The letter had been sent to GPs by Northampton General Hospital trust chief executive Andrew Riley.
As media attention snowballed over the weekend, NHS East Midlands chief executive Barbara Hakin said the controversial move was 'unacceptable' and forced the letter to be withdrawn.
In a statement she said: 'The content of the letter is unacceptable. The chief executive of the hospital recognises this and has withdrawn the letter.'
Mr Riley made the offer to patients after Northampton teaching primary care trust had stopped paying for some minor procedures and introduced a minimum four-and-a-half-month-wait for other routine surgery to offset debts of£44m.
The letter was leaked to the Northampton Chronicle and Echol ast week. In an interview with the newspaper Mr Riley said that if the PCT did not fund the services and operations were not being performed, wards may have to be closed.
Responding to the development, Mr Riley said: 'I regret that this letter was sent out - it was not our intention to cause distress or concern to local GPs or their patients and I apologise sincerely.
'Our patients are currently being seen well within the government target of six months for people needing routine procedures.'