The study employed the DEA-Malmquist index model and Markov Analysis to evaluate the health resource allocation efficiency and dynamic changes of Traditional Chinese Medicine (TCM) medical institutions in the Yangtze River Economic Belt and the Yellow River Basin from 2014 to 2023. The results showed that the comprehensive efficiency of TCM medical institutions in the Yangtze River Economic Belt and the Yellow River Basin in 2023 was 0.892 and 0.883, respectively, indicating relatively low efficiency in both regions. The total factor productivity in both regions was greater than 1, and exhibited an overall upward trend. However, the efficiency type was unstable, with transfer risks, resulting in a leapfrog transfer occurring in some areas. Spatial factors affected efficiency transfer, and these transfers were associated with the initial level of resource allocation. Some provinces experience a phenomenon of decreasing returns to scale, along with input redundancy and insufficient output. While the configuration of low level and high level was relatively stable, there remained a risk of grade decline. The findings suggest the need to improve the efficiency of resource utilization by appropriately adjusting the scale of TCM healthcare institutions, focusing on redundant resources, promoting technological progress, optimizing resource allocation, and improving the dynamic evaluation and regulatory mechanism.