German government initiatives to boost use of IT in healthcare
5 February 2006
Expenditure on healthcare IT in Germany represents a paltry 0.5% of total
healthcare outlays — an extremely low proportion compared to other developed
countries. However, the pursuit of a more integrated healthcare IT policy,
government initiatives and new reimbursement structures are set to boost
demand for healthcare IT in Germany.
Only 15-20% of German hospitals currently follow an integrated healthcare
IT strategy that embraces the hospital-based, in-patient sector and the
ambulatory, out-patient sector. This low penetration rate has been
attributed to a variety of reasons — the absence of coherent federal
initiatives towards eHealth, the decentralised healthcare administration
which has resulted in varying levels of IT development in the different
Lander, restricted hospital IT budgets and the lack of an articulated
enterprise-wide IT strategy.
However, new integrated-care approaches and disease-management programmes
are now aiming to integrate and co-ordinate ambulatory and hospital care.
This is set to trigger increased demand for healthcare IT solutions
creating, in particular, strong growth potential for clinical systems in the
outpatient arena. As a result, exciting investment opportunities are
emerging in Germany's healthcare IT sector.
After 2005-2006, government initiatives and the launch of a new hospital
billing system under the diagnosis-related groups (DRGs) is poised to
accelerate market growth. Recent healthcare reform acts have prioritised
healthcare IT with Federal initiatives encompassing electronic patient
cards, healthcare professional cards, e-prescription and electronic patient
"Whereas previously healthcare IT was initiated at Lander level, and
often implemented in the form of pilot projects, a nation-wide approach is
planned as stated in the Health Ministry's master plan 'Information
Technology Society Germany 2006,'" notes Siddharth Saha, Programme Manager,
Healthcare IT at Frost & Sullivan.
Legislation requiring the transmission of all patient and procedure data
to the sickness funds for reimbursement purposes in electronic form and new
reimbursement regulations introduced for in-patient treatment following the
establishment of DRGs, has compelled hospitals to invest in the necessary IT
systems to achieve regulatory conformity.
In addition to hospitals having to comply with regulatory requirements
(DRGs, procedural coding etc), greater awareness of the role IT systems play
in improving work-flows, controlling costs and increasing cost-efficiency
are also set to expand the German healthcare IT market.
The total German healthcare IT market including clinical and
administrative systems (hardware, software, services and maintenance
contracts) targeting both hospital and ambulatory sectors has been estimated
at €1.2 billion in 2003. Segments with the highest potential include picture
archiving and communications systems/radiology information systems
(PACS/RIS), electronic medical records (EMR), decision support tools and
data management systems.
Initially, healthcare IT was dominated mainly by administrative systems
that facilitated patient data administration and financial
reporting/purchasing. However, even as the market for administrative systems
has become increasingly saturated, the demand for clinical systems has been
rising. In keeping with these trends, a steady annual growth rate of 5.7% is
estimated for administrative systems and 15-20% for clinical systems up to
2006. This indicates expanding market opportunities for suppliers of
Formidable barriers await competitors wishing to enter the increasingly
attractive German healthcare IT market. Existing barriers include an already
high level of competition, a price driven market where purchasing decisions
tend to focus on price and the lack of quick return on investment.
To facilitate their market entry, new competitors could contemplate
either acquiring or entering into partnership/alliances with a German
company. Ultimately, the key factors for success will include relationship
building and focusing on optimising service provision.
"It is vital for suppliers to build and maintain relationships with key
personnel in hospitals/clinics," says Mr. Saha. "Also, hospitals operate
24/7 and therefore need high service levels and reliability. Hospitals value
sufficient support that is still affordable. Accordingly, suppliers must
constantly strive to enhance their service provision component."
Source: Frost & Sullivan
Email: Radhika Menon Theodore