Effective policy research of county and township health sector integration in China: Empirical evidence from the difference-in-differences model

Medical service fragmentation is a common problem worldwide, and many countries have adopted integration to solve the difficulty. Contrary to developed countries, developing countries such as China must consider how to implement integration under a relatively weak medical foundation. This study aims to evaluate the effect of the "Compact Union of County and Township Health Sectors" policy on the medical service capacity of a typical integration model represented by Shanxi Province in China and determine the path the policy followed. By using Shanxi's county-level medical integration as a quasi-natural experiment, this study establishes a difference-in-differences model to investigate the effect of the policy using official data. A series of tests are conducted to verify the robustness of the result. Finally, the policy pathway is tested. The results show that the third-level surgeries and outpatient service utilization of leading hospitals and township institutions increased. Still, inpatient service utilization and fourth-level surgeries did not show a significant change in either type of institution. Moreover, the enhancement of leading hospitals' service capacity comes mainly through improving asset efficiency and personal income, while the improvement of township institutions' capacity comes primarily through increased personal income. Compact integration of county-level medical institutions can stimulate and improve service capacity by improving asset efficiency and personal income, even with a weak medical foundation. However, to achieve continuous service capacity improvement, the professional level of county-level institutions must be strengthened with a superior hospital's assistance, and personnel's enthusiasm for active innovation must be cultivated.