NHS hospitals are to be banned from cutting costs by setting minimum waiting times and rationing certain treatments following a damning expose of "scandalous" practices, the Government announced.
An investigation earlier this year found waiting times were being deliberately extended in some areas so that patients would go private or die before they were seen to slash costs.
The study by the the Co-operation and Competition Panel (CCP), commissioned by ministers, also uncovered arbitrary spending caps that meant patients were denied treatments such hip replacements and cataract removals.
Health Secretary Andrew Lansley said the cost-cutting methods would be banned from the end of March - with Primary Care Trust (PCT) bosses potentially facing the sack if they breached the new rules.
"For too long, Labour turned a blind eye to unfair practices within the NHS which harmed patients," Mr Lansley said. "No right-thinking person could possibly understand how anyone could delay a patient's treatment unnecessarily. If patients need treatment, they should get it as soon as possible, and where they choose.
"That is why we're taking action against those Primary Care Trusts which are behaving in this way. From next year, everywhere in England, minimum waiting times and caps on operations will be banned."
Patients in England have a legal right under the NHS Constitution to start their hospital treatment within 18 weeks of referral by their GP.
But the CCP study says even though hospitals could see patients sooner, many were saving cash by introducing minimum waits, meaning patients were left in pain for longer than necessary, while others went private or died.
Shadow health secretary Andy Burnham MP said: "When Labour left office NHS waiting lists were at their lowest ever level.
"One of Lansley's first acts as Health Secretary was to relax Labour's commitment to treatment within 18 weeks. We warned him that waiting times would increase and this is exactly what has happened, with around a 50% increase in breaches of the 18-week standard."