Taoiseach Enda Kenny's new government is facing its first controversy amid reports of radical health service reform which opponents have said are out of the "Tory handbook".

Fianna Fáil - whose support is vital for Fine Gael's survival in power - said it was concerned over proposals to create trusts to run hospitals and warned that it wants the Health Service Executive (HSE) retained and improved, not dismantled.

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The Anti-Austerity Alliance said the changes listed in the draft programme for government will lead to the privatisation of healthcare.

Simon Harris was appointed Health Minister in the minority government and has said he is aiming to create an agreed 10-year strategy to resolve the overcrowding, waiting lists and other crises in the sector.

But Billy Kelleher, his opposite number of the Fianna Fáil benches, said his party will oppose any plans to fragment health services.

"We believe the HSE should be improved, not broken up. The development and sustaining of integrated services on a national and regional basis needs a national structure," he said.

And on the proposed trusts Mr Kelleher said his party had "grave concerns".

"Government plans will see these trusts manage their own recruitment, agree individual contracts with key staff and make collective agreements with their employees," he said.

Mr Kelleher said he was very concerned about how that would hit services in Navan, South Tipperary General and Portiuncula or the employment status and rights of front-line staff in smaller hospitals.

"This clearly means that there would no longer be national standards and terms for employing staff. It could lead to nurses in one hospital group being paid less or having different contracts of employment than nurses in another group," he said.

The formal programme for government is expected to be published mid-week.

Ruth Coppinger, Anti-Austerity Alliance TD, said the proposals are an attempt to privatise the health services by stealth.

"The cocktail of measures including the creation of a health commission, hospital trusts and health commission will lay the basis for privatisation," she said.

"This is a carbon copy of the method which the Tory government have introduced over the last number of years to privatise parts of the NHS.

"The plans aim to run the health service as a business."

Ms Coppinger said that by establishing trusts, hospitals effectively become standalone enterprises with a corporate structure.