A leading provider of integrated health and social care looks set to abandon its ambitions to become a standalone community foundation trust in a move lawyers say could be repeated elsewhere.

The board of Torbay and Southern Devon Health and Care Trust was yesterday due to be warned the organisation was unlikely to pass Monitor’s strict viability tests in its current form.

The trust was formed from the provider arms of Torbay Care Trust and community services previously delivered by NHS Devon in the south of the county. It also provides social care under arrangements with Torbay and Devon councils.

Care trust chief executive Anthony Farnsworth said in a report that around half of its £138m income was “subject to review” by April 2014 as contracts awarded under the Transforming Community Services programme came up for renewal and Torbay council reviewed its funding arrangements.

Mr Farnsworth said that although there was no expectation the work would be lost, the trust would struggle to “demonstrate sufficient financial resilience to Monitor”. To do this it would have to prove it could cope with the theoretical downside scenario of it losing the contracts.

A spokesman for Monitor said the regulator had not yet received any FT applications from community trusts and so had not considered the issue in detail.

David Owens, commercial partner at Bevan Brittan, told HSJ that while larger community trusts with numerous contracts would probably withstand Monitor’s viability tests, smaller organisations would find them “very challenging”.

He added: “I would not be surprised if more of these new community trusts come to the same conclusion as Torbay.”

Seventeen aspirant community FTs deliver more than £2bn of community services. They are the main provider in 34 primary care trust areas. Of these, seven have a smaller turnover than Torbay and six have just one main contract.

Under Transforming Community Services, most PCTs awarded services without a competitive tendering process on three-year contracts. Market analysts Laing and Buisson have predicted a “wave of tenders” in 2013-14 when these arrangements expire.

A spokesman for Derbyshire Community Health Services Trust, one of the only two aspirant FTs to submit their applications to the Department of Health, said the trust was unconcerned as it expected its contract would be renewed on a rolling basis.

However, DAC Beachcroft commercial health partner Robert McGough said it was hard to see how commissioners could justify not tendering for community services when Virgin ran much of Surrey’s services and Serco had been named a preferred provider in Suffolk, proving there was a market.