More hospitals are to be allowed to become foundation hospitals, the prime minister has announced.
There are fears staff could leave other hospitals to work at foundation trusts
Tony Blair announced an extension of the controversial programme, which has faced opposition from Labour MPs and unions.
It means 38 NHS trusts in England which have been awarded three-star ratings can apply to be included in the scheme.
Twenty-five trusts have already applied to become foundation hospitals.
Tony Blair also announced an extension of the work carried out by fast-track treatment centres, which carry out operations such as hip replacements.
He said the diagnostic and treatment centres, run by the private sector, will carry out 125,000 orthopaedic operations over the next five years - in addition to the 286,000 operations a year to be carried out by NHS and private centres.
Fifteen NHS centres are already open and a further 31 are due to open by 2005.
One private centre is already operating, with a further 18 planned.
Health ministers have said they want to see every NHS trust achieve foundation status over the next four to five years.
Health minister John Hutton said: "As with the first wave, each preliminary application for NHS foundation status will need to provide clear evidence on the NHS Trust's current and recent past performance and working practices across the range of national priority areas.
"NHS Foundation Trusts will be firmly part of the NHS but will be locally accountable, free from Whitehall control and as a result better able to deliver responsive services to the communities they serve."
The plan to allow foundation hospitals to raise funds through private borrowing, has proved controversial.
The Bill creating foundation hospitals was only narrowly passed in the Commons earlier this month, with a majority of just 35.
And opponents say that there remains a risk of a "two-tier" health system, with foundation trusts improving while conventional trusts did not.
Unions have warned staff could be attracted to foundation hospitals, making it harder for other trusts to recruit.
Liberal Democrat spokesman Dr Evan Harris said: "Foundation hospitals are a flawed and divisive idea.
"Opening up the number of foundation hospitals from 25 to all 63 three-star health trusts doesn't make it a better idea.
"The basis for selection is arbitrary since it is now common knowledge that the star-rating system rewards bad practice and figure fiddling as much as anything else.
"The prime minister has never addressed the key concern which is the unfairness of a system which allows certain hospitals to have extra money at the expense of all other hospitals."
Mr James Johnson, chairman of the British Medical Association, said: "Developing extra protected capacity for elective work will help the government meet its waiting list targets, but more importantly will benefit patients whose quality of life may be seriously impaired while waiting for treatment.
"Obviously if more resources were directed to NHS hospitals they could take on this additional work."
He added: "The BMA does have a number of concerns regarding the centres and we will be taking these up with the Department of Health."
Dr Beverly Malone general secretary of the Royal College of Nursing said: "We think it would be premature to push ahead with the further extension of foundation trusts.
"The concerns of the health community have not been adequately addressed and an immediate roll out of all three-star rated trusts would not allow time for proper evaluation or bedding in of the new structure."