Background: In the hospital, as an economic firm , economic analysis should be utilized for optimal use of resources and production facilities . In microeconomics, the hospital economic behavior can be analyzed through the production function as a firm producing health services .

  Objective: The aim of this study was to estimate the production function and to determine the economic behavior in hospitals of Mashhad University of Medical Sciences.

  Methods: This analytical study was conducted on all hospitals (11 hospitals) of Mashhad University of Medical Sciences in 2010 . The double-log Cobb-Douglas production function was used to estimate the economic behavior of the production and service delivery . Data were collected in panel form (combined) and by survey method for a period of 13 years . Finally, the econometric software Eviews 5 was used to estimate the model.

  Findings: Physicians (0.57), nurses (0.36), beds (0.24), technology (0.0004) and other personnel (-0.07) inputs had the most effect on hospital production (the number of inpatient admissions), respectively. Determination coefficient (R²=0.99) and Durbin-Watson test (D.W=1.98) values fall within favorable range. Total production function coefficient was more than 1.1.

  Conclusion: The results showed the great importance of physicians to increase the production (the number of inpatient admissions). Since the production function of Iranian hospitals is often increasing returns to scale , investment on production inputs can predict the increasing rise of production.