This study examines the de/erminants of health care provider choice of urban householdsrnof Ethiopia. Particularly, it investigates the effects of user fees on the demand for healthrncare by different segments of socio-economic group using multinomial logit model. Therndata source of the study is the Ethiopian Urban Socio-economic Survey conducted inrn2004 by the Department of Economics of Addis Ababa University in collaboration withrnthe Department of Economics, University of Goteborg in Sweden Cost recoveryrnmechanisms were introduced based on the principle that health care demand inrndeveloping countries is price inelastic; so that more resources can be generated for thernhealth sector without reducing the demand by the poor. But the results of this studyrnreveal that for a given rise in health care cos/, the poor will reduce /he demandfor healthrncare significantly in greater proportion relative to the better off In other words anrnincrease in user fee is likely to drive out the largest portion of the poorest householdsrnfrom receiving medical care. The study also shows the poor are required to payrnsignificantly greater proportion of their income to health care than the better off in orderrnto get treatment. This will aggravate the existing inequality in access to basic health carernservices. Hence, even though the principle of cost recovery had been advocated asrnalternative means of health care financing in most developing countries, increasing userrnfee may drive the poorest population out of health care market or deepen their economicrnsituation unless some reliable protective measures are taken.