As part of the private companys 10-year contract to run the Huntingdon hospital, it has to pay any budget deficit at the end of the financial year. This year, it was £1.3million, a six-month report of its finances showed. It means that in its two-and-a-half-year tenure, Circle has made support payments of £4.85m just £150,000 shy of a £5m milestone at which point both Circle and the NHS Trust Development Authority must agree on the basis for the continuation of the franchise. The financial report said the loss of £1.3m was marginally higher than expected and was due to unanticipated contractual deductions stipulated by the local Clinical Commissioning Group. Earlier this year, Hisham Abdel-Rahman, Hinchingbrooke chief executive, said he expected to make a budget surplus in this financial year after breaking even in the year ending March 2014, though this now looks in doubt. Despite the deficit, hospital bosses have made year-on-year efficiency improvements of six per cent, compared to the four per cent required. They have also substantially reduced the hospitals annual losses, estimated to have been £7m a year under NHS management. The report warns that funding from the NHS was being redirected to struggling hospitals, leaving small trusts such as Hinchingbrooke at a disadvantage. It adds: Consequently, Circle has commenced discussions with the NHS as to its commissioning and contract intentions in relation to Hinchingbrooke and the wider system. The impact of changed funding mechanisms currently leaves a degree of uncertainty over Hinchingbrookes profitability over the next year, but Circle believes that our patient-centred and innovative approach should ensure the long-term sustainability of the contract. A Circle spokesman said: Hinchingbrooke continues to deliver excellent care. It made a loss marginally higher than expected last year, but still achieved above-average efficiency savings, and an approximate 90 per cent reduction of the deficit in just two years. Were obliged to declare that theres a degree of uncertainty for 2014-15 which is why people may have seen alarmist headlines but were not contemplating any pull-out. A spokesman for the NHS Trust Development Authority said: Hinchingbrooke Hospital is providing a good quality of care to patients and is moving in the right direction. We believe that Circles patient-focused approach is the right one and we are continuing to have positive discussions with them about the future sustainability of the contract. As part of the franchise, the first £2m of profit the hospital makes in a year is given to Circle, with any excess going towards Hinchingbrookes £38m debt. If the debt is fully repaid, it will trigger a £31m reward.