A special response team (SEK) had arrived at the man's home in Rodgau, near Frankfurt, just before 7am after beat officers were unable to defuse the situation.
The pensioner, who had a valid firearms license, threatened to use violence if anyone tried to force him to leave against his will, investigators said.
After the SEK arrived, he opened fire and refused to lay down his weapon after the initial shots.
Officers returned fire after he resumed shooting, fatally wounding him and leaving him dead on the ground outside the house.
The floor was left strewn with cartridge casings and there were several bullet holes in the garage door.
Police forensics teams locked down the area through the afternoon as they gathered evidence.
It is not yet clear why the man was to be admitted to the clinic.