An award-winning healthcare organisation that helped thousands of patients with specialist needs has been forced into administration after an NHS bureaucrat decided not to renew its contract.

In a letter to shareholders dated August 5, and leaked to the Epsom Guardian, the board of Epsom Downs Integrated Care Services (Edics) said that with "inappropriate retention of funds and with no contract going forward the company is forced to cease trading."

The company, which ran clinics across the area for NHS patients was placed into administration last Wednesday, August 14, with Peter Kubik and Michael Kiely of UHY Hacker Young LLP appointed as joint administrators.

The letter, signed by company secretary, Paul Hollings said the NHS had been holding back £1.2m for money undertaken by Edics under its contract with Surrey Primary Care Trust.

It said that this situation was compounded by Surrey Downs Clinical Commisioning Group (SDCCG) which took over from the PCT in April, holding back a further £850,000 for April and May.

Disputes over these payments, which the CCG has said related to value for money, were compounded, according to Mr Hollings, when a draft contract provided by the CCG for the year starting on August 1, included a clause requiring Edics to refer 20 per cent of patients referred to it back to their own GPs - with a equivalent drop its income.

The CCG insists this was just a proposed figure for the likely number of inappropriate referrals, which would have been checked by an audit.

Mr Hollings told shareholders "With no contract in place and no assurance on outstanding payements the company requested urgent instruction as to what action to take for patients' care from 1 August 2013. The response regrettably was delivered to the company when attending a meeting convened to review financial statements at mid-day on 31 July 2013. The company was advised that the CCG would not issue a successor contract and that all services would cease at midnight on that day!"

He said that at a meeting later that day CCG officers "recognised the precipitous nature of their earlier notification" and it was agreed Edics would continue to care for its patients until August 9 to give the CCG time to find alternative providers.

But a CCG spokesman stood by its earlier statement that it was Edics that pulled the plug.

She said: "On 30th July Edics' medical director wrote to the CCG to inform us they would be ceasing all clinical services from midnight on 31st July."

The spokesman went on to say: "One of the reasons the contract was not continued was that the CCG did not consider them financially viable due to the level of management costs."

It emerged last week that the CCG had been unable to consult its members on the issue as widely as it would have liked because many of its GPs - to whom the organisation is answerable - were stakeholders in Edics.

The problem of how it was going to deal with possible conflicts of interest was raised by this newspaper in March with its new clinical chairwoman, Dr Claire Fuller. Dr Fuller, who said that patients would be at the heart of everything the CCG did, said affected GPs would be involved in the discussions, but not the final decision.

In the event, the decision on whether to renew the contract was delegated to just one man - Miles Freeman, its chief officer, brought in when the CCG formed and with a long history of commissioning inside the NHS in London.

This week a CCG spokesman said the organisations rules for conflict of interest were followed but the short timescales involved had an impact on the consultation process. She said: "We are looking at our current processes around this and any improvements we can make to ensure member practices are as engaged and involved as possible going forward."

Health campaigner Bess Harding questioned why there had been no public consultation prior to the axeing of such an important service and whether the correct procedures were followed.

 Mr Hollings said the company was now taking advice about claiming for damages.

Residents Association Councillor Nick Harrison, representing Nork, said: "I do think it is a tragedy that we have lost a service that that served its patients so well. When it was set up Edics was better and cheaper for the NHS. What has changed since then? It would appear there was a lack of management by the PCT in the final year when there were four managers managing it."