A £167m scheme to centralise a hospital trust's services on one site has been dropped at a likely cost of £10m. Essex Rivers Healthcare trust made because the decision because the opening of a new independent treatment centre would have made it unaffordable and because the plans did not align with the government's desire to move more services into the community.

A£167m scheme to centralise a hospital trust's services on one site has been dropped at a likely cost of£10m. Essex Rivers Healthcare trust made because the decision because the opening of a new independent treatment centre would have made it unaffordable and because the plans did not align with the government's desire to move more services into the community.

Now the private finance initiative partners want as much as£10m in recompense for the costs they have incurred on the project.

The trust said it still wanted to move services from Essex County Hospital, which is nearly 200 years old, and centralise them at Colchester General Hospital, but it would now have to develop alternative arrangements.

Chief executive Peter Murphy said: 'The plan we have now needs to change to make it more affordable and the 'best fit' with the rapidly changing healthcare system.'

The dropped scheme would have seen extensive redevelopment at the Colchester General Hospital site to move all services out of the Essex County which is in the centre of Colchester. It would have been completed in 2010-11.

The trust had been working with a consortium of Senate Health ' part of Amec ' and Innisfree as preferred bidder since 2004, but had not signed a final contract.

Like other PFI projects it has come under extensive scrutiny both locally and at the Department of Health.

But Mr Murphy said four factors had influenced the decision:

- the white paper on care outside hospitals which envisages many outpatients and diagnostic services being based in the community rather than at acute sites;

- payment by results, which gives trusts less certainty about their future income;

- plans for an independent treatment centre in Essex which is expected to take 20 per cent of the trust's elective income '£7.8m in 2008-09;

- the adoption of the DoH's Supporting People with Long-Term Conditions model, which means many people with chronic conditions would come to hospital less often.

The decision to cancel the scheme was backed by the DoH's private finance unit and Essex strategic health authority. Mark Millar, director of resources and planning at the SHA, said: 'This is a prudent and sensible decision which will be better for the local community in the long run.'

But it is unusual for a PFI scheme to be cancelled so close to financial close. Amec said the cancellation of the project was not its fault and it would be looking for reimbursement of the costs it had incurred. The trust said: 'There is an agreement between the trust and Senate Health which covers a number of issues which, as you would expect, is subject to commercial confidentiality.'

It is thought likely that the DoH will agree to meet at least some of the company's costs, to calm the commercial sector's nerves over the future of PFI.

A DoH spokesman said it was too early to speculate about the costs involved.