A specialist Birmingham hospital is cutting 90 jobs to save #1.5 million despite ending the last financial year in surplus.
Birmingham Women's Hospital, in Edgbaston, ruled out a "slash and burn" policy and hopes the six per cent reduction in its 1,500-strong workforce will be achieved through natural wastage and a recruitment freeze.
But it has not ruled out compulsory redundancies.
NHS trusts across the UK must break even by April 2007 as part of the Department of Health's criteria for awarding foundation status, which it wants all hospital trusts to achieve by 2008.
The Women's Hospital, which hopes to achieve foundation status by next April, has a budget of about #70 million for 2006/07.
It said changes to the NHS national tariff, which sets out how much primary care trusts pay for operations and hospital services, was one of the main reasons for a funding gap of #3.1 million, half of which will be recouped through "staff savings".
A hospital spokeswoman said: "We're already facing a deficit of #1.5 million for next year which, considering we ended last year with #50,000 surplus, has to be addressed now.
"If there were ways to increase our income or make savings another way, we would rather do that."
The announcement comes six weeks after the trust announced 13 managerial and senior nursing posts would go this month as part of a "reorganisation plan" which would save #150,000.
Staff have been asked to make suggestions where savings can be made within the hospital, which has a higher ratio of non-clinical staff - 71.1 per cent - than similar NHS organisations.
Chief executive Julie Burgess said it had to take action now to avoid reporting a deficit at the end of the financial year.
She said: "To achieve financial balance by the end of 2006/07, which all trusts are required to do, we have to save the equivalent cost of 90 jobs, which is an unfortunate
position for us. Our services are more expensive than the costs set out in the new tariff, which is why we find ourselves in this situation, but we are not alone in this either.
"We don't intend to take a 'slash and burn' approach to making these savings, we want to do this in a sensitive, measured way.
"We are very aware that this hospital provides a regional service and that neonatal care is a very important part of that, so there are no plans to make major cuts in that area.
"Following further consultations with staff we hope to have achieved these savings by July or August, and we do hope to make these changes with as little impact on patient care as possible."
It brings the total number of job cuts announced in Midland hospitals in the last two months to more than 3,000. More than 1,000 are to go at North Staffordshire and 800 at Sandwell and West Birmingham.
The Women's is one of only two in the UK offering specialist care to women and treats complex gynaecology conditions and infertility.
Councillor Emily Cox (Lib Dem Moseley Kings Heath), who gave birth to her daughter Isobel at the hospital on October 19, 2005, yesterday branded the jobs axe as "appalling".
Coun Cox, who sits on the city council's health scrutiny committee, said: "It's absolutely appalling news. This is a place where babies start their lives, and if cuts are being made here what will happen to the rest of NHS?"