Andrew Freeman is chief executive of Yarrawonga District Health Service, west of Albury, a public hospital and community health centre that provides medical care and a range of other services, such as maternity, geriatric, physiotherapy and social work.

He said the ''block grant'' system set up by the state government had given him flexibility to fund services that were not truly efficient to run in a small community.

''For example, it allows us to maintain an active obstetric service,'' he said. ''But on a pure efficiency model, is it efficient to run a maternity service? In dollar terms, maybe not.

''It concerns me, the talk [in the reform plan] about efficiency.''

The ability to move funds around the hospital without tying them to a particular treatment also allowed him to run a midwife training program, to keep expertise in the community.

''Victoria has recognised that for smaller health services, pure case-mix funding wasn't the best model,'' he said. Other small health services have used the flexibility to boost primary care, he said.

He was also concerned that if his hospital was amalgamated into a local network of hospitals it would lose touch with the community, and perhaps lose the input of local volunteers as a result.

But he said the ''devil will be in the detail'' of the Commonwealth plan.

''It's not as though the model can't work that they are proposing,'' he said. ''But I would just hate to see this place lose that local ownership.''