German hospitals are set to receive more financial support under a new bill announced by Health Minister Karl Lauterbach on Wednesday.
The plans include reforms to the current financing system to ensure hospitals receive 60% of their funding as a flat rate, rather than on a case-by-case basis.
Lauterbach said the bill would guarantee hospitals can continue to treat patients in an ageing society and ensure high standards across the country.
"Without changing the structures of inpatient care, there is a risk of hospital insolvencies, poor treatment and long journeys [to hospital]," he said.
"We will therefore replace per-case rates, which currently often determine medical practice, with flat rates and quality specifications. Then medical need will determine treatment, not economics," Lauterbach added.
The current system has faced criticism after allegations that some medical facilities have scaled back cheaper treatments in order to prioritise more expensive operations.
Germany's federal states have raised objections to the plan, but the bill will not require their support in the Bundesrat, the country's upper legislative chamber.
Instead, the bill will be debated in the Bundestag, the country's lower house, where the governing coalition has a majority of seats. If approved, the law is set to come into force in early 2025.