This paper discusses the decision-making mechanism of medical market on supply side and how the hierarchical medical system help inhibiting the excessive medical behavior. In the case of incomplete information and rigid demand hypothesis, the patient will accept all the supplies doctor offered and there is structural unbalance in both general medical market and advanced medical market which means the excessive medical treatment exist. Under the hierarchical medical system, distinguishing by primary medical institution, both general medical market and advanced medical market reach equilibrium which improve the social resource allocation efficiency and the patients’ welfare at the same time. Based on the analysis above, the corresponding policy suggestions are put forward.