OBJECTIVES: The Hungarian goverment allocates significant investment budget for hospital development between 2008-2013. A cost-benefit model was developed to assess the social benefit of public health care investments. We present the results for a planned investment in a large district hospital with 1586 beds. METHODS: We considered the following long-term social and financial benefits: 1) QALY gain and incremental costs from new services; 2) cost savings and QALY gain from simplified patient routes and reduced postoperative complication; 3) improved technical efficiency of operation (e.g. matrix organization); and 4) reduction of fixed costs.Inncremental costs and benefits are calculated over a 15 year period. We employed 8% discount rate for costs and 5% for QALYs. Health benefits were translated to monetary terms by assuming 40‘000€/QALY gain coversion rate. 250 HUF/1€ exchange rate was used in the model.RESULTS: Our model estimated €8,1 million financial and €43,7 million social benefit over 15 years from the €49,5 million investment. The Net Present Value of the hospital development project is €7,5 million (including the remaining value of assets after 15 years). The investment potentially improves the sustainabilty of the hospital operation, as the annual net financial balance exceeds the annual cost of depriciation by €800‘000. CONCLUSIONS: Cost-benefit analysis of public investment projects improves the allocative efficiency of scarce resources. Our model can assess the return on investemnt by capturing long-term social and financial benefits and also the sustainability of hospital operation. Prospective validation of the model is necessary.