NHS Direct is to be completely wound up by the end of the financial year and its remaining business dispersed to other providers, it has been announced.

The closure of the telephone and online health advice provider after 15 years follows the NHS trust’s announcement it was pulling out of all 11 of its NHS 111 contracts because they were financially unsustainable, just three months after a disastrous launch in April.

Despite only providing 30 per cent of contracted call volumes on its biggest contracts in the West Midlands and North West, the organisation has been losing about £0.5m a week ever since.

More than 700 staff will be put at risk of redundancy when a formal consultation period starts on Monday, with redundancy costs potentially running to £15m.

The remaining 469 staff are expected to transfer to the ambulance trusts lined up to take on the 111 contracts on a temporary basis.

NHS Direct chief executive Nick Chapman told HSJ it had had no option “but to withdraw from the contracts” as “understandably, commissioners were not willing to increase the contracted sums”.

He said the Trust Development Authority had given the trust until the end of the year to sort out the problems but it had to agreed last month it would be unable to set a balanced budget.

“As a result we are now progressing with the TDA to the formal process of closing the trust,” he said.

He stressed patient services would not suffer as a result of the break-up of the organisation. NHS England is overseeing the transfer of the 111 contracts to ambulance trusts and out of hours providers, as reported by HSJ earlier this month.

NHS Direct bid on the basis of a cost per call of about £7. NHS England director of operations Dame Barbara Hakin told HSJ any payments above that level to the “step in providers” had been agreed by local commissioners. However, £5 of the £15m of accident and emergency funding set aside for NHS 111 was allocated to support the temporary providers.

NHS England is currently developing a new service specification and has asked commissioners to put any reprocurements on hold until it is published next spring.

She confirmed one of the things being considered was whether there should be more clinicians on the service.

Asked whether NHS Direct was entirely to blame for its predicament or whether NHS England and the Department of Health which signed off the contracts as ready to go live should also share some responsibility, Dame Barbara said there were “all sorts of issues in the early days of NHS 111 from which we have learnt significant lessons”.

She added: “We completely respect NHS Direct’s decision to withdraw from the market. Nobody would suggest for a minute that one organisation was to blame for those issues in the early days of 111.”

HSJ understands the digital services provided by NHS Direct will transfer to the Health and Social Care Information Centre where they will sit with NHS Choices as the Health and Social Care Digital Service. This includes the contract recently won by NHS Direct to provide online health and symptom checkers to its Australian counterpart.

The Choose and Book appointments line run by NHS Direct is already due to be reprocured by March 2014. The small team responsible for stepping up the National Flu Pandemic Service could also go the information centre. This is being overseen by Public Health England.

However, the complex health information and medicines enquiry service and the dental nurse assessment service are unlikely to be recommissioned by NHS England, despite handling around 16,000 calls a month transferred from NHS 111

The services, worth more than £12.5m a year, were a feature of NHS Direct’s 0845 service and were commissioned for the first year of NHS 111.

Mr Chapman said it would not make a difference to the organisation’s future viability even if they were recommissioned.