Administrator to cut services after takeover of ailing South London Healthcare Trust

An NHS hospital trust which is losing more than £1m a week is set to be taken over by a Government appointed administrator with the power to sack staff and cut services as part of a radical restructuring programme.

In a controversial move, the Health Secretary Andrew Lansley has written to the board of the South London Healthcare Trust warning them he intends to trigger an "unsustainable providers regime".

The move means the trust, which runs the Queen Mary Hospital in Sidcup, the Queen Elizabeth Hospital in Woolwich and the Princess Royal Hospital in Bromley will be taken over by a "special administrator" with wide ranging powers to cut costs.

It is the first time that the powers have ever been used and are likely to result in significant reductions in staff and services which the Department of Health admits will be "unsettling".

However sources said that debts at the trust had risen to "unsustainable" levels due in part to two large PFI deals which costs the trust £61m in interest payments a year. The move comes just a few days after the trust’s chief executive Dr Chris Streather announced he was stepping down.

In his letter to the Trust, Mr Lansley said: "A central objective for all providers is to ensure they deliver high quality services to patients that are clinically and financially sustainable for the long term.

"I recognise that South London Healthcare NHS Trust faces deep and longstanding challenges [but] there must be a point when these problems, however they have arisen, are tackled.

"I appreciate that any decision to use these powers will be unsettling for staff, but I want to stress that the powers are being considered now so that patients in South-east London have hospital services that have a sustainable future." However, the move is likely to trigger anger from the hospital management who argue they have made significant progress in dealing with its problems.

Earlier this year it was shortlisted for an award for its quality of care, management and innovation. It was the only trust in London to be named and the only one that isn’t a foundation trust.

It was praised for its significant improvements to the quality of patient care and the management of complex service changes within the context of "very challenging circumstances" that it has been working in.

However the trust had outstanding debts of £69m at the start of the financial year.

A spokesman for South London Healthcare said it had entered into talks with the Department of Health and NHS London "on the best future for the trust".

"Our priority, and that of others involved, is to make sure that our long-standing and well-known financial issues are resolved," he said.

"Our staff have worked hard for patients and in spite of significant financial issues, we are extremely proud that we now have among the lowest mortality and infection rates in the country.

"We expect these discussions to come to a conclusion in the second week in July, when a decision will be taken by the secretary of state. In the meantime, we can reassure local patients and the public that our staff will continue to provide services as normal."

Professor Chris Ham, chief executive of the Kings Fund – a leading health think tank – said the move was a sign of things to come.

He said a special administrator would look at a wider range of options, including splitting up the trust’s services and "disposing of them to other providers".