Last month, Health Secretary Andrew Lansley said that the trust, which operates three hospitals in Woolwich, Orpington and Sidcup, could go into administration as it has accumulated debt of £150m.

Powers included in the Health and Social Care Act of 2006 allow ministers to send in a special administrator for ‘unsustainable NHS providers’. Today these were activated for the first time with the appointment of Matthew Kershaw as administrator.

Kershaw is the DoH’s director of provider delivery and will assume the powers of the trust board’s chair and directors from July 16. He will be responsible for maintaining patient services as well as developing recommendations to secure a sustainable future for services provided by the trust for Lansley to consider.

He will prepare a draft report, to be published in Parliament by October 29, setting out what action needs to be taken. This could recommend that the trust be dissolved, and its services transferred to other trusts. A final report for the secretary of state will be produced by early January, with a decision on what action needs to be taken will be made by February 4.

Lansley said Kershaw would work with clinicians, all other trust staff, commissioners, patients, the public and other stakeholders to ‘drive the changes and shape a sustainable solution for South London Healthcare NHS Trust and the local health economy’.

He added: ‘Past efforts have not succeeded in putting the South London Healthcare Trust on a sustainable path. This will be a big challenge and my key objective for all NHS trusts is to ensure they deliver high-quality services to patients that are clinically and financially sustainable for the long term. The purpose of the Trust Special Administrator is to ensure that services are high quality and to ensure a lasting clinical and financial solution.

Responding to the news, Sue Slipman, chief executive of the Foundation Trust Network, said this first use of the failure regime was ‘a crucial test of how a key part of the new system will work’.

She added: ‘All eyes will be on the process which, if it works as intended, will resolve the situation swiftly and ensure there is minimum disruption to patient care while allowing services to be delivered more efficiently. In the future, bold decisions might need to be made which allow NHS trusts to reorganise their services before they get to the point of being forced into failure.’

David Stout, NHS Confederation deputy chief executive, said the government was taking the right action.

'Propping up struggling trusts with short term solutions is not the answer. These organisations need to be allowed to sort out their fundamental problems,' he said.

'We need more decisive action if the NHS is going to maintain the highest quality service and stay on a stable financial footing during these financially challenging times. This will mean many NHS organisations making radical changes to way services are provided.'