Financial pressure remains for public and private hospitals in Germany

 

PricewaterhouseCoopers (PwC) analysed the accounts of more than 100 clinics in the country.

Overall, hospital profitability remains low.

Despite the comparatively low provision of subsidies, private clinics are the most profitable structures in terms of return on sales.

For private clinics, the EBITDA ratio last year was 7.6% versus 8.5% in 2017. That for non-profit hospitals stood at 3.3% while it was 0.2% for public hospitals.

When looking at cash management, private clinics, in particular, have succeeded in reducing their receivables reach, thereby reducing financing costs and freeing up liquid funds. Days sales outstanding for them has dropped by 3.2 days to 43.6 days while that for public clinics remains at 57.2 days.

The cost of materials and labour give a particular insight into how hospitals function economically. The rate stands at 92% of sales for public hospitals, which means that for every €100, they only have €8 to spend on maintenance, financing and other expenses. That rate stands at 87% for non-profit hospitals and 83% for private clinics.

“Overall, the key figures show that the clinics are doing worse economically than in 2017,” said Michael Burkhart, head of healthcare at PwC

The modernisation rate, in other words the ratio of investments to depreciation, of the clinics covered in the study shows that the infrastructures of institutions of all sponsoring organisations are becoming more modern or growing.

If the ratio is more than 100%, investments exceed annual depreciation.

The highest degree of modernisation, at 173%, is found in non-profit clinics, followed by publicly owned hospitals (145%) and private institutions (111%).

“Private clinics recognised the need for modernisation early and are now gradually reducing their investment,” said Burkhart explained. In contrast, public and non-profit organisations have not yet completed their current rounds of investment and many construction projects will be completed after 2020.

“Whether the currently high investment volume will then decrease, is still unclear,” Burkhart said. “But one thing is for sure: If you let your infrastructure become obsolete, you will quickly lose yourself in the competition of the German hospital market.”

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