NHS star ratings are set to be replaced by a five-level worded grading system under plans going out to consultation.
The Healthcare Commission is consulting on its plans
The Healthcare Commission inspection body suggests using grades from "very good" to "serious concerns", covering performance in seven areas, from 2005.
They would place more emphasis on patients' experiences than the star ratings started in 2001 for hospitals, ambulances and primary care services.
The BMA and the Patients' Association welcomed the end of star ratings.
The commission has launched a three-month consultation on the proposals.
It said the five-level grading system was not set in stone and it has put forward a number of options on how performance will be measured.
They have also been designed to reduce the burden of inspection.
The new yearly ratings system, provisionally called a health check, will be based on seven key areas identified by the Department of Health - safety, clinical and cost effectiveness, governance, patient focus, accessible and responsive care, care environment and amenities, and public health.
Commission chairman Professor Sir Ian Kennedy said: "With our new annual health check we will build a richer picture of healthcare organisations.
"We want to hear from patients, the public and those working in healthcare about what information they would find most useful."
New NHS rating proposal
The scrapping of the star ratings has long been expected.
It has proved controversial ever since it started, with critics saying it was too crude and simplistic for the NHS.
Patients' Association chairman Michael Summers said he would be glad to see the back of the star ratings.
"I accept that with patient choice we do need some form of ratings system but star ratings were too simplistic," he said.
"It is fine for hotels but not for the NHS. What patients need is a system that takes into account the outcomes of surgery and clinical performance."
Nigel Edwards, director of policy at the NHS Confederation, said: "The new system must be more reflective of hospitals' performance than the star ratings, where NHS organisations could go from one extreme of the rankings to the other in a single year.
"Hospitals must no longer be branded failures for under-performance against a single criteria, which could boil down to the waiting times for a handful of patients or minor changes to their financial status.
"There is much in these proposals which looks encouraging."
The British Medical Association said the new system must be "robust, transparent and meaningful".
A spokesman said: "The BMA is pleased that the star ratings system is coming to an end. We have repeatedly called for a better system that uses fewer targets and gives patients more useful information."
And Health Minister Lord Warner added he welcomed the "thrust" of the proposals.
"I believe that the approach the commission is proposing will improve the way patient care is measured and ultimately enable patients to exercise choice."
Liberal Democrat health spokesman Paul Burstow said: "The litmus test for the new health check must be that it cuts the red tape that ties the hands of hardworking doctors and nurses and ensures that they can always treat the sickest quickest.
"Too many of the political targets set by health ministers miss the point and make things worse."
And shadow health secretary Andrew Lansley said: "This U-turn demonstrates forcibly how right the Conservatives were to say star ratings were a misleading and unhelpful way of describing hospitals."