By politics.co.uk staff
A lack of funding growth means many hospitals will have to fundamentally change their business models, the NHS' chief executive said.
Sir David Nicholson admitted the NHS faces a "difficult settlement" as the government pushes its health reforms, establishing consortia of GP in a bid to create a market dynamic, through parliament.
Until 2015 the NHS will only receive annual rises of 0.1% above inflation, following ten years of funding from the New Labour government.
"It is a difficult settlement for the NHS, no doubt about it," Sir David told the BBC.
"Most hospitals will be able to survive and thrive in the new world. But undoubtedly there will be those that will find it difficult."
He explained that many hospitals whose business model was based on increasing capacity had to "seriously look at the way they operate".
"The thing about the hospital service is that it has grown enormously over the last ten years in particular and we are going into a period where growth in the NHS is what they describe as 'flat real'," Sir David added.
The NHS is attempting to achieve savings of up to £20 billion but plans on reinvesting the money. Many other parts of government, Sir David pointed out, are facing cuts outright.
Earlier this week the Trades Union Congress said there were 50,000 planned or potential job cuts in the health service across the UK.
"Cutting staff or services is not the only, nor the best, way to save money in the NHS," Dr Hamish Meldrum of the BMA commented.
"There needs to be a much greater focus on reducing waste, such as that created by the bureaucracy of the internal market and the expensive folly of the private finance initiative."
Once the government's reorganisation of the NHS is complete an NHS commissioning board will be set up, chaired by Sir David.