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The recent reform of hospital financing in Italy, which took place in 1995, increased the power of incentives producers respond to, making budget constraints harder and reducing resources devoted to their funding. In this paper we measure the evolution of technical and scale efficiency of public hospital across the reform. We look at a sample of 43 hospitals in Emilia-Romagna region, between 1994 and 1997. We conduct the analysis using DEA (Data Envelopment Analysis). In our sample we find evidence of rapidly decreasing return to scale in hospital production. We see that technical efficiency tend to increase in the early stage of the reform, while it decreases in the last year, basically due to a large reduction in output. We don't find evidence of any significant increase in scale efficiency. Interpretation of these results are provided and discussed.