Germany's Hospital Coding Revolution

Germany’s healthcare system is at the threshold of a profound transformation. The introduction of Hybrid Diagnosis-Related Groups (Hybrid DRGs) marks a pivotal shift in how medical services are reimbursed and delivered, promising to reshape patient experience and dramatically streamline clinical processes.

What are Hybrid DRGs?

Hybrid DRGs are a new reimbursement model that provides the same flat-rate payment for selected procedures to hospitals, regardless of whether they are performed in a hospital (inpatient) or an outpatient setting. This model replaces the previous system, where only specialised ambulatory facilities could be reimbursed for day case procedures. 

The Case for Change

Of course, ambulatory surgery and recovery at home is better for most patients.  It is less stressful, associated with greater patient satisfaction, faster return to normal activities and employment and a lower risk of hospital acquired infection.  However, the previous system posed several limitations for new technologies supporting the transition from inpatient to ambulatory surgery.  The list of procedures that could be reimbursed was limited and difficult to change, making MedTech driven innovation pathways far more limited than in the hospital sector.  Therefore, on the one hand innovators were incentivised to drive technology adoption through the hospital sector, and on the other hand hospital doctors were incentivised to keep patients in hospital in order to meet reimbursement requirements.  In some cases, this hampered the adoption rate of new technologies or the ability to fully realise benefits for patients. 

The hybrid DRGs allow hospitals to introduce and expand patient access to ambulatory procedures.  In fact, the reimbursement has been set to reflect a reasonable shift between inpatient and ambulatory or outpatient procedures, which means that if hospitals fail to innovate care pathways, they will lose income against costs.  If they innovate quickly and effectively, they can benefit financially.  The initial rollout in January 2024 covered 12 procedures, including hernia repairs, removal of ureteral stones, and certain orthopaedic and gynaecological surgeries, with the list expanded significantly in 2025 and set for further growth in 2026.

Why Is This Change So Significant?

Germany has long lagged behind other European countries in shifting care to outpatient settings, largely due to this segmented reimbursement system, favouring inpatient treatment. Hybrid DRGs remove financial disincentives, making it attractive for providers to treat suitable patients in outpatient settings. This is expected to lead to a massive shift: millions of hospital days for short-term patients (those staying up to three days) could be saved, freeing up resources and reducing costs.  Estimates suggest that shifting short-term cases alone to outpatient settings could save the system billions of euros and up to 26 million hospital days per year if fully realised. In addition, MedTech innovations will enable the shift from much longer stays, e.g. 7-10 days, to walk in and walk out procedures.

By encouraging outpatient surgery, the healthcare system can reduce unnecessary hospital stays, lower overall healthcare costs, make more efficient use of medical staff and reduce waiting times for surgery.  For innovative medical device companies this promises to be a game changer.  Market access for proven new technologies, designed to enable the shift from inpatient to outpatient care will meet less resistance, with incentives in place for hospitals to proactively “pull in” these technologies.

The Road Ahead

In 2025, the number of eligible procedures increased from 338 to 575, and the model will soon cover even more complex interventions, including cardiac and vascular procedures, as well as common surgeries like appendectomy and cholecystectomy.

The calculation and compensation scales for Hybrid DRGs are still being refined, and robust digital infrastructure is required to process cases accurately and securely.  Furthermore, outpatient surgical infrastructure must be introduced, or expanded and modernized.  Clinical staff will need to redesign care pathways and undertake specialised training to optimise workflow and technology adoption. Bridging funds will be needed to support investment in innovations and the adoption of advanced medical tools.  Medical device companies can play a major part in supporting and assisting these changes, whilst helping hospitals to fully realise the financial benefits in shifting models of care.

Changes will not be without macro challenges because Germany has a 50% higher bed ratios per 1000 population than the rest of the EU.  Bed capacity, except during and in the immediate aftermath of COVID, has never been a major problem.  In order to fully realise the financial opportunities of service modernisation major reconfiguration of healthcare estate may be needed. Whilst also having high numbers of physicians and nurses, with per population ratios and growth rates well above the EU average, Germany has one of the lowest staff ratios per hospital bed.  Technology enabled reconfiguration will help level things out.

A new €50 billion healthcare transformation fund is set to come into effect between 2026 and 2035.  Hospitals may apply for investment for one or more service groups, mergers and closures of hospitals, or conversions into intersectoral care facilities.

Conclusion

Germany is Europe’s largest MedTech market, and the transformations made possible by Hybrid DRGs make the the market even more attractive for the right kind of MedTech and digital health start-ups seeking European market entry.

#MedTech #GermanMarket #HealthcareInnovation #MarketAccess #EuropeBusiness

VISEA Consulting Kieran Murphy, MPH Ethicon, Inc. Tim Schmid Edit Goldberg Katrin Althoff, MD Spencer Roeck Kathy Lee-Sepsick