Objective： To study the substitution effect of outpatient services on inpatient services and provide suggestions on designing outpatient policies. Methods: The data were from 13 districts/counties in one area of eastern China from 2007 to 2013 for the new cooperative medical scheme. This study employed a fixed effects model to analyze the impacts of outpatient visit times, expenditure amounts and reimbursements on inpatient services.Results: One outpatient visit reduced the total amount of inpatient services by 20 Yuan. An increase of 10 000 Yuan outpatient reimbursements saved 9 700 Yuan inpatient expenses. An increase of 10 000 Yuan outpatient expenses led to a decrease of 3 000 Yuan inpatient reimbursements. The outpatient services did not increase the inpatient hospitalization times significantly. In particular, the effects of the outpatient services were mainly on the inpatient services at the district/county levels, and no significant impacts on the outpatient services at the city levels. Conclusion: There is a substitution effect of outpatient services on inpatient services. The health insurance departments should take this substitution effect into account and shift more funds on outpatient series, when they design outpatient and inpatient reimbursement policies.