Health ministry · Hospitals
Hospitals: one reform, three levels of government
Germany has 1,841 hospitals, and in 2024 only 72% of their beds were occupied on average. Since 2025 the country has been restructuring the sector through a federal reform that the Länder implement and the self-administration pays for. Carsten Linnemann inherited that reform half-built. This page explains who does what, what is in force and what is still being argued over.
Schematic: editorial, based on Social Code Book V, the Hospital Financing Act and the KHVVG/KHAG. Number of hospitals: Destatis, 2024.
German hospitals in numbers
Destatis basic hospital statistics for 2024, the latest complete year.
Bed occupancy before and after the pandemic
SourceDestatis, press release 398 of 6 Nov 2025.
Hospital staff
SourceDestatis, press release 398 of 6 Nov 2025.
The combination of falling cases and low occupancy is at the heart of the reform argument. Germany has many hospitals, many of them small, while specialist staff are scarce. Each additional site spreads those staff more thinly. Treatment patterns have also changed: many procedures that once required a stay can now be done as day cases. Supporters of the reform conclude that capacity should be concentrated and that the money should follow the services a region needs, not the number of beds.
Dual financing and DRGs
Since 1972, hospital costs have been split between two payers.
Investment: the Länder
Under the Hospital Financing Act (Krankenhausfinanzierungsgesetz), the Länder pay for buildings, major equipment and modernisation of hospitals in their hospital plans. For years hospitals, insurers and independent experts have said the Länder pay too little. Hospitals then use operating income or their owners’ money for investment, which adds to the pressure on volumes.
Operating costs: the insurers
Current costs, such as staff, materials and energy, are paid by health insurers and private patients. Since the 2000s the main method has been diagnosis-related groups (DRGs). Each case is paid a flat rate based on diagnosis and procedures, with weights calculated by the InEK institute. Since 2020, nursing staff costs on wards have been paid separately through a nursing budget. In 2025 the statutory funds spent about €111.5 billion on hospital treatment, roughly 31.6% of their spending (vdek, BMG data).
The DRG system is credited with making hospital stays shorter and costs more transparent. Critics say it creates an incentive to treat more cases, especially profitable ones, and leaves rural hospitals with few cases unable to cover their fixed costs. The 2024 reform responds with a partial shift from paying per case to paying for readiness: standby payments (Vorhaltevergütung) meant to cover the cost of keeping services available, whatever the exact number of cases.
From KHVVG to KHAG: the reform timeline
Everything in this timeline before 29 July 2026 was inherited by Linnemann.
- 1 Jan 2025
KHVVG in force In force
The Hospital Care Improvement Act (Krankenhausversorgungsverbesserungsgesetz), passed under Karl Lauterbach, introduces nationally uniform service groups (Leistungsgruppen) with minimum standards for staff and equipment, standby payments and a transformation fund.
- 8 Oct 2025
KHAG adopted by cabinet
Under Nina Warken, the federal government adopts the Hospital Reform Adjustment Act (Krankenhausreformanpassungsgesetz), responding to Länder demands for more flexibility.
- 6 Mar 2026
Bundestag passes KHAG
The Bundesrat approves it on 27 March 2026 without calling the mediation committee.
- 15 Apr 2026
KHAG in force In force
The KHAG allows the Länder more exceptions and transition periods and moves the start of the standby payments back by a year, to 1 January 2028 (Görg legal analysis).
- Apr 2026
First transformation-fund approval In implementation
The Federal Office for Social Security approves €45.36 million for a site merger in North Rhine-Westphalia, the first grant from the fund.
- 10 Jul 2026
Hospital cost brake In force
The GKV stabilisation law limits the growth of hospital prices in 2027–2029 as part of about €19 billion in relief for the funds.
- 22 Sep 2026
Linnemann’s hospital summit
At the BMG hospital summit, the new minister announced that the emergency-care reform would be passed this year. He said a planned bureaucracy-reduction law would reduce duplicate inspections and introduce risk-based controls Proposed.
„Das geplante Bürokratierückbaugesetz soll zudem Doppelprüfungen reduzieren und risikoorientierte Kontrollen einführen.“
04 / Transformation fund
€50 billion to restructure the hospital map
The transformation fund provides up to €50 billion from 2026 to 2035 for mergers, conversions of small hospitals into cross-sector care centres, specialised centres and other structural changes (BMG, 17 April 2026). Half was originally to come from the health fund, and therefore from contributors, with the other half from the Länder.
That plan was controversial. Insurers argued that restructuring hospitals is a public infrastructure task and should not be paid for from contributions. Following the KHAG, the federal share of €29 billion is now to come from the special fund for infrastructure and climate neutrality (Sondervermögen Infrastruktur und Klimaneutralität) instead of the GKV (vdek and press reports). The Länder have to co-finance projects.
The fund is administered by the Federal Office for Social Security (BAS). Applications come through the Länder, which decide which projects fit their hospital plans. In implementation
Loss-making hospitals: estimates and forecasts
SourceKrankenhaus Rating Report 2026 (RWI/hcb), as reported in the DKG journal “das Krankenhaus” (secondary source). The 2027 value is a scenario under the GKV stabilisation law, not a baseline forecast.
Where federal rules meet Länder decisions
The reform depends on decisions in sixteen state capitals, which the federal minister cannot take.
Hospital planning
Each Land decides which hospitals are in its plan and, under the reform, which service groups each may provide, from general internal medicine to complex cancer surgery. North Rhine-Westphalia had already introduced a service-group system of its own, which served as a model. Länder governments insisted that planning stay with them, and the KHAG gave them more room for exceptions.
Quality
Service groups bring minimum requirements for specialists, equipment and related departments. The G-BA also sets minimum volumes for certain complex procedures and other quality rules. The aim is that complex treatment takes place where teams have enough experience. Critics worry about whether enough sites will remain.
Rural care
For thinly populated areas the reform allows exceptions and cross-sector care centres, which combine outpatient care, short inpatient stays and care services. Standby payments are meant to keep needed sites viable with fewer cases. Whether this works in practice will only be seen once the payments start in 2028.
| Task | Federal level | Länder | Self-administration |
|---|---|---|---|
| Payment system (DRGs, standby payments) | Legislates | Consent in the Bundesrat where required | InEK calculates; insurers and hospitals negotiate budgets |
| Service groups and minimum standards | Defines nationally | Assigns to individual hospitals | Medical service (MD) checks the requirements |
| Hospital plan, which sites exist | — | Decides | Insurers consulted |
| Investment costs | Co-finances the transformation fund (€29bn) | Pays; co-finances the fund | — |
| Quality rules | Legal framework | Hospital supervision | G-BA directives |
| Emergency care structure | Emergency-care reform (in parliament) | Rescue services | KVs (on-call service), hospitals |
Source: editorial summary based on SGB V, the Hospital Financing Act and the KHVVG/KHAG.
Outpatient care, emergencies and the summit
The hospital files on the new minister’s desk, with their status.
Emergency care reform
Adopted by the cabinet on 22 April 2026, first Bundestag reading on 9 July and expert hearing on 9 September 2026. The reform is meant to link hospital emergency departments, the KVs’ on-call service (116 117) and rescue services through joint emergency centres and initial assessment, so that patients reach the right setting. The final Bundestag vote had not taken place by early October; Linnemann wants it passed by the end of 2026. The second Bundesrat passage was planned for 16 October 2026 (AOK tracker).
Outpatient treatment in hospitals
A growing number of procedures can be done on a day-case basis with uniform fees for hospitals and practices (“hybrid DRGs”). The aim is to treat patients in the least costly appropriate setting. Destatis data show inpatient cases in 2024 still almost 10% below 2019, which suggests part of the shift is already happening.
Bureaucracy reduction and extra funding
At the 22 September summit Linnemann announced a bureaucracy-reduction law with fewer duplicate inspections and risk-based controls. Under the announced second savings law, about €450 million for hospitals and €100 million for university clinics are to be financed, as reported by the trade press. No bill has been published.
Linnemann’s line on the reform
So far the new minister has not proposed reopening the reform. His announcements concern implementation and its side effects: passing the emergency-care reform, less bureaucracy for hospitals, and targeted extra money financed elsewhere in the GKV. This fits his first guiding principle, that patients must get to the right place quickly, and his third, that staff should spend their time on patients rather than forms. Länder health ministers, hospital operators and insurers will judge him on three things: whether the standby payments start as planned in 2028, how the cost brake is handled, and whether the transformation fund reaches projects quickly.
Finances of hospital operators
Hospital associations warn that the 2027–2029 cost brake, combined with the later start of standby payments, will push more hospitals into deficit before the structural benefits arrive. In the Krankenhaus Rating Report scenario, 60% would make losses in 2027. The government argues that the transformation fund and the extra money from the second savings law ease the transition.
Sources & further reading
- Destatis — Hospitals 2024 (6 Nov 2025)
- Federal Ministry of Health — Krankenhausreformanpassungsgesetz (KHAG)
- Görg — The KHAG: reforming the hospital reform (1 Apr 2026)
- Federal Ministry of Health — First approvals from the transformation fund (17 Apr 2026)
- vdek — Transformation fund financing (2025)
- vdek — GKV benefit expenditure by sector (2026)
- Federal Ministry of Health — GKV financial results 2025 (10 Mar 2026)
- das Krankenhaus — Krankenhaus Rating Report 2026 (2026)
- Federal Ministry of Health — Linnemann at the hospital summit (22 Sep 2026)
- AOK — Legislative tracker: emergency care reform
- Federal Ministry of Health — GKV-Beitragssatzstabilisierungsgesetz (10 Jul 2026)
- apotheke adhoc — “Spargesetz 2” (Sep 2026)