Hospital buildings owned by Western Sussex Hospitals Foundation Trust will now be sold on the open market after failing to attract buyers with a health and social care remit.
The Harness Block and peripheral buildings at Southlands Hospital are now for sale on the open market. The Harness Block had sat empty for a year after the trust transferred its elderly inpatient wards to Worthing Hospital.
The board received one bid from a privately-backed group to use the site for health-related purposes.
However, the members said they were not satisfied that the proposal would benefit NHS patients.
Local campaigners were hoping the site could be used as a community hospital or for public health needs.