A composite method is developed and used for regional analysis of the distribution and efficiency of general hospitals. The study area is the Grand Traverse Region, an eight-county rural area in Michigan. The region had approximately the correct number of hospital beds to handle current and expected needs. Average costs were constant, indicating no economies of scale. Lower short-run costs than in comparable hospitals elsewhere indicated relatively productive techniques. Greater rates of use of the larger hospitals indicated that patients discounted the higher prices of larger hospitals by implicit evaluations of the higher quality of care and number of services they offered.
