Doctors in Oxfordshire are being offered payments to reduce the number of patients they send to specialists and consultants as health chiefs admit they could face a £23m budget hole.

Up to £1.2m will be handed over to GPs in incentive payments in a scheme designed to reduce referrals to hospitals.

Oxfordshire Primary Care Trust is facing a possible overspend of up to £23m, with a big rise in referrals blamed for the mounting problems.

It says the new scheme will help save the trust millions of pounds and avoid many patients having to go to hospital.

But patient groups expressed fears that the payments could influence clinical decisions. And they questioned why well-paid GPs would be getting extra funding for making what should be correct medical judgement.

The trust says it is still trying to establish why referrals have rocketed in recent months, draining the PCT budget.

One contributory cause is the success of the John Radcliffe hospitals and the NOC in cutting waiting times, resulting in a speedier throughput of patients. The county's ageing population is also viewed as a factor.

The PCT says the incentive scheme will reward doctors who can bring down referrals to the much lower levels of 2007. It is also to fund the development of new processes to ensure patients are not sent to hospital unnecessarily.

Many doctors have already signed up for the Demand Management Local Incentive Scheme. But GPs said the extra payments would reimburse them for the extra time and effort that would be spent having to review all referral cases with colleagues. They say the money will be invested in surgeries to help staff develop new specialisms.

Sue Woollacott, of the NOC's Patient Support Group, said: "Patient referrals should always be based on clinical need. If such a payment of money were to directly or indirectly affect GP judgement about the clinical need of a patients it would be appalling.

"Personally I cannot see why the PCT thinks GPs need incentives to make good clinical judgements. It seems to infer that GPs are not presently making good judgements and need financial payments to do it. I am sure this really cannot be the case."

A PCT document passed to The Oxford Times said: "Analysis has shown that there has been a statistically significant increase in GP referrals and this is contributing to approximately £6m of a predicted £23m year end overspend position."

Alan Webb, PCT director of commissioning, said: "What we are trying to do is understand what is driving the increase in referrals.

"What we are doing with this additional incentive scheme is asking GPs to review referral activity and processes with colleagues, which will take time. We are not paying them not to refer."

The Trust said it was confident the scheme would ultimately save money. The alternative would be to cut other elements of the PCT budget such as health promotion and drugs.

Oxfordshire Local Medical Committee, representing more than 300 GPs in Oxfordshire, is backing the scheme which started last week. Its chairman Dr Rickman Godlee said: "The number of referrals has increased dramatically. Hospitals are paid for the amount of work they do. If they overstretch themselves they get more money.

"The scheme is a good idea. Referrals to hospitals are expensive, costing between £150 and £200 for each patient.

"This is an incentive to GPs to spend extra time doing work that is going to save the local health economy money and mean more money for primary health care.

"It will incentivise GPs to look critically at every referral. Most referrals need to be done, But in some cases there may be alternatives, for instance where there is a GP with a specialist interest in say dermatology and eyes.

"This payment is to take on extra work. Within our practice the partners are spending 30 minutes a day discussing referrals."

But patient groups say the money would have been better spent on treating patients, with worrying knock on effects if patients did not receive early advanced treatment Jacquie Pearce-Gervis, of the Oxfordshire Patient Focus Group/ Intern LINks, said: "It is true that many patients do not want to be sent to hospital. But the other side of this is quite worrying. The real concern is whether we will now have cases where elderly people have to argue with GPs to see a consultant."

In 2007/08 Oxfordshire GPs made 108,866 referrals, But between from April to July the total was 38,489, which would represent a 6.1% increase by the end of the year.