Based on ideas of city and town spacing by Walter Christaller, the theory deals with hierarchies of goods and services, threshold populations required to market these goods and services, and ranges or territories over which the goods and services are sold. As used here, the theory applies to the distribution of health manpower or facilities within an urban area. Large hospitals or specialist physicians are higher order functions and thus require larger thresholds and ranges.

Developed by the geographer Christaller to explain the spacing and function of the settlement landscape. Under idealized conditions, he argued, central places of the same size and nature would be equidistant from each other, surrounded by secondary centers with their own smaller satellites. In spite of its limitations, central place theory has found useful applications in archaeology as a preliminary heuristic device.

A major theory that accounts for the size and distribution of settlements within an urban system. Walter Christaller presented the theory associated with business transactions: ranges and thresholds of a marketplace associated with core and hinterland areas.