The second wave of the Department of Health's independent sector treatment centre programme has been dealt a further blow, with Nuffield Hospitals pulling out of negotiations to provide mobile operating theatres across the West Midlands.

The not-for-profit provider had been named as preferred bidder to provide services across the region but has pulled out after six months of negotiations with the DoH. The company cited costs and delays for the decision. Chief executive David Mobbs said the scheme was due to go live this month but 'delays have seen costs and risks rise'.

The DoH will now be forced to start negotiations with reserve bidders Netcare in an attempt to salvage the contract.

It is a further setback to the DoH's hope to get a further 250,000 NHS patients per year treated in the private sector.

Private sector sources told HSJ they no longer believed the government would achieve its aim of spending£550m per year in private sector work for NHS patients.

This week Nuffield Hospitals announced its 2006 performance and accounts showing revenue for the 2006 declined 8.2 per cent to£480.6m. The company blamed the fall in revenue on a decline in opportunities in the NHS, with pressure to achieve financial balance taking priority over efforts to reduce waiting lists.