The productivity development in hospitals shows that it is very much possible to realise productivity growth in the public sector. The so-called Baumol’s disease has lost its grip on the hospital sector in the last decennium. The production of hospitals is characterized by complex logistical processes and the use of high-quality technology. This makes the hospital sector suitable for these substantial productivity improvements. New treatment methods and insights have led to a drastic reduction of the average admission period. In sectors with less complex and less capital intensive production processes the possibilities for productivity improvement could be different. In other words, the product type and the nature of the process in the hospital sector are ideal for productivity improvement, something that is not necessarily the case in every public sector.