Improving the efficiency of township hospitals in China: A case study in the context of pharmaceutical reform

Our goal is to assess changes in the factors affecting efficiency and the realignment of incentives. Using survey data from THs in Weifang prefecture and a nonparametric frontier model, we observe that average efficiency has remained constant and relatively low. Major challenges persist, including a “soft budget constraint,” financial barriers to healthcare access, and the excessive size of some THs, even after the reform’s implementation. We observe no significant shift in the determinants of efficiency, despite this being a primary objective of the reform, indicating that incentives have not been effectively realigned. Our findings suggest that a comprehensive implementation of the reform—addressing all incentive changes simultaneously—is essential to avoid unintended contradictions.