A 28-bed ward which provides care for elderly patients at Cannock Chase Hospital in Staffordshire is to close by the Autumn.
The Mid Staffordshire General Hospital Trust is saddled with debts totalling #5 million and claims the ward closure is necessary to help save the trust #700,000 by next financial year.
However, they also stressed the closure would not mean a cut in patients care.
Jan Harry, director of clinical standards at the trust, said the cuts were in line with government proposals to modernise the health service.
Mrs Harry said: "This is not cutting services but reconfiguring services, providing the same amount of care to the same number of patients but providing it differently.
"This change is in line with national NHS policy to modernise services by improving the flow of patients through hospital.
"Measures to modernise the service include using new techniques, harnessing new technology, introducing methods to speed up diagnosis, providing more day case surgery and new medicines as well as working more closely with colleagues in primary care.
"This range of measures will enable use to reduce the average length of stay of patients, meaning we can provide more care and improve standards of care in certain areas with fewer beds," she said.
The trust claimed there would be no job losses as all the staff currently employed on the ward will be asked to take up positions at other hospitals within the trust.
The trust also said patients currently treated on the ward, which will close by October 1, will be transferred to other hospitals.