This research attempts to construct mathematical models for estimating length of stay per admission and investigating the effects of patients'' characteristics and clinical indicators on the length of stay for the top ten Diagnosis-Related Groups (DRGs) at a teaching hospital. It is also concerned with the development of cost per admission and cost per patient day functions. Further, these functions are used for analysis to determine a value of the length of stay that would minimize cost per patient day. Also, the effects of changing the length of stay (from the actual to the projected levels) on the total cost per year and the cost per patient day are examined. Moreover, the current cost system for the teaching hospital is evaluated and a new cost system (Activity-Based Costing) is proposed. The nuclear medicine unit is selected to implement the new cost system. Overall, this research offers a new decision support instrument for healthcare administrators.