Each year the national associations of sickness funds negotiate agreements with the national associations of sickness-funds physicians. The same bargaining procedures apply to dental care. The associations work with guidelines suggested by the Advisory Council for the Concerted Action in Health Care and establish umbrella agreements on guidelines for the delivery of medical care and fee schedules tied to the relative value scales of about 2,000 medical procedures. At the national level, the Federal Committee of Sickness Funds Physicians and Sickness Funds is a key player, although it is little known outside the circle of health care practitioners and experts. It sets spending limits on the practice of medicine in physicians' offices, determines the inclusion of new medical procedures and preventive services, adjusts the remuneration of physicians, and formulates guidelines on the distribution and joint use of sophisticated medical technology and equipment by ambulatory-care or office-based physicians and hospital physicians.

At the regional level, regional associations of sickness funds and regional associations of sickness-funds physicians negotiate specific contracts, including overall health budgets, reimbursement contracts for all physicians in a region, procedures for monitoring physicians, and reference standards for prescription drugs.

A key instrument for containing GKV health care costs is the global budget, introduced in the mid-1980s, which sets limits on total health care expenditures. The GSG of 1993 retained cost containment methods until 1996, when it is hoped that structural reforms will no longer make it necessary. By means of the global budget, regional increases in total medical expenditures are linked to overall wage increases of sickness-funds members. The sickness funds transfer monies amounting to the negotiated budget to the regional associations of sickness-funds physicians; the associations pay their members on the basis of points earned from services performed in a billing period. The value of the services is determined by the negotiated fee-for-service schedule, which assigns points to each service according to the relative value scale. No exchange of money occurs between sickness-fund patient and physician. Privately insured patients pay their physicians themselves and are reimbursed by their insurance companies.

The monetary value of a point is determined by dividing the total value of points billed by all sickness-funds physicians into the region's total negotiated health budget. A greater than expected number of services billed will mean that a point has less value, and a physician will earn less for a particular service than in a previous year. To prevent physicians from attempting to earn more by billing more services, committees of doctors and sickness funds closely scrutinize physician practices. Excess billing practices are easily detected by means of statistical profiles of diagnostic and therapeutic practices that identify departures of individual doctors from the group average (a form of community rating). Physicians found guilty of improper conduct are penalized. The same procedures apply to dentists.

Land hospital associations and Land associations of sickness funds negotiate the general standards for hospital care and procedures and criteria by which to monitor the appropriate and efficient delivery of medical care. Each hospital negotiates a contract on hospital care and the prices for hospital services with the regional sickness-funds association. Until 1993 hospitals' operating costs (of which salaries made up as much as 75 percent) were covered by per diem rates paid by public and private insurance. Hospital investments and equipment are financed by Land general revenues.

The GSG of 1993 developed a more sophisticated reimbursement method for hospitals than the simple per diem rate in an attempt to achieve greater hospital efficiency and thereby reduce costs. The law requires that four sets of costs be negotiated for each hospital: payments to diagnosis-related groups for the full treatment of a case, with the possibility of an extra payment if a patient is hospitalized for an unusual length of time; special payments for surgery and treatments before and after surgery; departmental allowances that reimburse the hospital for all nursing and medical procedures per patient per day; and finally a basic allowance for all nonmedical procedures and covered accommodations, food, television, and similar expenses. The law also introduced new aggregate spending targets and spending caps on hospitals for the period 1993 to 1995. Moreover, the law imposes more stringent capital spending controls on hospital construction and expensive medical equipment.

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Source: U.S. Library of Congress