Referral systems are determinant factors for the cost-effectiveness, efficiency and quality of patient care. Delivery of health care in the Ethiopian system follows a three-tiered model. However, gaps in the referral system have been identified as areas for future improvement. Higher proportions of new patients visiting the hospitals were bypassers. Moreover, weak feedback mechanisms between lower and higher level facilities were identified. The need for more qualified and competent health workers was identified as one of the most important reasons for bypassing. Health care planners and policymakers need to streamline and strengthen the referral system.