Munich City Hospital: Value-Based Consolidation

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Munich City Hospital: Value-Based Consolidation
September 24, 2014 by Elisabeth Hansson, Brett Spencer, James Kent, Jennifer Cla
wson, Heino Meerkatt, and Stefan Larsson
Categories: Health Care, Transformation & Turnaround
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In This Article
Munich s ratio of beds to inhabitants is twice the average in Germany, which a
lready has 70 percent more per capita than the OECD average.
New European Union rules limiting public subsidies required the hospital to
develop a sustainable operating model to avoid bankruptcy.
By identifying where it delivered patient value, the hospital established cr
iteria not only for where to cut but also for where to invest.

Value-Based Health Care series Munich City Hospital is one of the largest public
hospitals in Germany, with four large independently operated sites, all located
in the city of Munich; 69 separate departments, each with its own medical direc
tor; and a 30 percent market share in the Munich metropolitan area. Because of o
vercapacity in the local market (Munich s ratio of beds to inhabitants is twice th
e average in Germany, which already has 70 percent more per capita than the aver
age for Organisation for Economic Co-operation and Development countries), the h
ospital has been losing money for ten years. New European Union rules limiting p
ublic subsidies are requiring the hospital to develop a sustainable operating mo
del in order to avoid bankruptcy.
In 2013, The Boston Consulting Group began working with Munich City Hospital to
define a new strategic direction. The guiding principle behind the work was the
conviction that the only way to consolidate and cut costs effectively was not to
focus on costs alone. Instead, the team started with a question: What is the ri
ght medical concept to ensure that we can deliver the highest quality of care?
The team took a hard look at what the various units in the hospital network were
really good at and devised an operating model in which the four sites were trea
ted not independently but as part of an integrated network. By identifying where
the hospital delivered patient value for instance, those specialty units that had
enough patient volume to deliver high-quality outcomes the team was able to estab
lish a set of criteria not only for where to cut but also for where to invest. T
he key question changed: How can we grow beds in those areas where we are strong
?
Answering that question required broad and deep interactions with clinical staff
, with a great deal of discussion and close examination of clinical practice. Th
rough these interactions, the team identified some departments with positive pat
ient outcomes and strong growth prospects. The goal was to maintain the core of
these high-performing units and consolidate the rest. For example, one of the ho
spitals in the network was especially good at rehabilitation. The team recommend
ed that this hospital become the rehab center for the entire network, allowing t
he rehab units at the other three hospitals to close.
The final strategic plan calls for massive consolidation (from 69 departments do
wn to 40), the centralization of support services such as testing labs and pharm
aceutical supplies, and painful job cuts (roughly 2,000 of the hospital s 8,000 em
ployees). And yet, there is a relatively strong consensus in support of the new
strategy.
Most of the hospital s constituencies understand that the current organization str
ucture is neither economically nor medically sustainable. What s more, because the
new strategy builds on the considerable strengths of the hospital and because t
he process for transformation has been collaborative, it includes an achievable
roadmap for growth in addition to the painful but necessary cuts. As one medical
director commented, Finally, we have a concept we can believe in.
To Contact the Authors
Elisabeth Hansson
Partner & Managing Director
Stockholm
Brett Spencer
Partner & Managing Director
Chicago

James Kent
Partner & Managing Director
London
Jennifer Clawson
Associate Director
Madrid
Heino Meerkatt
Senior Partner & Managing Director
Munich
Stefan Larsson
Senior Partner & Managing Director
Stockholm
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