Healthcare Provision Shifts Under DIP Reform: From Conventional Medicine to Traditional Medicine

The Diagnosis-Intervention Packet (DIP) payment reform aims to enhance cost efficiency in healthcare delivery but may also induce adaptive physician behavior. This study examines whether the DIP reform leads physicians to shift conventional medical demand toward traditional medicine. Using patient-level data from a Chinese integrative medicine hospital, we analyze changes in conventional and traditional medicine expenditure structures before and after the DIP reform, with heterogeneity analyses across insurance schemes and age groups. Conventional medicine expenditures decreased significantly, while traditional medicine expenditures increased substantially after the reform, indicating physician-induced service substitution from conventional to traditional medicine. These findings suggest that although the DIP reform effectively contains conventional medicine costs, it may unintentionally transfer excessive medical demand to traditional medicine, underscoring the need for integrated regulatory mechanisms across medical treatment systems.