NHS chief executive David Nicholson has described the idea of many primary care trust provider arms becoming independent as “nonsense”.

It confirms that the policy of asking community providers to become separate foundation trusts or social enterprises has been abandoned.

The idea that at a time when we are facing real financial challenge, that we’ll start creating a whole new set of NHS organisations is nonsensical

David Nicholson

Instead, Mr Nicholson appeared to give his strong support to “vertical integration” of community providers with acute trusts.

Speaking to the NHS medical directors summit yesterday, Mr Nicholson said: “The idea that at a time when we are facing real financial challenge, that we’ll start creating a whole new set of NHS organisations is nonsensical.”

In particular, he said the idea of many PCT providers becoming foundation trusts was “nonsense”.

“We have got to move from that quickly and think of alternatives ways of doing it.”

He said cost-saving improvements could often be made at the “interface” between providers and this was a case for integration, with acute or other providers.

Mr Nicholson said: “I would say to those in acute and community services you should be talking long and hard to each other.”

He said “vertical integration” was “a real opportunity to improve services right across whole pathways”.

The co-operation and competition panel is currently investigating two proposed mergers of community services with acutes, from NHS Lewisham and NHS Derby.

It has not yet ruled on any vertical mergers but has approved the transfer of NHS Barking and Dagenham’s community health services to North East London Foundation Trust, a mental health services provider.

As recently as April, PCT providers were pressing for all to be allowed to become foundations, rather than only the six existing pilot sites.

However, in August Mr Nicholson scrapped an October deadline for PCTs to outline plans for their provider.

Yesterday he accepted the DH had not “covered ourselves in glory” with its community services policy.