This study analyses the cost (total cost and unit cost as well as unit costs of final cost centers) of the Suwamedura hospital in the year 2008. All the cost components are considered from provider perspective. This hospital started as a model chest clinic in Kurunegala municipal council area, North Western Province, Sri Lanka in 2001. After that it has developed as medium scale hospital with OPD facilities. This study is important for our health sector, because the Provincial government of North Western Province decided to start new chest clinics in six base hospitals in this province in 2011. The total cost of the hospital is Rs 12,787,165.38(USD111,192.70) and the unit cost of the hospital Rs 237.82(USD2.07). The unit costs for out patient department are Rs 148.00(USD 1.29), for medical clinic Rs185.61(USD1.61), for chest clinic (non tuberculosis) Rs 371.72(USD3.23), for well baby clinic Rs 1,744.40(USD15.17), for tuberculosis unit Rs 3,970.82(USD34.53) and for dental clinic Rs 259.06(USD2.25). But unit cost of the DOTS program is Rs 4,715.74(USD41.00) High unit cost and low performance indicators suggest low utilization in certain units in this hospital due to inefficiency in human and material resource allocation and the wastage of resources in the hospital. This study presents recommendations to the hospital administrators on improving these areas towards achieving quality and standard provision of health care.