A cost-minimization approach to planning the geographical distribution of health facilities

This paper illustrates a method of planning the geographic distribution of health facilities in order to maximize the social benefits achievable from the investment. Data from Bangladesh have been used to determine the optimal distribution of emergency obstetric care (EOC) facilities in the country using the estimates of average social cost per woman. Costs incurred by households, including the costs associated with maternal mortality, tend to increase with increasing radius of a facility's catchment area. The average facility-based costs tend to decline with increasing radius due to lower per capita capital expenditures. The summation of these two average cost functions generates a U-shaped curve. In this research, the minimum point of the aggregated average cost curve defines the 'optimal' radius of a health facility. The catchment area defined by the optimal radius minimizes the average social cost of providing EOC services in a region. The empirical analysis suggests that the optimal radius for the 20 regions of Bangladesh varies from about 6 to 12 km. If the optimal radius of the catchment area is used in planning health centre locations, Bangladesh will need to set up 450 EOC facilities; currently there are only 90 such facilities.