Most hospital reforms carried out in Europe over the past few decades concern the supply of hospital beds and hospital financing systems. In Hungary, financing was not tied to hospital input or output until a Diagnosis-Related-Group system was introduced. This change provided an opportunity to study the effect of the new system, taking the supply of hospital beds into account. We studied the effect of the financing system and bed supply on four output parameters, average length of stay; admission rate; occupancy; and case-mix. The incentives of the financing system influenced the length of stay (shorter) and the admission rate (more admissions). Although the case-mix did increase, occupancy was not affected. The supply of more beds resulted in higher admission rates and a slightly lower efficiency (a lower occupancy rate). No interaction effects of (variations in) the bed supply and the financing system were found.