The prime minister's delivery unit is taking a key role in shaping 'crisp' new guidance for primary care trusts to reduce inappropriate hospital admissions and save over £1.4bn a year.

The prime minister's delivery unit is taking a key role in shaping 'crisp' new guidance for primary care trusts to reduce inappropriate hospital admissions and save over£1.4bn a year.

Department of Health head of demand-side reform Bob Ricketts said the savings could be made by cutting inappropriate hospital admissions by 12.5 per cent. But he warned that getting it wrong would be a 'recipe for chaos'.

Mr Ricketts, speaking at an HSJconference on ensuring PCT financial health, said demand management was not about rationing. 'It's about making sure the patient receives the right treatment in the right place and time.

'Demand management done well will improve outcomes and be fairer. It needs careful thought and design or it will marginalise clinicians and reduce activity.'

He said that, in devising demand management strategies, commissioners must set rigorous benchmarks, use recognised clinical guidelines and ensure schemes have been explained to patients.

He added that PCTs across England were already working on directing patients to the most appropriate care outside hospitals - mentioning a referral management scheme in Somerset for people with musculoskeletal problems that has saved£700 per patient.

And he was 'incredibly impressed' with work done in Eastern Birmingham which has introduced the 'Insight' referral management tool, where 80 GP practices log every referral, which the PCT and the GPs themselves review, so referral patterns can be compared and best practice referrals identified.

To date it has seen savings of around£2m in cutting inappropriate referrals and treating more patients nearer to or at home. 'If the scheme was translated across eastern Birmingham that would amount to potential savings of£14m,' Mr Ricketts said.

Asked if the guidance would give explicit instructions, Mr Ricketts said he could not go into precise details as the document was still awaiting ministerial approval. 'It will be field-tested in early December to make sure it is crisp enough.'

He said it 'won't be a legally binding document for the NHS but it will be for some other organisations' who work for the NHS under contract.

Earlier Audit Commission managing director for health Andy McKeon said most PCTs were 'doing well despite all the gloom and doom'.