Health secretary Alan Milburn announced this week that managers at underperforming trusts are 'on probation', as he published the star rating system which has replaced traffic lights, and tough measures to deal with 'no-star' trusts.

Launching the new performance ratings, Mr Milburn repeatedly stressed the importance of management. 'The crucial ingredient that makes or breaks a hospital. . . is about how well the hospital is organised and how well It is managed.'

And of the chief executives and chairs at the 12 no-star trusts, he said: 'People are on probation. I think everyone understands that.'

Mr Milburn said the trafficlight system had been dropped in favour of allocating stars because 'we listened to what people in the service had to say. This is a different way of describing the same outcome.'

A senior NHS source told HSJ there had been 'no shortage' of people saying the traffic light idea was a poor one - 'not least the chief medical officer [Professor Liam Donaldson]'.

Under the current scheme, trusts have up to three stars, allocated according to nine core performance criteria - including waiting lists and hospital cleanliness - and further 'refined' according to a 'balanced scorecard' of criteria relating to patient focus, staffing issues and clinical areas such as compliance with risk management standards for clinical negligence.

Mr Milburn stressed: 'These are not perfect measures.'They will be developed further for next year.

NHS chief executive Nigel Crisp said: 'For slightly more refinement, We have used evidence from the Commission for Health Improvement where That is appropriate.'

Mr Milburn conceded that some trusts, including two zerorated ones, had been reclassified because of findings by CHI review teams. 'It is significant, and I think it is an important override mechanism, ' he said.

A CHI spokesperson said: 'Over the next year, the star ratings will be influenced by CHI's work.

We are a part of the mix.'

This could mean, for example, that stars could be lost or gained during the coming year following publication of a trust's clinical governance review report.

But while ministers' response to proposals for an increased role for CHI in the Bristol inquiry report would have 'an impact', he was cautious about how far CHI's role in the ratings system might grow.

The dozen zero-rated trusts will have immediate intervention from the Modernisation Agency, as well as monitoring from regional offices and the Department of Health's central performance directorate.

At the other end of the scale, three-star trusts win a range of extra freedoms, including the right to create spin-off companies, extra cash for central programmes without the need to bid for it and the opportunity for chief executives 'to provide direct advice and input to ministers and the NHS chief executive' on policy.

Three-star trusts can get extra resources if they take over and improve persistently failing trusts, with chief executives taking two salaries for managing two trusts under the franchise system. 'This would 'unleash the spirit of public sector enterprise', Mr Milburn said.

The health secretary said the star ratings 'contain few surprises, except for the public'. The poor performers had been 'very well known for very many years' inside the service.

He added: 'One of the ways you can drive and improve performance is by giving patients better choice, not just over the time of their appointment but the location of the hospital.'

The 'dirty dozen' Three months to improve: detailed monthly monitoring Dartford and Gravesham trust Ashford and St Peter's Hospitals trust The Medway trust University Hospitals of Coventry and Warwickshire trust (will have a return CHI visit within three months) Brighton Health Care trust Barnet and Chase Farm Hospitals trust A year to improve Epsom and St Helier trust Stoke Mandeville Hospital trust Portsmouth Hospitals trust Oxford Radcliffe Hospital trust East and North Hertfordshire trust United Bristol Healthcare trust