Using the micro-panel data of all secondary and tertiary hospitals in X City of Guangdong Province from 2008 to 2011, this paper empirically studies the technical efficiency of private hospitals in urban areas and its relevant factors by DEA-Tobit two-step method, and also analyses the underlying cause for technical efficiency difference between private and public hospitals. We find that, ceteris paribus, the DEA technical efficiency of private hospitals is significantly 0.2629 higher than that of public hospitals, which is due to the fact that the growth rate of inputs like beds and areas of private hospitals are lower than that of public hospitals while the growth rate of outputs like outpatient services is higher than that of public hospitals. In addition, drug share has significant negative impact on the technical efficiency of hospitals, while quality of care and market competition help to significantly increase the technical efficiency of hospitals. Accordingly, this paper suggests that the government should further support and promote the development of private hospitals, completely keep a hospital from heavily depending on "drug sales", standardize and regulate market competition and enhance the quality of care.