An NHS hospital trust has been formally warned it could be declared bust – in the first case of its kind.
South London Healthcare, which runs three hospitals, had debts of £69m at the start of the financial year.
The health secretary has told the trust an administrator could be brought in within weeks. The trust could be dissolved and some services closed.
A spokesman for the trust reassured patients that services would be run “as normal” until a decision was made.
The trust runs the Princess Royal University Hospital in Orpington, Queen Mary’s Hospital in Sidcup, and the Queen Elizabeth Hospital in Woolwich.
When the three hospitals became one organisation they inherited a large debt – mainly from the private finance initiative that had been used for the buildings at Orpington and Woolwich.
In recent years, the deficit has got worse – it reached 2012 with £69m of debt on a turnover of just over £424m.
As well as struggling financially, the trust also has some of the longest waiting times for operations, and longer than average waits in A&E. However, it does have low infection and death rates.
If a decision was made to break up the trust, it would not necessarily mean the closure of all services. Another more successful NHS organisation or private provider could end up taking on some.
But for that to happen, there would need to be a formal process of review and consultation.
Any decision would then need to be signed off by Health Secretary Andrew Lansley and reported to Parliament.
In a 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 long-standing challenges, some of which are not of its own making.
“Nonetheless, there must be a point when these problems, however they have arisen, are tackled. I believe we are almost at this point.”
The process now faced by the trust – known as an unsustainable providers regime – was established under the last Labour government as a last resort, but it has never been used.
Mike Farrar, head of the NHS Confederation, which represents trusts, said: “We welcome this decision. The NHS can’t go on with short-term fixes to financial problems.
“That might mean some tough decisions, but hopefully will deliver financial sustainability in the long term.”
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”.
“The first priority must be to ensure continuity of patient care for the services that must remain at these hospitals,” he said.
“For other services more radical options need to be looked at, including transferring services to other hospitals, or stopping that care altogether.”
Labour accused the government of “losing its grip” on NHS finances.
“After many years of neglect by the Tories, Labour used PFI to deliver the biggest hospital-building programme in the history of the NHS, benefiting millions of patients,” a spokesman said.
“In contrast, this government has lost its grip on NHS finances and is wasting billions of pounds on a NHS reorganisation which is opposed by patients and health professionals.”
The process that could lead to the trust being dissolved involves: