Healthcare company Circle Holdings has announced it is in talks to withdraw from its contract to manage Hinchingbrooke - the country’s first privately-run NHS hospital.
The company states that the franchise, which it took on in early 2012, is no longer sustainable under the current terms.
It has now started talks with the NHS Trust Development Authority to agree an withdrawal from the contract.
Bosses claim unprecedented increases in accident and emergency attendances, insufficient care places for patients awaiting discharge, and a 10.1 per cent cut in fund mean that running the Huntingdon-based hospital is no longer viable.
The firm points out it has made payments of about £4.5 million to support the hospital.
Steve Melton, chief executive of Circle, said: “Like most hospitals, over the past year Hinchingbrooke saw unprecedented A&E attendances and not enough care places for healthy patients awaiting discharge.
“At the same time, our funding has been cut.
“We also believe that inconsistent and conflicting regulatory regimes compound the challenge for acute hospitals in this environment.
“This combination of factors means we have now reluctantly concluded that, in its existing form, Circle’s involvement in Hinchingbrooke is unsustainable.
“We have entered into discussions with the Trust Development Authority, and the patients of Huntingdon are our absolute priority in these talks.
“I would like to pay tribute to the amazing work of our staff.
“I will be speaking personally to them over the coming days and weeks.
“I’ve been humbled by the compassion, dedication, and professionalism of doctors, nurses, and managers.
“The hospital’s remarkable improvement over the past two years is a credit to them.”
Michael Kirkwood, chairman of Circle, said: “It is with regret and after considerable thought we make this announcement.
“The board has unanimously concluded that current conditions in the healthcare economy and regulatory environment are unsustainable for a franchise operator.
“We are proud of our colleagues’ achievements at Hinchingbrooke.
“Circle remains a committed partner of the NHS at our elective treatment centres and independent hospitals.
“Our clinician-led and employee co-owned model has a proven track record of efficiency and quality improvement, and we will continue to play a substantial role in the NHS.”
Under the terms of its contract, Circle has the right to end the franchise if it has to make aggregate support payments to Hinchingbrooke in excess of £5 million.
To date, Circle has made payments totalling approximately £4.84 million.
A spokesman for Circle said: “Conditions have significantly worsened in recent weeks and it is highly likely that Circle would be obliged to make further support payments that would exceed the £5 million cap.”
“We believe that solving the problems facing Hinchingbrooke can only be achieved through joined-up reform in Cambridgeshire across hospitals, GPs, and community services.
“In addition, we were one of the first hospitals to be inspected under the Care Quality Commission’s (CQC) new process.
“We understand the CQC report will be published soon, and expect it to be both unbalanced and to disagree with many of its conclusions.
“We are not the only hospital to find their process problematic, and believe that inconsistent and conflicting regulatory regimes compound the challenges for acute hospitals in the current environment.”
A spokeswoman for the health union Unison said: “Circle’s withdrawal from Hinchingbrooke is something Unison anticipated from the outset.
“While Circle claims that cuts to funding and added pressure on beds is the cause, this remains the case in all NHS trusts and yet they are unable to pull out in this manner.
“Hinchingbrooke, once a low cost, high achieving, thriving district general hospital, was starved of funding in a deliberate attempt to bring in private sector partner intended to pave the way for further partnerships of this nature.
“With staff morale at an all time low, a terrible leaked CQC report and staff of all levels voting with their feet, this partnership was doomed to fail.
“Unison feel vindicated in their lack of faith in this partnership and remains firm in its belief that there is no place in the health of the nation for companies to seek to make a profit in the way Circle planned.”