Abstract
This paper studies medical referral systems in developing countries in relation to patients' health care seeking behavior. It is shown that the vertical referral structures are consistent with patients' cost minimizing behavior in their search for medical treatment. This consistency is a consequence of a common desire among patients and health planners to minimize costs of treating illnesses, so as to get the most from their limited resources. The conditions under which the medical referral system reflects treatment seeking behavior of patients are specified. Since these conditions do not hold exactly in the real world, the referral system has some major weaknesses as a model of how national health service delivery systems actually function. Reforms are suggested to rectify these weaknesses.
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