In this reimbursement model, the quality of treatment should increase while the total cost of treating a dialysis patient should remain constant. Fresenius Medical Care has been active for many years in numerous countries with a variety of health care systems and reimbursement schemes. Thanks to our international experience we are able to bolster the activities of the national health care systems, to adjust our business to the local environment, and to generate profitable growth. In the United States, our largest market, patients covered by the public health insurers Medicare and Medicaid account for about 53% of Fresenius Medical Care’s dialysis care revenues.

• The market for infusion therapies and clinical nutrition
  Demographic developments, medical advances and the often still insufficient availability of medical care in developing countries will continue to be the growth drivers in this market.
  
  We expect further cost-containment pressure and health care reforms in Central and Western Europe. Despite these trends, we believe that there will be continued growing demand for innovative and cost-effective therapies and products. We expect growth in the low single digits for the infusion therapy and clinical nutrition market in Central and Western Europe. The market for intravenously administered generic drugs in Europe should see growth rates in the mid single digits. For Eastern Europe we expect market growth rates in the high single digits.
  
  There continues to be high growth potential in Latin America and in Asia-Pacific. The rising demand for primary care in hospitals and thus for high-quality therapies will result in continued strong growth rates in many countries in these regions in the coming years. We expect the markets of Asia-Pacific and Latin America to continue growing at high single to double-digit rates. We also expect a rising demand for medical devices in the coming years.
• The German hospital market
  Hospitals face further economic pressure in 2008. The German government has increased the hospital budget for 2008 by 0.64%, while maintaining the 0.5% contribution hospitals are required to make towards improving the finances of public health insurers. Consequently, there is little scope for absorbing cost increases. According to a recent survey conducted by the German Hospital Institute, 42 % of the clinics expect their situation to deteriorate compared to 2007.
  
  The DRG system has entered the last year of the convergence phase in 2008. As the legal situation stands at present, the convergence phase will be over for the most part as from the beginning of 2009. This means that as from then all hospitals will have to bill on the basis of standardized base rates valid throughout the respective state. The new system introduces more market-driven principles and performance transparency in the area of acute care. It will also encourage further competition since it enables the budgets agreed with the health insurers to be increased if performance is enhanced because additional services will no longer have to be provided at a low marginal revenue rate.
  
  A further reform of hospital financing is currently in preparation for the year 2009. Under discussion is the introduction of so-called selective contracting, i.e. the negotiation of volumes, prices and quality standards for certain services directly with the individual health insurers. At present, the services are negotiated jointly and uniformly with all health insurers. HELIOS Kliniken would be very well positioned should the proposals be implemented.
  
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