Payment by results, the system the NHS uses to fund treatments, is costly and in need of a radical overhaul, according to a body representing primary care trusts.
According to the NHS Alliance, the system inflates costs of procedures.
Payment by results works by PCTs paying hospitals a fixed rate for each procedure, which is determined by a national tariff.
The NHS Alliance pointed to a recent Audit Commission study, which estimates that PBR overestimates costs by as much as 10%.
Dr Michael Dixon, chair of the NHS Alliance, said: ‘We are talking about quite a large margin, which means that the level of error, up to 10%, may well be the equivalent of total savings required at a time of deficit.’
The NHS Alliance has called for trusts to be able to undercut PBR in areas where it is too high and for the tariff to become the maximum price payable for a procedure.