Background <p>Traditional Chinese Medicine (TCM) constitutes an integral component of China’s medical system and has been elevated to a strategic national priority through key policy initiatives. Despite this strong policy support and sustained investment, growing evidence indicates persistent and structural inefficiencies in the allocation of healthcare resources within TCM hospitals, which constrain their capacity to deliver high-quality services and achieve policy goals. Multiple studies and official statistics report widespread technical inefficiency and significant regional disparities in resource distribution among TCM hospitals. However, persistent challenges remain in optimizing resource allocation efficiency and spatial equity within TCM hospitals. Current literature demonstrates limitations in comprehensively addressing both efficiency metrics and geographical distribution patterns, particularly through integrated analytical frameworks that capture the unique operational characteristics of TCM institutions.</p> Methods <p>This investigation employed a comprehensive methodological approach utilizing twelve-year panel data (2012–2023) from 30 provincial-level administrative regions. We established a multidimensional assessment framework incorporating static efficiency, dynamic productivity changes, and spatial distribution patterns. The analytical strategy integrated three complementary methodologies: the DEA-BCC model for evaluating static technical efficiency, the Malmquist productivity index for analyzing total factor productivity (TFP) dynamics, and the Health Resource Agglomeration Degree (HRAD) to Population Agglomeration Degree (PAD) ratio combined with Geographic Information Systems (GIS) for spatial equity assessment and visualization.</p> Results <p>The static efficiency evaluation revealed a national average technical efficiency score of 0.852 in 2023, with merely 23.3% of regions achieving DEA efficiency. The primary constraint was identified as deficient pure technical efficiency (mean = 0.882), with slack variable analysis demonstrating substantial resource redundancies, particularly in human resources and bed capacity in provinces like Shandong and Anhui, alongside service output deficiencies exemplified by Hunan’s outpatient visit shortages. Dynamic analysis indicated a 0.4% annual decline in TFP (mean = 0.996), predominantly attributable to deteriorating technical efficiency, while technological change (TC) exhibited marked instability with fluctuations between − 13.6% and + 17.5% during the study period. Spatial analysis uncovered pronounced geographical disparities, showing absolute resource concentration in eastern regions including Beijing, Shanghai, and Shandong, contrasted with western regional resource scarcity. The relative equity assessment demonstrated a complex distribution pattern where developed coastal regions exhibited resource shortages relative to their population densities, while several central and western provinces achieved superior resource-population matching.</p> Conclusion <p>This study systematically identifies three fundamental characteristics of China’s TCM hospital resource allocation: persistently low static efficiency driven by managerial inadequacies, declining TFP primarily due to technical efficiency regression combined with volatile technological advancement, and a spatially imbalanced distribution featuring concentrated absolute resource agglomeration in eastern regions alongside better relative equity metrics in inland provinces. These evidence-based findings emphasize the critical need for developing precisely tailored strategies that address region-specific efficiency constraints and resource-population matching considerations to optimize TCM hospital performance and support national healthcare objectives.</p>