Ministers must spell out the future direction of NHS reform or risk losing the interest of the private sector, an influential panel has warned.

In a report published two weeks before Lord Darzi's final recommendations, the panel assembled by the King's Fund warns that larger firms no longer see NHS hospital work as central and fewer companies are interested in employing clinicians to provide core primary care.

The panel, which includes NHS North West chief executive Mike Farrar and Health Foundation chief executive Stephen Thornton, demands that the government must "match actions to rhetoric and prioritise market development" or private and voluntary sector investors will view the NHS as a risky market and walk away. The report, which was submitted to the Darzi review, echoes Healthcare Commission and Audit Commission concerns that reforms have not achieved their objectives.

It states: "All of the various elements of the reforms are working somewhere, although not always as intended. None is working everywhere."

Other demands are for clearer rules for dealing with "provider failure" and exit, for public consultation to focus on commissioning strategies and primary care trusts to appoint clinical panels to advise on commissioning. It calls for greater contestability in primary and community care, including phasing out the minimum practice income guarantee for GPs.

The news came as another King's Fund report on shifting care out of hospitals found "patchy" progress and confusion about the benefits and impact of the policy on traditional patterns of hospital-based care. The "seesaw" behavioural simulation, commissioned by the DH to inform the Darzi review, found that PCTs risked appearing to act "indifferently" through behaving impartially and failing to realise the consequences and risks of tendering.

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