Differences in hospital costs and utilization between the United States and Canada are analyzed and an attempt made to measure the significance of various demographic, economic, and other factors thought to be related to the differences. Increases in utilization are traced to population increases and to actual increased use per person; and cost increases tied to general inflationary trends are separated from those attributable to specific hospital price increases. Differences in the financing and reimbursement mechanisms in the two countries are shown to have had little effect on relative cost increases, which in the period under consideration were parallelled by similar or greater increases in other industrialized nations.