Another 20 NHS trusts could also find themselves in special measures, it has emerged, as Health Secretary Andrew Lansley seeks to turn around one trust losing £1 million a week.
South London Healthcare NHS Trust will be the first in the country to be put under the control of a special administrator tasked with putting it on a viable footing. A further 20 trusts are facing serious financial difficulties which could ultimately see them in the same situation, it has emerged.
South London Healthcare NHS Trust, which runs three hospitals, has been criticised over standards of care and has run up deficits of more than £150 million over the past three years. Despite efforts to improve its financial performance, it is still thought to be on track to lose between £30 and £75 million a year for the next five years.
Its chief executive was informed Monday night that the trust is likely to be put into the "unsustainable providers regime" which was introduced by the last Labour government but never before used.
Mr Lansley sent a letter as the first step in the legal process towards installing a special administrator using the powers. The administrator will take over the board and recommend measures to the Health Secretary to put the trust's finances on a sustainable basis.
The trust runs Queen Mary's in Sidcup, the Queen Elizabeth in Woolwich and the Princess Royal University Hospital in Bromley. It has released a statement reassuring patients that services would continue as normal.
Sources close to Mr Lansley said long-standing difficulties had been made worse by Labour's merger of the three hospitals' smaller trusts in April 2009 and by two PFI deals that are now costing £61 million a year in interest. They said the hospital's deficit last year - covered by money from elsewhere in the NHS budget - was equivalent to the salaries of 1,200 nurses or 200 hip replacements a week.
A further 20 other NHS Trusts are also facing serious financial difficulties - some because of taking on expensive PFI schemes and others because of other long-standing issues. They have been set goals by the Department of Health to perform better but ultimately, if they do not achieve the results, they could also face being put in special measures.
Foundation Trust Network chief executive Sue Slipman said: "We welcome the fact that the Government is facing up to this serious situation by allowing the issues to be confronted. The health service is under enormous financial pressure at the moment.
"There will be much to learn from how this is resolved. This will not be the last time that the failure regime will be brought into play, but we should also remember how well so many NHS trusts have performed when faced with the need to make punishing financial changes in services."