The objectives of this study are to analyze the determinants of hospital productivity and costliness by developing hospital production and cost functions. A hospital cost function is useful in establishing whether a particular hospital is more or less costly than the average, but a hospital production function is necessary to establish why such a hospital is more or less costly. This study views the hospital as a multiproduct firm, combining many inputs to produce a variety of outputs. The cost function is developed on the basis that output will be disaggregated, such that each disaggregated class of output corresponds to a homogeneous class of costs. Five alternative methods for the estimation of the production function are suggested. The primary methodology will be multiple regression analysis of cross-sectional/time series data from all non-Federal Hospitals in California. Extensions of regression analysis -- seemingly unrelated regressions, Bayesian analysis, and nonlinear estimation -- will be employed to handle the more difficult aspects of the estimation, particularly the pooled cross-sectional time series aspects of the data. This study's unique opportunity to analyze data from all California hospitals results from the passage in 1972 of the California Hospital Disclosure Act -- legislation that makes available to analysis for the first time an extensive and systematically collected body of data.