This study analysed and compared the determinants of length of inpatient stay between the rural and metropolitan public hospitals. The investigation was based on the 1998/99 Western Australia patient discharge data. A Cox regression model was used due to the high proportion of patient transfers in the rural hospitals. It was found that several variables were associated with length of stay (LOS) variations within Diagnosis Related Groups (DRG). The method provides additional insights to hospital management and clinicians in assessing the risk of prolonged hospitalisation. From a state government perspective, a DRG payment adjustment strategy may be developed for different categories of admitted patient episodes. The analysis has implications on the formulation of differential funding rates between rural and metropolitan hospitals.