Taoiseach-elect Brian Cowen tonight signalled that some State agencies could be scrapped as part of a long-term revamp of the public sector.
An international report has highlighted shortcomings in the management of many government bodies with the health service coming in for particular criticism.
Mr Cowen said the study by the Organisation for Economic Co-operation and Development (OECD) paved the way for a wide-ranging review of 800 state agencies.
"I strongly agree with the OECD's call for improved governance arrangements for the Public Service, which must be at the heart of the next phase of public service modernisation," he said.
"There is a need to take a hard look at the approach to agencies, why and how they are set up and the proper reporting relationships between agencies and their parent departments."
The report called for better sharing of information between the Department of Health and the Health Service Executive (HSE).
It was also critical of proposals for the setting up of a "super" regional hospital in Navan, Co Meath, while suggesting two hospitals could be planned for the north east - one regional and one general.
Mr Cowen said: "As a result of this report I'm not ruling out anything which will help us improve the delivery of public services to citizens."
Outgoing Taoiseach Bertie Ahern backed his successor adding that the Government recognised the good and bad in the public service with a warning that the number of state agencies needed to be looked at.
"The OECD's findings and recommendations regarding agencies are well-founded and hard-hitting," Mr Ahern said.
"Departments are focusing on controlling inputs to agencies, rather than on what they should do, or how well they are performing.
The Taoiseach suggested findings and recommendations in the review will provide the basis for a renewed agenda for reform.
Tom Geraghty, Public Service Executive Union spokesman, claimed the report was a missed opportunity.
"Suggestions such as greater use of outside consultancy are, frankly, daft and outrageously expensive while others, such as greater delegation of managerial responsibility are so generalised as to be meaningless," Mr Geraghty said.
"The biggest failure, however, is in the fact that the team has lost sight of the needed improvements in actual delivery of service and has once again made the cardinal error of putting forward human resource solutions regarding pay, promotions and mobility."
On health, the report stated that while Ireland has a younger population than continental Europe, the cost of medical manpower is more expensive.
It said greater emphasis has been put on aligning pay-rates for staff with other countries rather than on the maintenance and refurbishment of buildings or on the development of primary and community-based services rather than hospitals.
Labour's Jan O'Sullivan said the report proved more money needed to be put into health.
"It is a dose of reality in terms of our actual spending on health," she said.
"Ireland is near the bottom with regards to the provision of acute beds as well as regarding health spending overall.
"In addition the Labour Party's proposal to increase the number of acute beds and step-down beds has been justified by this report."
The OECD has also shown that private insurance financing of medicine does not necessarily improve its efficiency.
The report said that if the HSE's plans to reform health care in the North East were successful, it would be one to be applauded.
However, it stressed that community health care settings had to be in place and more nursing home beds made available for the elderly before acute services were cut back and a new super hospital can be build for the region.
It said budgets allocated to primary care were currently being sidetracked to the hospitals.