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Background Young children are known to be the most frequent hospital users compared to older children and young adults. Therefore, they are an important population from economic and policy perspectives of health care delivery. In Switzerland complete hospitalization discharge records for children [<5 years] of four consecutive years [2002–2005] were evaluated in order to analyze variation in patterns of hospital use. Methods Stationary and outpatient hospitalization rates on aggregated ZIP code level were calculated based on census data provided by the Swiss federal statistical office (BfS). Thirty-seven hospital service areas for children [HSAP] were created with the method of "small area analysis", reflecting user-based health markets. Descriptive statistics and general linear models were applied to analyze the data. Results The mean stationary hospitalization rate over four years was 66.1 discharges per 1000 children. Hospitalizations for respiratory problem are most dominant in young children (25.9%) and highest hospitalization rates are associated with geographical factors of urban areas and specific language regions. Statistical models yielded significant effect estimates for these factors and a significant association between ambulatory/outpatient and stationary hospitalization rates. Conclusion The utilization-based approach, using HSAP as spatial representation of user-based health markets, is a valid instrument and allows assessing the supply and demand of children's health care services. The study provides for the first time estimates for several factors associated with the large variation in the utilization and provision of paediatric health care resources in Switzerland.