This study compares the quality of services provided by public and private hospitals in Bangladesh. The premise of the paper was that the quality of hospital services would be contingent on the incentive structure under which these institutions operate. Since private hospitals are not subsidized and depend on income from clients (i.e. market incentives), they would be more motivated than public hospitals to provide quality services to patients to meet their needs more effectively and efficiently. This premise was supported. Patient perceptions of service quality and key demographic characteristics were also used to predict choice of public or private hospitals. The model, based on discriminant analysis, demonstrated satisfactory predictive power.