Background Whether activity-based financing of hospitals creates incentives to treat more patients and to reduce the length of each hospital stay is an empirical question that needs investigation. This paper examines how the level of the activity-based component in the financing system of Norwegian hospitals influences the average length of hospital stays for elderly patients suffering from ischemic heart diseases. During the study period, the activity-based component changed several times due to political decisions at the national level. Methods The repeated cross-section data were extracted from the Norwegian Patient Register in the period from 2000 to 2007, and included patients with angina pectoris, congestive heart failure, and myocardial infarction. Data were analysed with a log-linear regression model at the individual level. Results The results show a significant, negative association between the level of activity-based financing and length of hospital stays for elderly patients who were suffering from ischemic heart diseases. The effect is small, but an increase of 10 percentage points in the activity-based component reduced the average length of each hospital stay by 1.28%. Conclusions In a combined financing system such as the one prevailing in Norway, hospitals appear to respond to economic incentives, but the effect of their responses on inpatient cost is relatively meagre. Our results indicate that hospitals still need to discuss guidelines for reducing hospitalisation costs and for increasing hospital activity in terms of number of patients and efficiency.