Over the past 30years the number of hospitals in Germany has fallen by 21% and the number of hospital beds by 27%. During the same period the average length of stay in hospitals has halved. Nevertheless, the system efficiency is too low. The causes of the system inefficiency in the German hospital sector and approaches for a hospital reform are presented. The official statistics were analyzed and a summary of fundamental works, studies and expert recommendations is given in a review article. The regulatory coexistence of hospital planning and hospital financing leads to a structural underfunding of hospitals and to a suboptimal supply with hospital services. The purely inpatient-oriented remuneration system conserves inpatient forms of treatment. In an international comparison there is ahigh hospital density in Germany. This intensifies the shortage of specialist personnel in healthcare professions. In addition, the level of digitalization in German hospitals is too low. A reduction of the number of hospitals in conjunction with increased specialization can increase the quality of hospital treatment for the patients and also increase the effectiveness of the deployment of scarce specialist personnel. There is a need for a differentiated financing concept according to treatment levels. An increase in the attractiveness of specialist healthcare professions, particularly by improvement of the training can counteract the shortage of specialist personnel. The hospital system must catch up with digitalization in order to be able to provide up to date equipped workplaces and modern organized work processes and also to improve the economic efficiency.