Hinchingbrooke and Peterborough hospital decisions condemned
The Department of Health has been criticised for allowing a new hospital in Peterborough while a private firm was being hired to run Hinchingbrooke Hospital 24 miles away.
The future of the cash-strapped hospitals was now "in doubt", the Commons public accounts committee said.
The MPs said there had been a "complete lack of strategic oversight" of NHS services in the region.
Ministers said locals would continue to receive high-quality health services.
In its report the committee said that "the strategic management of health resources across the East of England SHA [Strategic Health Authority] has failed".
It said the Department of Health was "ultimately responsible" for the decision to locate two hospitals "only 24 miles apart... in an area of the country where the NHS has a long-acknowledged over-provision of acute healthcare".
The new Peterborough City Hospital was built under a private finance initiative (PFI) scheme which has proven to be financially "catastrophic" for the Peterborough and Stamford Hospitals Trust, the committee said.
The MPs said the trust had accumulated a deficit of £45.8m by the end of 2011-12, on a turnover of £208m - the highest deficit to turnover ratio of any NHS trust.
Huntingdon's Hinchingbrooke Hospital was taken over by Circle Healthcare, a private company, in February 2012, after its bid to take over Hinchingbrooke Health Care NHS Trust had been accepted in November 2011.
"We are concerned that Circle's bid was not properly risk assessed and that Circle was encouraged to submit overly optimistic and unachievable savings projections," the MPs' report said.
"While some financial and demand risk has been transferred to Circle, the NHS can never transfer the operational risk of running a hospital, leaving the taxpayer exposed should the franchise fail."
Conservative MP for Peterborough Stewart Jackson, a member of the committee, said the Department of Health was now paying almost £1m a week to keep the Peterborough and Stamford Hospitals Trust afloat.
There will have to be "unprecedented" levels of savings for the two NHS trusts to become viable, leaving the future of both in doubt, he added.
"The trust's financial position is now so serious that, even if it achieves challenging annual savings, it will still require significant financial support of up to £26m a year for the next 30 years to remain viable," the report explained.
It also said: "The decision to approve these two deals flies in the face of past and present government policy to treat more people outside hospitals and to concentrate key services in specialist centres."
The report also found that management consultants had been used at "great expense to little effect".
Circle aims to achieve savings of £311m over its 10-year franchise contract, but the MPs said the company had not achieved the savings it expected in the first few months of operation, and had parted company with its chief executive only six months into the project.
Unison's Christina McAnea said: "Unison warned from the start that selling Hinchingbrooke off to a private company was the wrong cure for its problems. In just one year some of our worst fears are coming true, and the much-hyped savings that many claimed would be delivered are not materialising."
Health Minister Earl Howe said the difficulties seen at the hospitals showed the "unique challenges for managing healthcare in the East of England".
He added: "We will not sweep these problems under the carpet, and in doing so our priority will be to ensure the needs of local patients continue to be met in the best possible way.
"We are working closely with both hospitals and Monitor [the regulator of NHS foundation trusts] to ensure local patients continue to have access to high-quality services whilst managing the financial issues faced in the east of England region."