--adds detail and comment from shadow health secretary--
Circle Holdings (LON:CIRC) has started negotiations to pull out of the contract to run Hinchingbrooke, the UK’s only privately run hospital.
Shares in the private group fell by almost 30% after it said government spending cuts and a surge in A&E admissions meant its involvement with the franchise was now unsustainable.
The hospital in Cambridgeshire had been lauded as an example of how private providers could work within the NHS.
But Circle’s decision is the latest sign of the deepening crisis for the NHS and its accident and emergency care.
Andy Burnham MP, Labour’s shadow health secretary, said patients who rely on Hinchingbrooke will be worried about their hospital following the announcement.
“Ministers must provide urgent reassurance and set out a plan to ensure the continuity of services at the hospital in this uncertain time.
“It was the decision of the Coalition in November 2011 to appoint Circle and they must take responsibility for this mess.”
His Conservative opposite number, Jeremy Hunt, highlighted Labour’s role in deciding to hand the hospital to the private sector.
Meanwhile, a Care Quality Commission report on Hinchingbrooke will be published soon and Circle said it expected it to be “unbalanced” and to “disagree with many of its conclusions”.
The company is obliged to make a final support payment of approximately £160,000 to Hinchingbrooke, bringing its maximum total support to £5mln while termination and re-procurement costs will be a further £2mln.
Michael Kirkwood, Circle’s chairman, said: "It is with regret and after considerable thought we make this announcement.
The board has unanimously concluded that current conditions in the healthcare economy and regulatory environment are unsustainable for a franchise operator.
“We are proud of our colleagues' achievements at Hinchingbrooke, he added, and that “Circle remains a committed partner of the NHS at our elective treatment centres and independent hospitals.”
Circle shares slumped 27% to 48.7p.