The assurance of good health care is one of the key social issues for every community and is the interest of every individual. As a result of the specifics in the management in the health sector, with the pronounced political influence in the management of public hospitals, and insufficiently economically educated management and general lack of staff, the Croatian health system demonstrates serious shortcomings. For these reasons, the demand for the services of private hospitals is growing. Following their management and administration, we can monitor the importance of quality budgeting strategy and cost management. The specificity in operating hospitals derives from their function: they provide service vital to their users (patients), and on the other hand, they need to operate in order to make profit, just like any other company. Although in public hospitals this second goal is more theoretical than practical, private hospitals must make (and maximize) profits - this is a pre-condition for their survival on the market and the means to meet social and economic goals. Contrary to the traditional notion of saving and minimizing costs, modern management in hospitals requires a proactive management that will assure that costs are streamlined and optimized to achieve set goals, while ensuring long-term business sustainability. This implies a developed awareness and synergy of all company’s segments, and above all timely and reliable information - financial and non-financial - which most often come from the accounting and qualitative business assessment. Starting from the definition of profit as the difference between total revenues and total costs, which is a more controllable variable, this research focuses on the process of managing and analyzing the cost structure of private hospitals, presenting the case study on the example of Special Hospital Medico in Rijeka. The given analysis demonstrates how the process of managing a private hospital is conducted and provides an answer to the key questions of modern business from the perspective of a successful company, with a focus on the costs as the key category. The processes, tools and methods used by management in the cost optimization are presented. As already mentioned, the privatization of health care is a growing global trend. For this reason, the subject of empirical analysis of this paper can serve as a reference for other, primarily private institutions, and as a basic model of cost management for public hospitals in order to optimize their business.