Derivation and application of a new hospital price index constructed for the National Advisory Commission on Health Manpower. Based on a weighted average of the prices of the factors used as inputs in producing hospital care, it distinguishes the effects of price inflation from the progressive increase in the amount of labor and supplies consumed per patient-day. Of the 92 percent rise in costs per patient-day during 1955-1965, only 37 percent was due to price increases. Since 1966, doctors and hospitals have been progressively slowing down the increase in resource inputs (the difference between price increase and cost increase) --a fact completely obscured by the normally cited indicators of hospital cost. 6 pp.