Abstract: Overall, the autonomy of China's public hospitals extends continuously, most of which are nearly between budgeting organization and autonomous organization. According to the distribution of decision-making powers between the government and the public hospital, the paper puts forward three kinds of relationship type: the public hospital being entangled with the government, the public hospital breaking away from the government, and separating the public hospital from the government with organic connection. The relationship of entanglement type manifests as affiliated administration and restricted dependent autonomy. The detachment type manifests as inflated autonomy and atrophic detachment. A series of incurred problems and contradictions originate from such problems as the entanglement, the detachment, the principal-agent chain between the government and the public hospital, and the hospital building functions dispersing in various government departments and the fragmentation of external governance in the course of public hospital governance. To solve these problems the paper puts forward separating the public hospital and not breaking away from the government, taking the institutional arrangement centering the corporate governance structure as the grasp to readjust the relationship between the government and the public hospital. Based on the polycentricity governance theory, the paper designs and analyzes the corporate governance structure of public hospitals, the check-and-balance system, and the incentive-restraint mechanism.