Selection of funding models by hospitals in Switzerland, Germany and Austria

The cumulative dissertation on the topic of financing of hospital properties enjoys the kind support of the BEKB /BCBE and is supervised by Prof. Dr. rer. oec. Reto Steiner.

1. Initial situation and underlying problems

During the last years many countries have reformed their health care system, especially the sector of hospitals. Most transformation projects in the hospital sector can be categorized as Diagnosis Related Group reform, brief DRG-reform. It includes a transformation from a per diem allowance for hospital services to a case-based lump sum payment. In some countries like Switzerland, this lump sum payment includes investment costs. So hospitals have become ful-ly responsible for their properties. They have to deal with questions how to design, build, fi-nance and maintain (DBFM) buildings and equipment. Although hospitals in other countries like Germany and Austria are partly supported by the public sector, they have to deal with the same DBFM-questions as in Switzerland.

Looking at financial theory, there are common models how to deal with DBFM-questions. Generally spoken a hospital can design, build, finance and maintain its properties completely in-house, the hospital can do it completely with external partners or choose a hybrid model. There is no evidence so far which factors are relevant for their decision making process and what the outcome of the chosen funding models is.

2. Research questions

Because of the lack of knowing how hospitals choose their funding models, this study should answer the following questions:

• Which funding models are used in hospitals in Switzerland, Austria and Germany? How can the selection of funding models be explained?
• What's the impact of a selected funding model? Can there be found some key success factors?

3. Theoretical framework an research design

There are two theoretical frameworks relevant for the thesis. First following financial theory by Wolke there is a distinction of funding models. These models can be separated into the three categories hierarchy (in-house solution), market (external solution) and hybrid forms. Second following Transaction Cost Economics TCE by Williamson there are different factorsin choosing funding models. Beside the three well known factors “asset specificity”, “uncer-tainty” and “frequency” (replaced with trust) there should be included the two additional fac-tors “bargaining power” and “financial scope”. For the factor “bargaining power” there is em-pirical evidence, that it influences the market-hierarchy decision. The factor “financial scope” is taken into account following pecking order theory by Myers and Majluf (1984). If a hospital has enough cash, it favours internal than external funding. Figure 1 summarises all factors tak-en into account.

After literature research a survey of all hospitals in Switzerland, Germany and Austria will be conducted. The survey should start in fall 2014 and will be addressed to CEO or CFO of hos-pitals. To do this, there's cooperation with the University of Potsdam and the Johannes Kepler University of Linz.

4. Expected findings

It is expected to find evidence for one or more hypothesised correlations. In the research pro-ject there are two challenges: First the attempt to explain selection of funding models by TCE is quite new. So the results are uncertain. Second TCE can't be measured directly, so the costs have to be asked indirectly by questionnaire.

This dissertation is beeing written by external PhD candidate Bernhard Eicher under the supervision of Prof. Dr. Reto Steiner.