How profitable are most hospitals

Speculating with clinics The financial disaster of German hospitals

Threatening privatization, lowering wage costs, blackmailing cities - politicians, entrepreneurs, churches and municipalities fight hard when taking over hospitals. Who wins, who loses?

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The good medical care in a big city has its price: In Offenbach am Main it is one euro. In return, 2300 employees are now worried about their jobs, pension commitments or tariff affiliations after the sale of the city clinic. The city has lost its influence on the clinic and has just thrown the managing director down.

On July 1st, after 150 years, the city hawked its professionally respected clinic for the symbolic price to the private clinic chain Sana in order to save the house from the impending bankruptcy. The indebted Offenbach took over old loans and new obligations amounting to at least 250 million euros. That was Sana's condition. The hospital now bears the title of "the most difficult renovation case in the republic" in the industry.

Specialized clinics are usually more profitable

One reason for cases like Offenbach: "In 2012, 46 percent of general hospitals closed with a deficit", recently warned Josef Düllings, President of the Association of German Hospital Directors. A mere eleven percent achieved the necessary return on sales of four percent. Mind you: it seldom has anything to do with the quality of the medical business. "Only one in ten houses can survive on its own," says Düllings. The size is also not decisive: small, specialized clinics are often more profitable.

Takeovers and mergers among the 2,000 German hospitals are currently in vogue. Because even if it doesn't always look like this: You can make money with clinics. The private sector creates more than twice the return on sales than the competition (see graphic).

That is why politicians, companies, churches and municipalities are fighting hard for the 90 billion euro market with hip operations, caesarean sections and kidney transplants. Hospitals are becoming an object of speculation: every new operator hopes to make money with this clinic, unlike his predecessor.

When it comes to takeovers, everyone involved tricks and bluffs. Municipalities are threading merger talks with hospital chains and breaking them off again. The threat of privatization should then only make the clinic workforce flexible for their own tough restructuring cuts.

Many Christian porters use moral pressure to squeeze maximum manpower out of their employees. Listed chains under pressure to generate returns kick the workforce from old collective agreements into less paid ones after mergers. Cities are being squeezed out of millions in grants, see Sana and Offenbach. Insubordinate hospital bosses are silenced by politicians.

And the merger carousel should turn even faster soon. Volker Braun, clinic analyst at Commerzbank, expects a "certain recovery" as early as next year when local elections are due in eleven federal states: "Before that, hardly a mayor or district administrator dares to put his hospital up for sale."

Now the Bad Homburg Dax company Fresenius is additionally shaking up the market. The announcement by CEO Ulf Schneider electrifies the industry: The clinic subsidiary Helios will take over 43 hospitals and 15 medical care centers of the competitor Rhön-Klinikum for three billion euros. This creates Europe's largest private clinic group.

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