DoH director of system management Bob Ricketts told a King's Fund debate that PCTs should 'monitor GP referral rates and incentivise reductions where they are overly high'.
This contradicts GPC advice that practices should avoid deals with PCTs for hitting targets.
GP referrals to secondary care rose 6.4 per cent in 2009, DoH data show, despite the use of referral management schemes.
Candace Imison, King's Fund deputy director of policy said cutting referrals to hit targets was dangerous for patients.
'The use of norms and averages (when monitoring referral rates) needs to be treated with extreme caution,' she said.
'There are many reasons why one GP may refer a patient while another chooses to manage them.'
But PCT directors at the event urged managers and clinicians to agree local enhanced services (LESs) to compare GPs' referral patterns.
Denis Gizzi, director of system reform at NHS Oldham, was 'surprised' the GMS contract did not incentivise 'capacity management'.
He proposed LESs to cut unnecessary lab tests, medication, diagnostics and admissions. 'We have to apply some technical standards (to GP referral) and incentivise practices to stay within these slots,' he said.
Conor Burke, managing director of NHS Redbridge, said the PCT benchmarked individual GPs to make them look at their performance.
But Ms Imison said GPs faced increasing pressure. 'GPs are trying to do a complicated process in a very short space of time, especially if they are working where there is an increasingly complex set of services out of hospital.'
GPC chairman Dr Laurence Buckman said benchmarking individual GPs was 'one of the most inappropriate things you could do'. He said: 'In principle analysing referrals is good for patients, but not as a cost-cutting exercise.'