Understanding congestion in China’s medical market: an incentive structure perspective

Congestion has become one of the most important factors leading to patient dissatisfaction and doctor-patient conflicts in the medical market of China. In this study, we explore the causes and effects of structural congestion in the Chinese medical market from an incentive structure perspective. Our analysis reveals that prior medical system reforms with price regulation in China have induced hospitals to establish incentives for capital-intensive investments, while ignoring human capital, and have driven medical staff and patients to higher-level hospitals, reinforcing an incentive structure in which congestion in higher-level hospitals and idle resources in lower-level hospitals coexist. The existing incentive structure has led to cost increases and degradation of human capital and specific factor effects. Recent reforms to reduce congestion in the Chinese medical market were not effective. Most of them had no impact on and did not involve the existing distorted incentive structure. Future reforms should consider rebalancing expectations for medical quality, free flow of human capital and price regulation reforms to rebuild a new incentive structure.