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The purpose – Service quality and customer satisfaction have been extensively researched in the profit sector, but are also important in the non-profit sector. Specialty hospitals and health spas operate in the non-profit sector in Croatia, but some of them try to provide a part of their services to the health tourism market. Hospitals that work in the non-profit sector and especially those that see their future in the health tourism market need to pay attention to service quality and customer satisfaction. Although specialty hospitals are a vital segment of the Croatian health system, there has not been enough research regarding service quality and customer satisfaction measurement in that sector. Therefore, the purpose of this study is to assess the impact of service quality on customer satisfaction in the healthcare sector. Design/methodology – Empirical research is used to determine patients’ perceptions and expectations of service quality in one specialty hospital for medical rehabilitation. SERVQUAL instrument was used to measure the service quality. The SERVQUAL questionnaire included an expectations and perceptions section, each consisting of 34 statements. In addition, the questionnaire contained an extra section relating to demographics and an overall question on the impression of quality of the service provided. One hundred and four (104) satisfactorily completed questionnaires were collected. Findings – The analysis revealed that patients perceived a rather satisfactory level of health care quality across all SERVQUAL dimensions. Patients who perceived a higher level of service quality show greater satisfaction with the services, as well as a higher level of loyalty to the hospital which provides medical services. Research results indicate the multidimensionality of the concept and the existence of a gap between patients' expectations and the perceptions of service quality. Finally, despite the criticism of the SERVQUAL instrument, this study confirms the usefulness of the SERVQUAL model in terms of its reliability and validity for measuring quality in the health care sector. Originality of the research – This paper sheds light on a poorly researched field in the Croatian context. The specific environment in which the research was done demanded the implementation of a modified SERVQUAL model which was broadened with the items referring to sports, recreation and amusement activities. Theoretical contribution of this paper is reflected in testing the dimensionality and reliability of the modified SERVQUAL instrument for measuring service quality in a specialty hospital. It was found that the modified model has four dimensions. The ‘Output quality’ dimension, which refers to the services outside the sphere of medical services, has the greatest impact on the patients’ satisfaction. The practical contribution of the paper is manifested as an encouragement for managers in specialty hospitals to devote greater attention to service quality and customer satisfaction measurement, especially when their goal is to enter the health tourism market. It provides directions for hospital managers to develop strategies which will meet patients’ expectations of service quality and increase their competitiveness in the health tourism market.