Primary care trusts wanting to reconfigure services were given a stark message in an economic analysis prepared for the NHS in London: financially, it will make sense to cut beds and services at non-private finance initiative hospitals.

The paper recommends reducing services at Queen Mary's Hospital, Sidcup, rather than PFI hospitals in south east London, where a consultation on reconfiguration proposals is expected this autumn.

It adds that decisions should take into account many factors, not just finance. But with significant excess of beds expected and a£65m deficit some cuts seem inevitable. A spokesperson for the project board said hospitals were working to see where care would be best delivered but that all were likely to see significant change.

Reducing work at PFI hospitals at Bromley and Woolwich would achieve few savings as the NHS is committed to annual payments for the buildings, and often additional costs for some elements of facilities. The report says 'whole hospital PFI sites' have 'less flexibility to reduce 'hard' facilities managements costs in the event of an unplanned reduction in activity because of constraints in their PFI contracts'.

In contrast, excess land and facilities at non-PFI sites could be sold off to make significant savings.

The paper also warns that a new PFI site at Lewisham Hospital will need to achieve 'high utilisation rates... if it is to avoid the increased pressures giving rise to a worsening of its income/expenditure and cash flow positions'.

Sharon Massey, cabinet member for health and adult social services at Bexley council, which covers Sidcup, said: 'We are devastated that Queen Mary's is coming out as the most vulnerable hospital. There is effectively a mortgage on other hospitals. Queen Mary's does not have a mortgage so is easy to dispose of.'

The paper focuses on south east London but arguments would apply in other areas with a mix of PFI and non-PFI hospitals.

Imperial College London professor of health policy Nick Bosanquet also sent out a warning. He said: 'There will be a temptation to say 'we are stuck with these contracts, we will close down older hospitals which may in fact be lower cost'.'