Plans for the Royal United Hospital to become a foundation trust have been put back a year after a critical Care Quality Commission report.
The busy hospital is keen to achieve foundation status to give it greater financial freedom but the quango Monitor, which regulates the provision of foundation trusts, has deferred the application for a year.
Its move follows a visit by inspectors from another watchdog, the CQC, which found that the hospital had been using a day care unit to accommodate inpatients.
It said this was not designed or organised to meet people's needs, and also raised concerns about patients transferred to nursing homes without sufficient information about their care and treatment needs being passed on.
As a result Monitor will not authorise the foundation trust application for another year, until the CQC's concerns have been addressed and inspectors have revisited the hospital.
A statement from Monitor said: "We are concerned that the trust has not yet demonstrated that it meets specific thresholds for authorisation.
"The Care Quality Commission identified several areas of concern potentially impacting on the quality and safety of the services provided at Royal United Hospital Bath NHS Trust.
"These were highlighted by the four outstanding CQC compliance actions and means the CQC will be re-inspecting the hospital.
"Monitor will not authorise trusts without this assurance from the CQC."
The RUH applied to become a foundation trust in 2011 to have greater freedom to set its own priorities, and hoped it would be achieve the status by the summer.
Delaying the application will affect its merger with the cash-strapped Royal National Hospital for Rheumatic Diseases, which is dependant on the RUH becoming a foundation trust.
The boards of both hospitals approved the merger, saying it made sense to have one big foundation trust rather than two smaller ones as the RNHRD (popularly known as the Min) struggles with financial problems that have controversially forced it to close a head injury rehabilitation unit.
The RUH said: "We will continue to focus, with our partners in the community, on delivering sustainable solutions to managing the pressures we have all faced from emergency admissions.
"As a consequence of this deferral we will also continue to work with Monitor and progress
our application at the appropriate time."
Meanwhile, following concerns from staff and union representatives the RUH has confirmed it will not be looking to implement local pay arrangements.
The RUH was one of 19 hospitals and health trusts that paid £10,000 to join the South West Pay Terms and Conditions consortium, which was looking at pay, overtime, holidays, incentives and working hours.
The group, dubbed a pay cartel, was met anger by staff and union representatives, who were unhappy with the decision and concerned about the whole concept of regional pay, which could see NHS staff in different regions paid different wages.
A number of hospitals pulled out of the consortium following meetings with staff, and the group – dubbed a cartel by unions – has now concluded its work.
An RUH spokesman said: "We have considered the final report of the South West Pay, Terms and Conditions Consortium, whose work has now concluded, and heard representations from staff side colleagues.
"We do not intend to join any reformed consortium in the future, and have confirmed our commitment to nationally negotiated terms and conditions for staff.
"Changes to national terms and conditions for Agenda for Change staff were agreed at the end of February.
"We have begun to discuss with staff side how these national changes should be implemented in a fair and consistent manner at the RUH, and will also review the flexibilities that already exist within the national terms and conditions to support changes that enable us to meet our savings challenge.
"We will spend around £138 million on pay during this business year.
"Whilst recognising that there continue to be challenges ahead, we are committed to working with our staff side colleagues to ensure that staff at the RUH are rewarded in a way that ensures we can best meet patient needs."
Jeannett Martin, regional director of the nursing union the RCN, said: "The campaign by the RCN and other unions has been successful in diverting the South West pay cartel from their original intention to implement local pay systems across the South West region.
"The RCN calls for all employers in the South West who had been a member of the pay cartel to confirm to their staff that they will not return to a local pay cartel if it re-emerges in future. This will be a first step in rebuilding staff trust. Regional pay systems are not only unfair for staff, they are costly and complicated to implement and this wasted money damages patient care."
