Derriford Hospital will undergo a major refurbishment

Plymouth Hospitals NHS Trust says it is reviewing its Vanguard project due to changes in the way the NHS is paid for and managed.

The plan would have meant demolishing 80% of the hospital and building a 200-bed non-emergency care centre.

Instead the trust is going to refurbish the hospital and build a reduced �210m care centre by 2010.

'Private competition'

The trust blamed a number of factors including payment by results, a new system of funding being rolled out whereby hospitals are paid per patient treated rather than given a lump sum based on past activity.

It said in a statement that the new system meant that it would be far more difficult to predict future funding levels.

The trust also pointed to the government's policy for significant development of community services.

The aim, revealed in a recent White Paper, is to reduce pressure on acute hospitals, and to enable specialist hospitals such as Derriford to excel in specialist treatment.

The trust also cited the government's encouragement of private firms to provide healthcare services to NHS patients, "in direct competition to long-standing acute general hospitals".

The trust said Derriford would be refurbished and a reduced care centre would contain outpatient, rehabilitation and surgical facilities.

Vanguard director Andy Ibbs said: "We are working closely with our partners to finalise the shape and size of the facilities."

The Department of Health is due to review the care centre aspect of the project in the coming weeks as part of their review of all major capital developments across the country.