A tender process for the running of George Eliot Hospital Trust has been abandoned, it was announced today.

The three remaining bidders in the process, run by the NHS Trust Development Authority, were South Warwickshire Foundation Trust, which wanted to take the trust over, and Circle and Care UK, which had both submitted bids to run it as a franchise.

HSJ understands the decision does not mean the NHS is abandoning management franchising as an option for NHS trusts altogether. It remains an option for Weston Area Health Trust, in the south west.

George Eliot chief executive Kevin McGee, speaking to HSJ about the decision to scrap the process today, said it was due to recent improvements in clinical performance, particularly in its emergency department and avoidable harm. However, he also indicated that an ongoing national review of how hospital “chains” could be established in the NHS was a factor.

He said the trust had developed a relationship with University Hospitals Birmingham Foundation Trust, which was helping it improve care quality.

George Eliot was “buddied” with the UHB when it was placed in regulatory special measures last year due to care quality concerns.

UHB chief executive Dame Julie Moore is an outspoken advocate of small district general hospitals being run in “chains” by larger providers, such as hers.

Mr McGee said about the link to UHB: “Its an important relationship for us. The decision that has been made is the George Eliot Hospital will continue as the George Eliot Hospital for the foreseeable future. We recognise that to do that, that we will have to, and want to, continue with the support from UHB.”

The tender process began when the George Eliot board decided it could not reach foundation trust status on its own. Mr McGee today said he did not know whether it could gain foundation status, and that its focus was on improving clinical quality and finances.

“Where that will lead us, it’s very difficult to say”, he said.

“There’s still a lot of work to do on clinical and financial sustainability, so this is not an end position for us.”

The £123m turnover trust is in significant financial difficulty, and forecasting a £7.9m deficit for the end of 2013-14. Its position is set to worsen in 2014-15, as Mr McGee said he was negotiating a planned deficit of between £10m and £12m with the TDA. A key factor in the trust’s finances has been the need to recruit extra clinical staff.

South Warwickshire chief executive Glen Burley said: “We are extremely disappointed with the decision to stop the process to find George Eliot Hospital a long term partner for the future as we firmly believe that an integrated Warwickshire organisation is best for patients and the sustainability of the health economy.

“We understand that this process hasn’t been stopped because of the quality of the bids and we now need to take some time to understand this decision and the impact it will have.”