Survey of trust chiefs shows huge budget shortfalls and a need for reorganisation of services

The leader of England's hospital and primary care trusts has warned that the NHS is heading for disaster and must change course if it is to survive.

Mike Farrer, chief executive of the NHS Confederation, said some hospital departments must close, specialist services must be consolidated, and more care must be provided in the community to meet budget shortfalls.

Similar calls have been made by politicians and senior NHS figures over the past 20 years. But this time, Mr Farrer will say in a speech to health service leaders today, the deteriorating financial situation in the NHS means decisions can no longer be shirked.

Three-quarters of chairs and chief executives from 250 NHS trusts and organisations surveyed by the confederation said the current financial situation was "very serious" and a quarter said it was "the worst they had ever seen".

Mr Farrer said: "We know what needs to happen. But are we going to be able to take the assertive action needed in time?"

John Appleby, chief economist at the King's Fund, warned in the British Medical Journal that demands for the NHS to find savings equivalent to but over and above the £20bn required by 2015, in the years to 2020, were "undoable" and that the NHS was being set up for failure.

He argued for the closure of specialist departments and their transfer to centres of excellence. "We need specialised centres for stroke care which we know have saved lives in London, we need more coaching for patients leaving hospital to enable them to cope at home, which reduces re-admissions, and we need more patients with dementia, who occupy 20 per cent of hospital beds, managed in the community," he said.

The NHS needed "a new model of primary care", Professor Appleby added, with more use made of community pharmacies to supplement the service provided by GPs.

Mr Farrer blamed politicians and NHS managers for "a failure of leadership" and warned they must abandon short-term solutions and win public backing for long-term radical changes.

The Health Secretary, Andrew Lansley, said: "We have committed to investing an extra £12.5bn in the NHS and led a programme of quality-led savings for reinvestment in services. The NHS needs to change to match the needs of a changing population."