> If you take a look at the regulations of the Fifth Social Code (SGB V), which is relevant for German health care, you will quickly notice, without reading into the detailed regulations, that many of the paragraphs have an additional letter. These are legal regulations that were subsequently incorporated into SGB V. In addition to these changes in the law, which over time have been identified as relevant to health policy and therefore need to be changed, there are also special passages in the law where the legislature allows defined changes within care. For example, the regulations surrounding the establishment of “new examination and treatment methods (NUB)” in the context of acute inpatient care or the “selective contractual regulations (model projects, special care, etc.)” should be mentioned here. Such options make it possible to establish innovations in the healthcare system on the basis of individual health insurance contracts or special negotiation and approval procedures. This opens doors for service providers and payers to enable, for example, qualitative but also economically interesting improvements within care. Such approaches can typically be aimed at improving procedural, organizational, financing and remuneration forms. However, such improvements require careful exploration of whether there are providers and/or demanders for the care or whether this care is actually accompanied by qualitatively comparable or even improved care results (while at the same time taking into account the associated level of care costs in the sense of a health economic evaluation). so that it is economically competitive. In addition to the supply costs that are already offset by the cost bearers to the service providers, there are also transaction costs.
Transaction costs
In general, the term transaction costs includes the costs that enable and accompany exchanges in an economic system. Transaction costs arise when transferring and enforcing property rights. They keep economic systems running. In previous editions of the “Monitor Health Services Research” they were described as the costs of initiation, agreement, subsequent control and adjustment of the mutual service relationships. Transaction costs can therefore also be interpreted as “sacrifices” or as “commitment” to the economic and supply processes depicted in the contracts. They arise due to human transactions over time from the pre-contractual phase to the final settlement of a terminated agreement.
The term “transaction costs” goes back to the economists Coase and Williamson, who both developed their own theories about the existence, origin and explanation. Coase sees transaction costs as an indicator of structural differences. Certain services can be provided by companies under different conditions than the market (or markets). In this way he justifies the existence of companies and at the same time points out differences in the administration of the specific service provision. Williamson expands this approach when he justifies the existence of transaction costs with human and environmental factors, which he embeds in his own organizational framework.
When it comes to administration costs, a distinction can be made between ongoing or already sunk (dead) transaction costs. The ongoing transaction costs can arise internally (i.e. in the company itself), externally (i.e. on the market) or intermediately (i.e. in a continuum between the company and the market). All types of ongoing transaction costs mentioned can be defined as either ex ante or ex post costs (i.e. before or after the transaction is or has been executed). The ex ante costs consist of the work on the draft contract. These include search, information, negotiation and hedging costs. The ex post costs arise during the actual contract processing in the context of enforcement, monitoring, adjustment and arbitration. Sunk transaction costs can no longer be recovered at any time and are therefore lost forever (see Fig. 1).
Comparison of the different forms of coordination
Transaction cost levels indicate differences between organizational arrangements. According to Coase, such arrangements can be determined by the respective form of coordination on the one hand “hierarchically” (i.e. through the self-defined/set structures in a company) or on the other hand “marketally” (provided by an external service provider and then purchased by the company). This means that contractual rules can also be questioned based on transaction costs if the identified differences express the superiority of one of the two solution approaches and the two arrangements can be substituted for one another. It is important to recognize that transaction costs are not static quantities, but can vary depending on the current state of technical and/or political developments. They also change, for example, with the development or erosion of emerging or emerging markets. Last but not least, the disruptive forces of digitalization will need to be taken into account more and more in the future.
Such differences manifest themselves when, for example, hierarchical coordination (i.e. administrative processes managed within a company) becomes cheaper over time (e.g. due to increasing experience), but then market solutions emerge for such administrative processes that are still in development show more cost-effectively. In such constellations, it would no longer make economic sense to continue to adhere to the entrepreneurial form of coordination, unless other reasons would require this (strategic independence goals, data protection reasons, etc.). Such companies would try to obtain their transaction cost level along the most opportune line of operation. The point in time for switching from one form of coordination to the other is reached when the costs of the alternative coordination (different) would develop more favorably than the previously preferred one (see Fig. 2).
As an example of revenue for the healthcare system, it can be said in a system-analytical context that the administrative payment of service expenditure via a central fee office with the inherent corporatist agreements will often be more cost-effective than a mathematical and technical check carried out in the company Administration of such service expenses on the basis of individual invoices. After the insured have made use of service providers, a reimbursement of costs will usually be made based on the individual invoices, after which the insured will receive a refund for the expenses they have paid.
The lines of operation are likely to differ here. In the same way, however, market forms of coordination could also emerge as superior up to a certain point in time until hierarchical (entrepreneurial) forms of coordination then emerge. A second example could be the outsourced revenue and receivables management of a service provider, which is ensured by a service provider until it is worthwhile (e.g. due to an achieved billing volume) to set up a position in the company for these processes . Ultimately, it is a classic decision about in-house and external administration (or production of the required service) and therefore a “make or buy decision” with a special focus on the costs of bureaucracy.

Organizational framework for transaction costs
The economist Williamson expands this consideration to include an organizational framework in which the transactions take place. Within this framework, he differentiates between human and environmental factors. On the human factors side, he points to only limited rationality, which must be taken into account when information is imperfect and there is a lack of ability to forecast future market events. The arrangements are usually designed and planned for the long term, so that in the more distant future the imperfection in the contract design threatens to become ever greater. Added to this is the opportunism that all individuals possess and which of course also affects the form of coordination. Self-interests can emerge here and need to be taken into account.
When it comes to environmental factors, he sees deficits in assessments of any existing influencing factors that affect coordination (complexity). There is also uncertainty as to whether everyone involved will still show the same enthusiasm during the transaction as was the case before the transaction. In addition, information deficits can arise from a lack of communication or from distorted reports. The frequency or specificity of the transactions is linked to the administrative know-how that may have already been acquired in the context of processing and, closely linked to this, the number of transactions (or for the healthcare system: the number of cases). The analysis of the utilization level of the administration is elementary here.
Innovations in the national health system
The establishment of innovations in the German healthcare system is complex and can only be achieved if very specific rules are observed, which are aimed at using the solidarity-financed funds of the statutory health insurance, as one of the competitively organized branches of the national social insurance, in the most targeted and economical way possible. Service providers and payers are equally obliged to comply with the cost-effectiveness requirement as defined by law. The example of “new examination and treatment methods” (NUB, synonymous with the efforts of many service providers) and “selective contracts” (e.g. for service provision and cost bearers) is intended to illustrate how much the level of transaction costs affects the implementation of these care approaches are influenced.
New examination and treatment methods (NUB)
The rules for NUB come from Section 6 Paragraph 2 of the Hospital Fees Act (KHEntgG) and are the collective term for forms of therapy that are to be introduced into the healthcare market. Naturally, there are no billing options for such new services in the form of remuneration according to the respective catalog according to the diagnosis-based case groups (DRGs). This means that billing cannot be carried out using the retrospective aG-DRG system, which means that your own valuation/billing modalities have to be agreed upon.
For these NUB procedures, among other things: new therapies, new operation and procedure codes (OPS) or new flat rates to be paid per case and/or additional fees (on a test basis) are taken into account. The entire process usually extends over a period of 3 years and is accompanied by extra-budgetary, case-related NUB fees. These fees are therefore reimbursed for services that have not yet been properly taken into account via the flat rate per case in the DRG catalog and are not excluded from financing. During the probationary period, it is important to document performance and cost data (if necessary also with additional data collection). It is possible for service-providing hospitals and payers to set their own, temporarily valid remuneration agreements in the negotiation rounds.
NUB fees are part of hospital budget negotiations. It is not uncommon for applications for NUBs to be handled not only by the respective hospitals, which would correspond to hierarchical coordination, but also by the manufacturing companies (market coordination). The associated applications are limited to one year and must therefore be submitted annually. The latest submission date is October 31st. of each year with an effect for the following year, which is likely to bring together considerable strengths among everyone involved around this date.

Selective contracts
In contrast to collective agreements, selective care agreements, which are to be discussed and agreed between individual service providers (and/or their associations) and one (or more) payers without any legal requirements, allow significantly more degrees of freedom. Typical legal regulations are the special care (§ 140a SGB V) and the model projects (§§ 63ff. SGB V). As attractive as the degrees of freedom obtained are, they also need to be examined carefully (with considerable effort)! There is a risk of pitfalls associated with the individual contractual agreements and the associated incentives that undermine the existing system rules and are therefore not intended.
The participation rate of insured persons is also a date that should not be underestimated. Participation is by no means automatic; rather, the insured must be informed about the conditions of the innovation models. Given the principle that participation by insured persons is voluntary, it is important to actively target the group of intended participants.
Selective contracts are by no means created out of lameng, but on the contrary require extremely careful preparation and analysis of the existing supply options. In addition, there are legal requirements in the form of the adjustment of the collectively agreed budgets, in terms of proof of economic efficiency and information. the respective state supervisory authorities or the federal supervisory authority (Federal Social Security Office, BAS). In particular, contracts agreed by a community of service providers or by several health insurance companies often require considerable coordination within the associated organizations.
It can be observed that, especially in this supply area of selective contracts, external providers (especially smaller units of service providers and/or health insurance companies) also approach them to offer their services. Corresponding services can consist of a potpourri from supply analysis, contract initiation, contractual partner search through to later contract processing and/or contacting insured persons or marketing the supply pilots.
Dilemma of innovative
care approaches and
their forms of coordination
The differences in transaction costs create a dilemma for the respective healthcare system. It is important not only to start the search for successful innovations, but also to ensure that transaction costs are as low as possible with a view to later implementation. Since all supply pilots are under strict observation with regard to their profitability, both types of costs (namely supply and transaction costs) must be included in the calculation. In addition, there is competition with the national standard care that has been established for years, which has become very cost-effective over the years given the corporatist agreements (with a historical lead-in including many learning loops). This means that the level of transaction costs for standard care shown in Figure 4 tends to continue to decline and is therefore at a relatively low level. This is justified by many, sometimes very specific, regulations surrounding data transfer and exchange with the inherent, sectoral procedures.
If a new care model is now established, this establishment is (often typically) accompanied by a different form of coordination than that of standard care. At the beginning, the transaction costs for this care approach will tend to be high, as information, search and initiation costs typically arise. As utilization (number of cases) increases, this level of transaction costs will decrease. In cases where conditions may be renegotiated, the transaction cost level, which tends to fall, will experience a selective increase again. As a result, it will take experience (or time) until the transaction costs of the new care approach fall to the transaction cost level of standard care or below such a value.
The result is that one of the greatest competitions for the supply pilots comes from the camp of supplies regulated by collective agreements. This means that all innovative care approaches, no matter how desirable they may be, have a systemic disadvantage that they can only make up for with time and experience.
Summary
Offers of innovative care models and the transactions behind them cannot be achieved due to excessive administration costs. High transaction costs can hinder the intended meeting between buyers and suppliers to such an extent that such offers are completely undermined. If necessary, no provider agrees to invest in the preparation of a transaction that involves a boost in innovation. As a result, this can mean that later no buyer is willing to provide a correspondingly higher remuneration share for the transaction costs incurred. This is fueling a health policy demand for a separate form of financing for corresponding care pilots (often referred to as “start-up financing”). This is currently planned for innovators in Germany as part of the funds provided by the Innovation Fund. If such a pool of funding did not exist, there would certainly be fewer innovation efforts in the health system. In addition, the digital design of our health and care system will further erode the level of transaction costs for standard care in the future. This may have a negative impact on the high expectations of the selective contract regulations. In this segment, technical development is certainly still in its early stages. In this field, it is important to closely monitor not only technical developments, but also health and care policy developments. The administration, whether on the part of the service provider or the cost bearer, will be well advised to prepare for the development spurts to be forecast and to analyze the opportunities and risks of the respective developments, including with regard to their relevance to transaction costs. <<

“At a time when national health care was almost exclusively regulated by collective agreements and it was more absurd than common to deal with competitively organized selective contracts, the transaction cost theory was rarely considered and the costs of bureaucracy were taken for granted. Only with the rise of individual contracts have transaction costs come into focus. It is important to pay close attention not only to the conditions of the actual pension benefits, but also to the associated administrative effort. Structures that are too bureaucratic have the potential to undermine health care benefits that have been laboriously earned.”
Prof. Dr. rer. pole. Hans R. Hartweg,
Professor in the “Wiesbaden Business School” department at RheinMain University of Applied Sciences (HSRM)