Top hospital to be closed as cash crisis engulfs NHS

Trust plans sale of land to developers in struggle to cut £100m debt

A leading teaching hospital faces closure as a result of the financial crisis gripping the NHS. Managers at Imperial College Healthcare NHS Trust, which runs three major hospitals in London and two smaller units, is considering a proposal to shut St Mary's, Paddington, and sell off the site to property developers.

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Six firms of architects, among them the Danish company CF Moller, have been asked to provide a quote for turning St Mary's into 3,000 flats. Imperial wants to know how much it could raise from the sale of the site before it makes a final decision.

The health trust, one of the largest in the country, is effectively bust. It faces debts which have grown from £40m to £100m this year and must implement radical cuts to balance its books.

The proposed closure highlights the immense pressures on the NHS, which must find £20bn of savings over the next four years, at the same time as it implements a bitterly contested NHS reform Bill, which returns to the Commons tomorrow.

St Mary's stands on a prime commercial site in Paddington basin, and Imperial could save millions by moving its activities to an expanded site at Hammersmith hospital in west London, situated next to Wormwood Scrubs prison.

If the closure plan is confirmed it will cause a political firestorm. St Mary's is by far the highest-profile hospital to be threatened in the UK for 20 years, since the proposed closure of four teaching hospitals in London in 1992. The Health Secretary, Andrew Lansley, announced a moratorium on hospital closures last year and has drawn criticism for repeatedly delaying a decision on Chase Farm hospital in north London, where managers want to switch the accident and emergency and maternity departments to neighbouring hospitals.

The plight of Imperial brings into focus the desperate straits in which many London NHS trusts find themselves. The problems have been growing for decades as too many hospitals, located too close together and providing too many of the same services, have chased too few patients. As a result, they have found themselves struggling to maintain standards and sinking into debt.

The problems have been aggravated by the advent of the private finance initiative. Many trusts have added buildings funded through PFI which are now draining their coffers in interest payments. But they cannot be closed because, even if trusts stop using the space, they have to continue to pay for it.

St Mary's was where Alexander Fleming discovered penicillin, for which he was awarded the Nobel Prize. The 500-bed hospital was recently designated one of London's four major trauma units and is home to Lord Ara Darzi, surgeon and a former Labour Health minister, who pioneered keyhole surgery.

The trust also runs Charing Cross Hospital in Fulham which is in urgent need of an upgrade to bring it into line with fire regulations. A second option involves an arrangement between Imperial and West Middlesex trust which would lead to the closure of Charing Cross and the transfer of routine surgery to the West Middlesex, with emergency services going to Hammersmith.

A senior manager at another London NHS trust said: "The proposal is that Imperial will be centred on Hammersmith and St Mary's will close. Charing Cross needs £100m spent on it for fire regulations and is an unsatisfactory tower block, but must be kept because of its location. Paddington basin is a prime redevelopment site so will fetch a high price." Another source said: "Imperial is bust. It is not going to find the savings it needs through 'salami slicing'. Instead of three sites it may end up with one site if St Mary's and Charing Cross go."

Tomorrow, the King's Fund will call on the Government to take the politics out of hospital closures by handing responsibility to independent bodies.

Sir David Nicholson, the NHS chief executive, warned politicians in July that they must back big service changes or put "quality and safety at risk".

In a statement to The Independent, Imperial Healthcare NHS trust confirmed that "we started a tender process to appoint architect and engineer firms to look at the development potential of all of our sites" and that it was undertaking a "long-term strategy review". The statement said the trust had identified £45m of savings towards a £70m target for the year which would leave a £30m deficit, and was reviewing "how to make the best use of our buildings".

"Like many acute trusts in London, Imperial College Healthcare is facing significant financial challenges linked to reduced income and the increased move of patient care from hospital settings into the community." Last night a spokeswoman for the trust denied there were plans to close St Mary's.