hospital, in birthing centers or at home (Federal Ministry of Health 2017). Obstetric services are therefore primarily covered by the DRG system. The goal is to use the DRG system to reflect the services actually provided, depending on the risk profile of the pregnant woman/woman giving birth (Schmidt 2010). Following the introduction of the DRG system, there was initially a sharp decline in the number of obstetric departments (IGES Institute 2013). While there were 1,186 maternity wards in 1991, this number had fallen to just 672 in 2017 (IGES Institute 2019). A variety of factors are likely to influence this development (German Bundestag 2018), as the introduction of a new remuneration system leads to fundamental changes in incentive structures.
Hospitals that are part of the hospital plan and are essential for ensuring comprehensive basic care for the population receive a supplement in addition to their regular remuneration via the DRG flat-rate payments (Section 136c (3) SGB V). This supplement can be used to offset deficits resulting from lower care needs. For hospitals offering obstetric care, the care area is determined by the inhabited geographical units located within a 40-minute car drive radius (G-BA 2020). The agreement of the Federal Joint Committee (G-BA 2023) lists 57 locations that receive this supplement (Federal Ministry of Health 2023). This supplement must be distinguished from other supplements that are paid out regardless of the number of treatment cases for essential hospitals, including those offering obstetric care in rural areas2 (Section 5 (2a) KHEntgG/G-BA 2023). Despite these security supplements, the federal states cited economic deficits, a lack of staff (midwives, doctors, etc.) and quality deficiencies as reasons for the closure of obstetric wards (German Bundestag 2018).
Since the data provided by the calculation centers refer exclusively to patients with normal fertility, the methodology for calculating the flat-rate fees was immediately questioned. Refinancing long-term fertility cases (high-risk pregnancies, etc.) results in high resource consumption (Beckmann et al. 2011). Flat-rate fees do not adequately cover specific services, such as those provided by Level 1 perinatal centers (Grüßner/Gembruch 2011).
Reform proposal and relevance
for obstetrics
To date, the nationwide reimbursement agreements have not meshed with state-specific planning. Needs-based, quality-oriented service provision and optimal patient allocation to care options are incompatible. The reform proposal therefore proposes linking the reimbursement system with hospital planning. This is intended to achieve a uniform definition of care levels, a system of service groups, and a reduction of the volume component in favor of reserve-based financing (Federal Ministry of Health 2022).
In the future, hospital care will be based on nationwide, uniformly defined levels of care. A hospital's care mandate will be allocated regionally and independently of hospital location at the service group level, instead of the previous specialist departments. Defined, structurally qualitative minimum requirements apply to each level (Federal Ministry of Health 2022). For this purpose, 128 defined service groups are prescribed in accordance with nationwide minimum requirements for service provision. The service groups are structured in such a way that treatment within a group requires similar qualifications, competencies, and technical equipment. Each service group is assigned a normatively defined provision share. This share is intended for the remuneration of staff and technical equipment. The service groups link the described level of care with the provision to be financed. The DRG component, the residual DRG (rDRG), which is reduced by the provision cost budget, is intended to reduce the volume incentive and economic pressure.
Thus, future remuneration consists of three components:
rDRG + nursing budget + reserve budget = hospital budget
(Federal Ministry of Health 2022).

Due to the high proportion of non-elective procedures, obstetrics is a specialty with high maintenance costs. A normal pregnancy cannot be scheduled or postponed. Hospitals must therefore maintain structures, but can currently only receive compensation linked to the actual treatment of cases. These structures are only partially refinanced (Schreyögg et al. 2020). Experts are discussing a budget of EUR 60% (Federal Ministry of Health 2022). This should ensure comprehensive, high-quality, and community-based pediatric and obstetric care (Federal Ministry of Health 2022).
methodology
Using qualitative research in the form of semi-structured, guideline-based expert interviews, various employees from hospitals in the Rhine-Main area at various perinatal care levels were included in the analysis. The interviewed experts (E01 to E06) were selected based on their professional experience (<10 years) and their position within the organization of service providers at different care levels (see Table 1). This ensures that the data reflects a broad range of care levels. Only experts from the fields of obstetrics and/or financing were interviewed. Expert E05 holds the leading position in a department focusing on medicine and quality. E06 heads a department focusing on hospital financing and remuneration (see Table 1).
Based on the interviews, we examined the impact of the current reimbursement system and the potential and challenges that might arise from the introduction of reserve budgets for inpatient obstetric care. Furthermore, the experts' wishes regarding reimbursement for inpatient care were documented. The interview guideline used covered four topics:
1. General impact of current remuneration in clinical obstetrics,
2. Perverse incentives,
3. Underfunding and comprehensive obstetric care,
4. Provision of financing and a final section with the respondents’ desired outlook3.

The data and statements thus obtained were summarized and analyzed using the inductive method. This allowed the entire set of statements to be systematically reduced to essential content (Mayring 2015). In addition, a cross-question category system was created, based on which terms were defined to summarize the core statements.
discussion
The results of the interviews showed that the effects of the DRG reimbursement system are perceived by the experts in a very complex way.
The length of stay for obstetric cases is described as too short (E01, E02, and E03). This applies particularly to cases with a higher degree of severity. The DRG system does not adequately reflect case severity (E03). Furthermore, "[...] the DRG system [...] does not adequately reimburse the large block of personnel costs [...]" (E03). This includes factors such as the time required for a midwife to work with the woman before a vaginal delivery (E01), the desired one-on-one care (E02), and the work of midwives on a mother-child ward (E06). E02 describes the increasing expansion of medical positions, while positions of "[...] other staff [...]" have been reduced (E02). This is justified by the fact that the case-related surpluses of the wards are achieved through DRG remuneration and not through the nursing budget (E02). A fundamental increase in case volumes is ruled out by E04 and E06. Births cannot be planned. However, due to high holding costs, no plannable services can be provided, and the resulting holding costs cannot be refinanced (E04, E06). This is particularly challenging for Level 1 perinatal centers.
In connection with the introduction of the DRG system, reference is made to the closures of smaller maternity wards at that time (E01 and E04). These points are not solely due to the financing system, but do contain corresponding incentives (E02, E04). E02, E03, E04, E05, and E06 consider the provision of additional care to be sensible in principle. This is intended to ensure population-based basic care. Attention should be paid to providing care for pregnant women and mothers close to home (E04). The 40-minute car journey time specified by the Federal Joint Committee (G-BA) is assessed differently. While E05 considers this "just about adequate" (E05), E04 assesses it as "[...] generous, [...] considering what is expected of the population" (E04). According to E06, how comprehensive obstetric care is defined depends on what the population wants and what they report back to politicians (E06).
The experts agree with the government commission's recommendations to promote the establishment of centers (E01, E03, E04, and E05). These centers offer the advantage of medically interdisciplinary specialized care. This avoids patient transfers to other locations (even in emergencies) (E01). If specific services are required, patients must also accept longer travel distances (E04). The prevailing settlement and population characteristics must be considered as determinants in this regard (E04). Due to the inadequate investment support by the federal states, an investment backlog has arisen in hospitals, which means that case-related surpluses must be generated from DRG reimbursements or other revenues (E02, E03, and E05). The financing of construction projects or digitalization measures is currently provided from revenues from other departments of the hospital (E05). As an employee of a hospital currently undergoing new construction, E02 describes that only "[...] marginal [...]" funding is available for these projects (E02). The current separation of operating cost funding and investment funding increases the economic pressure on inpatient maternity care. With (newly defined) reserve funding, this burden could be significantly reduced, particularly with regard to the provision of personnel and technical equipment4 (E02, E03, E04, and E05).
The more non-elective procedures performed within a specialty, the higher the risk that pre-emptive costs will not be covered (E04). The volume of obstetric services cannot be influenced (E04). Pre-emptive financing offers the opportunity to better represent obstetric care economically (E02, E03, E04, and E05). The challenges of pre-emptive financing, which can arise especially during implementation, can be summarized in the following three points:
1. The problem of staff shortages will not be avoided by the introduction (E02 and E03). However, the share of the reserve budget should be calculated so that the hospital's staff is adequately utilized (E02) and the level of care is taken into account in the calculation (E02 and E05).
2. The key according to which the reserve budget is calculated and distributed is relevant to perinatal care (E02, E03, E04 and E05), so that at least the actual costs incurred are refinanced (E02).
3. The share of DRG revenues reimbursed through hospital services is to be reduced to 40%. This also means that case-related surpluses are expected to be reduced in the future. Currently, the DRG share of the hospital's total revenue is approximately 75% across all departments. Following the introduction of a reserve budget, existing external financing must be repaid using reduced financial resources (E03).

E01, E03, and E04 further express a desire for the work of midwives to be adequately reflected in remuneration (E01, E03, and E04), as this time commitment is currently not adequately reflected in DRG remuneration (E01 and E03). Furthermore, tariff increases should be refinanced more quickly and comprehensively (E03).
Conclusion
This study is intended as an exploratory approach to examine the potential and challenges of reserve funding (see Fig. 1). Despite the utmost caution and neutrality in addressing the research question, limiting influences on the results cannot be ruled out. The experts' statements are heterogeneous in some areas, so that, even considering the scope of this qualitative research, this does not provide a representative result, but at least provides a preliminary outline of potentially emerging questions. These assessments and trends can therefore also be valuable. Accordingly, expanded research areas have been addressed that can be used for further research. It should also be noted that the government commission's proposal had not yet been finalized at the time of this study.
According to the experts, there is consensus regarding the need for a change in the reimbursement of inpatient services. The underfunding of maternity hospitals, as perceived by the experts, is due, among other things, to the current financing system. This is the reason for the current health policy legislative initiative. The scope and impact of the reform will depend on whether the perverse incentives identified to date in flat-rate reimbursements based on the DRG classification can be corrected (Schreyögg 2020). Financing within the framework of standby costs, especially for specialties with high unforeseeable caseloads, as is the case in obstetrics, is more than challenging.
Hospitals' ability to manage revenue accordingly is rather limited, and there is a high risk for maternity clinics that they will not be able to provide services that adequately cover costs. Currently, hospitals compensate for such inadequate reimbursement and financing by, among other things, increasing case volumes. From a health policy perspective focused on conserving scarce resources, increasing case volumes in obstetrics is less problematic. To safeguard the safety and well-being of mother and child, particular attention should be paid to aspects of the quality of care. Medical personnel should not be motivated to behave in a certain way by monetary incentives.
In principle, the plan to introduce a financing component of the provision costs for essential services in order to ease the economic burden on hospitals can be supported. The approach of considering different perinatal care levels and establishing minimum structural requirements for the distribution of financial resources appears to be a step in the right direction. The security surcharges paid to date, which were introduced as part of the Hospital Structure Act, can be understood as an anticipation of the financing of provision costs, which should be embedded in the new regulatory framework in the future. The fact that the proportion from which hospitals can generate case-related surpluses will be reduced by the introduction of the provision budget will affect not only the obstetric wards but also other service areas of the hospital. This will tend to reduce the scope for hospitals, which could potentially lead to dissatisfaction with such reduced degrees of freedom.