Policy Trends and Reforms in the German DRG-based Hospital Payment System

A central structural point in all DRG-based hospital payment systems is the conversion of relative weights into actual payments. In this context policy makers need to address (amongst other things) (a) how the price level of DRG-payments from one period to the following period is changed and (b) whether and how hospital payments based on DRGs are to be differentiated beyond patient characteristics, e.g. by organizational, regional or state-level factors. Both policy problems can be and in international comparison often are empirically addressed. In Germany relative weights are derived from a highly sophisticated empirical cost calculation, whereas the annual changes of DRG-based payments (base rates) as well as the differentiation of DRG-based hospital payments beyond patient characteristics are not empirically addressed. Rather a complex set of regulations and quasi-market negotiations are applied. There were over the last decade also timid attempts to foster the use of empirical data to address these points. However, these reforms failed to increase the fairness, transparency and rationality of the mechanism to convert relative weights into actual DRG-based hospital payments.