Waiting times for hospital treatment have reached their highest level for three years, as the NHS spending squeeze begins to bite, The King's Fund think tank has reported.

In February 2011, nearly 15% of hospital inpatients waited over 18 weeks for treatment, the highest level since April 2008, according to the first issue of a new monitoring report which the Fund is set to publish every quarter, to provide a snapshot of the state of the NHS as it comes to terms with the new financial climate and implements the government's reforms.

The proportion of patients waiting more than four hours in A&E rose sharply at the end of 2010, reaching its highest level since 2004-5, the report also shows. However, it adds that the proportion of patients waiting more than six weeks for diagnostic services fell back in February, reversing a steady increase since June 2010.

Moreover, cases of hospital-acquired infections have fallen to their lowest level in recent years, while delays in transferring patients out of hospital remains stable, according to the Fund, which says that its new quarterly report will provide a "regular health check" on the Service by combining analysis of key performance data with the views of a panel of 26 NHS finance directors.

While most of the directors told the Fund they are confident that they had met their productivity targets for 2010-11, more than two-thirds warned that they might not do so for 2011-12. Most of the 26 on the panel also believe that the government needs to be more realistic about the challenges involved in making the £20 billion in productivity improvements which the NHS needs to find by 2015, with only six of the directors identifying back-office efficiencies as being among the main ways productivity targets will be met and others expressing scepticism about the savings which can be made through this route.

12 of the finance directors said that closing hospital wards and reducing services will be among the main ways that savings will be delivered in their areas.

John Appleby, chief economist at The King's Fund, said the report "highlights significant concern among NHS finance directors - who are well-placed to report on the stresses in the system - about the prospects for the year ahead." 

"With hospital waiting times rising, the NHS faces a considerable challenge in maintaining performance as the financial squeeze begins to bite," Prof Appleby added.

However, the NHS Confederation stresses that the picture is "by no means a simple one," and points out that dealing with all the challenges facing the NHS "may well be making hitting targets for treatment waits difficult in some areas."

In general, the Coalition government's relaxation of the previous Labour administration's target of 90% of patients to be seen within 18 weeks of referral to hospital "gives hospitals greater freedom to treat patients based on clinical needs rather than the time they have been waiting, but we need to ensure that if they are being taken away or reduced in importance there are still mechanisms to ensure that patients can expect treatment to be timely and not subject to unnecessary delay," said Nigel Edwards, acting chief executive at the Confederation.

"The government's drive to measure the quality of patient care on outcomes rather than solely through crude target measurements has the potential to genuinely deliver better care for patients. But this is by no means a simple solution - measuring outcomes is extremely complicated and will require real work if we are going to genuinely measure improvements being made to care," Mr Edwards added.