Circle is pulling out of a deal to run Hinchingbrooke Hospital after stating its involvement “does not have a sustainable future in its existing form”.
Circle, the first company to manage an NHS hospital, said a combination of factors including unprecedented A&E attendances and a funding cut of around 10 per cent this year had led to its decision.
The Department of Health (DH) has said there will be a “managed transfer” of the running of the hospital.
The DH said the terms of the 10-year contract enabled either Circle or the DH to pull out in the event of losses of more than £5 million or if quality problems were not remedied. The DH said Hinchingbrooke Health Care NHS Trust was forecasting a deficit of £10 million in 2014/15.
The company said it took over the running of the Cambridgeshire hospital in 2012 and since that time it had saved the taxpayer “around £23 million in total”.
In a statement Steve Melton, chief executive of Circle, said: “Like most hospitals, over the past year we have seen unprecedented A&E attendances – at times up to 30 per cent higher year-on-year – and not enough care places for healthy patients who await discharge. Second, at the same time, our funding has been cut by approximately 10.1 per cent this year.
“With these pressures on the system, to maintain the standards our patients deserve requires significant further investment, on top of the £4.84 million and considerable resources Circle have invested in the hospital to date.
“We believe that solving the problems facing Hinchingbrooke can only be achieved through joined-up reform in Cambridgeshire across hospitals, GPs and community services.”
A DH spokesman said: "We're disappointed Circle has made this decision.
"There will now be a managed transfer of the running of the trust and patient care will not be affected.”
Hinchingbrooke Health Care NHS Trust has a history of financial trouble and accumulated a deficit of £39 million between 2004/5 and 2007/8, according to the National Audit Office.
In a report the NAO said Circle was awarded a franchise to run the hospital under a scheme in which it would only make money if the trust generated a surplus. If there was a deficit Circle would have to cover up to £5 million of the shortfall from its own resources, after which it had the option to terminate the agreement.