Choice of hospitals is being discussed in a number of European health systems. The Danish case provides interesting lessons because patients' free choice has been in effect since 1993. This paper explores the responses at the supply side after the introduction of DRG rates for extended choice patients in the Danish hospital system in 2000. The main question is whether the introduction of DRG rates and the resulting changes in incentives have affected county management of health care. How has the county-based governance system, which traditionally has emphasised budget control, co-operation and equity, reacted to the introduction of DRG rates and stronger incentives for "extended choice patients"?