The Circle Partnership was just £150,000 away from a threshold that could see it lose control of Hinchingbrooke Hospital, though both the NHS and Circle remain committed to the franchise.

As part of the private company's 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 hospital's 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 Hinchingbrooke's 
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.

“We're obliged to declare that there's a degree of uncertainty for 2014-15 – which is why people may have seen alarmist headlines – but we're 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 Circle's 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 Hinchingbrooke's £38m debt. If the debt is fully repaid, it will trigger a £31m reward.