Social enterprises are being allowed to take over £900 million of NHS services without safeguards to ensure they save the taxpayer money and will not go bust, a watchdog has warned.
And the high-profile initiative is at risk of being undermined by the Government's own plans to increase competition within the health service, it suggested.
The National Audit Office (NAO) found the "many risks" involved in handing control to bodies set up by groups of staff were not being adequately addressed by the Department of Health (DoH).
Vague contracts failed to require them to deliver better value than alternative providers and little provision had been made to deal with them failing, the NAO report said. Insufficient attention had also been given to the consequences of the groups going bust when they were forced to compete more widely with the private sector under NHS reform plans.
But the watchdog was met with an angry response from the Government, which accused it of "failing to understand the point of this initiative".
Cabinet Office Minister Francis Maude has championed the right of public servants to form mutuals or social enterprises to run services, with the aim of one in six having done so by 2015. Only 20 are operational in the health service so far but another 30 are expected to have begun work by September, delivering around £900 million of services.
The NAO said that some had already shown successes - for example in radically reducing sick leave in one area - but that it was too early in the process to determine their value for money. It also complained that the task of analysing effectiveness was made more difficult by the failure of the DoH to set any "measurable objectives" for the initiative.
Although Primary Care Trusts (PCTs) looked at the business case, they "did not contract social enterprises to deliver cost or service benefits beyond what the alternatives would have offered". The NAO said there was a danger that the enterprises would "struggle to become self-sustaining businesses" when services were opened up to more competition under controversial NHS reforms.
A DoH spokesman said: "The NAO's conclusions on Right to Request fail to understand the point of this initiative in terms both of the quality of care delivered and of cost savings. Across the country, the very reason why they have been so successful is that it is led by users of the service - local people, staff - those who are all best placed to deliver responsive services for their communities.
"The Department remains committed to freeing up NHS staff to take control of the services they provide to deliver the best care for their patients. We want to see even more of the frontline staff who know their patients best given the power and freedom to shape services around them through our Right to Provide scheme, the first such scheme to be launched in the public sector."