The 1997 hospital financing reform has been supposed to reduce considerable inefficiencies in the provision of hospital care in Austria. This paper focuses on the changes in hospital productivity between 1994 and 1998, thus including three years before the reform and two years after the reform. Using Data Envelopment Analysis we calculated the input-based Malmquist index, which is then decomposed into indices of pure technical efficiency change, scale efficiency change and technology change. The results illustrated a considerably positive shift in technology between 1996 and 1998, whereas the intended enhancement in technical efficiency has not yet taken place.