The NHS will face a £30 billion funding gap over the next few years that cannot be plugged with traditional efficiency savings, NHS England warned last week.
Chief executive Sir David Nicholson told Radio Four's Today programme that specialist services will need to be concentrated in fewer hospitals to prevent a repeat of the failings in Mid Staffordshire.
'This gap cannot be solved from the public purse but by freeing up NHS services and staff from old style practices and buildings,' said Sir David.
NHS England's analysis of its finances says that funding cuts of five to six per cent will be needed next year, on top of the four per cent efficiency savings already being demanded this year.
'NHS funding is unlikely to increase; it would be unrealistic to expect anything more than flat funding (adjusted for inflation) in the coming years,' the report says.
This translates into a £30 billion shortfall between 2013/4 and 2020/1. By 2021, the NHS will need to save 22 per cent of its projected costs.
However, 'traditional' productivity improvements such a pay freezes, reducing hospital stays and better performance management may not be enough: 'There is a limit to how much more can be achieved without damaging quality or safety,' the report says.
NHS England says it will not consider introducing new charges on users or reducing the scope of NHS services as solutions, but it invites debate and new thinking on how money can be saved.
This apparently rules out the proposal made by Baroness Shirley Williams of introducing nominal charges for GP appointments.
Dr Peter Carter, RCN general secretary, welcomes new ideas about the future design of services.