District general hospitals face handing their specialist services to regional centres of excellence because they will no longer be paid the services' full cost, HSJ has learned.

The Department of Health is developing a new 'top-up' system in which hospitals performing certain specialist procedures will receive a premium over the payment by results tariff to ensure their full costs are met. A number of DGHs that perform specialist procedures have been told they will be excluded from the list of providers eligible for top-up, which the DoH is due to publish in December.

Services affected include cardiology, respiratory, orthopaedics, neurosciences and specialised children's services.

NHS Confederation policy director Nigel Edwards told HSJ: 'A lot of people are very worried about this. If you are a non-teaching DGH but there's someone there with a special interest, you've virtually had it.'

'This could drive the centralisation of services. It depends how much people think they are losing and how much they think it's worth cross-subsidising services.'

DGHs told HSJ the loss of specialist status will mean an average 1 per cent loss of income and force them to consider ending affected services. This would hasten the controversial centralisation of specialist services that the DoH has said it wants.

Countess of Chester Hospital foundation trust finance director Jane Tomkinson said the loss of specialist status would cost the trust£1.3m and 'wipe out' gains it stood to make under reforms to the payment by results tariff for 2008-09.

'The big hits are in paediatrics and orthopaedics and we'll have to take a judgement in terms of whether we'll be able to continue to provide those full range of services in the future. That may involve us having to go to Monitor to request a change in the schedule of mandatory services and to consider whether our portfolio of services can continue as it currently is.'

Specialist commissioning groups - made up of a number of primary care trusts in each area - were charged with designating which of their local hospital providers should be eligible for specialist top-ups, in negotiation with their strategic health authorities. On 15 October the DoH published a 'provisional' list of 81 eligible for a top-up in one or more of eight specialist areas.

But HSJ has been told the DoH viewed the list as 'too generous' and asked SHAs and specialist commissioners to revise down the number of local providers by 31 October.

HSJ has seen the revised list for NHS South East Coast. Whereas the 15 October list designated 13 local hospitals as specialist, the latest version cuts this to just four and consolidates most services at Brighton and Sussex University Hospitals trust. Ten local providers were deemed orthopaedics specialists in the first version but the latest version designates none. Respiratory specialists are cut from seven to none and cardiology specialists from 10 to one.

A spokesperson for the SHA said: 'The intention of these changes is to create better provision in specialist units while allowing for the best possible provision of more routine treatment in all hospitals. By its very nature, the reassignment of funding in this manner will not be welcomed by all.'

One trust affected, Frimley Park Hospital foundation trust, was initially designated specialist in respiratory services but was struck off the latest list. Finance director Martin Sykes said: 'We are unclear as to whether we should now refer these patients only to specialist centres, or if we should continue to undertake the procedures while not being correctly reimbursed.'

Another NHS South East Coast hospital finance director described the designation process as a 'fiasco' which could cause problems for its foundation trust application.

HSJ understands that DGHs in other SHA regions will also be hit.

Hospitals told HSJ they were unhappy with the lack of consultation and transparency over the criteria SHAs and specialist commissioning groups used to designate 'specialist' providers. But Nigel Edwards said the process was always going to complicated.

A spokeswoman for the DoH said it was unable to comment as officials had yet to discuss the latest designations.

For more analysis from HSJ's editor, click here