Structural equation models are very common in medical, social, management and behavioral sciences where researchers established some causal relations between observed variables and latent variable. In structured populations the assumption of independence of observations is often violated and had been ignored by the researchers. As a result with the correlated structure of the error terms, biased estimates of the parameters have been produced that leads towards incorrect statistical inference. Multilevel structural equation model under one factor model has been proposed, estimated and compared with the traditional structural equation model on patient satisfaction data. Multilevel structural equation model produced better estimates than the structural equation models.