Objective: To analyze the effects of a reimbursement reform on somatic hospitals’ efficiency and quality, measured as patient experiences. By the reform a capitation-based block grant system was replaced by an activity-based system. Methods: Data on efficiency and patient satisfaction from 213 hospital departments before (1996) and after (1998, 2000 and 2003) the reform were analyzed using a mixed model approach. The efficiency ratings were developed at the level of the hospital using data envelopment analysis, while the patient satisfaction scores were at department level data from recent patient surveys. Results: Both technical efficiency and patient satisfaction increase after the reform. Discussion: We interpret increasing technical efficiency as a direct effect of the reimbursement reform. Higher patient satisfaction is understood as an effect of lower waiting time, which in its turn is an effect of the introduction of activity-based financing.