University College London Hospitals foundation trust is claiming significant savings and improvements in service quality by devolving budgets to clinical leads and directors.
Speaking at the King's Fund annual conference, UCLH medical director Professor David Fish described the foundation trust's service line model, in which clinical teams understand costs of their service and have responsibility for it.
The approach has been used at the London Heart Hospital, helping it turn around from an underused, loss-making unit with poor clinical outcomes in 2003-04 to a highly profitable unit with good outcomes.
Dr Fish said: 'We devolved the income and expenditure budgets and aligned the clinical and managerial structure, creating six business units clinicians could relate to.'
He added: 'We now have frontline teams driving the service.'
The work was led by surgeon Professor Sir Bruce Keogh, who is now the NHS medical director.
Foundation trust regulator Monitor is now helping UCLH run a pilot in maternity services, which is due to report formally in March 2008.
The trust started by increasing staffing and went through an educational programme focused on service line quality. Staff engagement is now so good that the entire midwifery night shift staff recently stayed on for an 8am meeting.
Professor Fish said the approach was only possible because of payment by results.
'We are a large trust and need to find ways to drive up people in the slower lanes.'