Trust plans to sell off St Mary's to developers to reduce £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 large hospitals in London and two smaller ones, is considering a proposal to shut St Mary's, Paddington, and sell off the site to property developers.

Six firms of architects have been asked to provide a quote for turning St Mary's into 3,000 flats. The health trust, one of the largest in the country, 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.

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.

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. The 500-bed St Mary's was recently designated one of London's four major trauma units and is home to Ara Darzi, the surgeon 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. Charing Cross is thought more difficult because of its location. However, 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.

In a statement to i, Imperial Healthcare NHS trust confirmed that "we started a tender process to appoint architect firms to look at the development potential of all of our sites".

"Like many 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," it said.