This article analyses the impact of the transition from output reimbursement to prospective budgeting upon hospital services. In the period immediately after the adoption of budgeting important changes in hospital services can be observed, such as a drop in admissions and the occupancy rate and falling treatment Intensity ratios (number of treatments per admission/outpatient visit). Hospital services prove sensitive to incentives built into the payment system. The specific impact upon services depends upon the design of the budgeting system. Changes in hospital health services can be seen as the result of cost containment strategies of hospital management. Some instruments for cost containment were: a reduction of staff; a more selective use of beds; and more stringent procedures for investments in medical technology. The common characteristic of these instruments is that they all reduce the volume of resources for the treatment of patients. Hospital management lacks effective instruments for more directly influencing the medical treatment process.