Aims: To provide a preliminary answer to the question of whether the economic incentives introduced by the municipal co-financing of hospital services work as intended in the reform. Methods: This study is based on 30 statistical cross-section linear regressions, OLS, using data from Statistics Denmark (Statistikbanken) and the Municipal Financial Accounts. Supplemented by data from a survey study from municipal health managers in all municipalities of the country. Results: Despite the favourable conditions presented by the design of our analysis, it is not possible to demonstrate a clear link between local efforts and number of admissions from the municipalities. Conclusions: The study does not support one of the fundamental theoretical assumptions behind the municipal co-financing introduced in the 2007 structural reform in Denmark. While the study failed to establish systematic links between municipal public health efforts and hospitalisation levels, it appears from other studies that municipalities are in fact increasing their activities in public health. This presents a theoretical puzzle and we present several possible explanations for further empirical work.