Capital Formation in Health Systems

Knowing how much a health system is investing in infrastructure, machinery and equipment is very relevant for policy making and analysis. Although health systems remain a highly labour-intensive sector, capital has been increasingly important as a factor of production of health services over recent decades. Consider, for example, the growing importance of diagnostic and therapeutic equipment or the expansion of information, computer and telecommunications technology in health care over the last few years. The availability of statistics on capital are essential to the analysis of the health system’s production capacity (that is, whether capacity is appropriate, deficient or excessive), which is needed in turn to inform policy implementation (for example, if excess capacity exists, the marginal cost of expanding coverage will be lower than if the health care system is already straining to fill current demand). Information on capital could also assist with the estimation of productivity, capital intensity and rates of return.