East Surrey Hospital has been named as one of the eight worst in the country.
The deficit in its accounts made it weak financially and lapses in its healthcare gave it a weak quality of service, a report from the Healthcare Commission said.
With two "weak" results, it joined hospitals in Devon, Cornwall and Yorkshire in the bottom eight of the 570 NHS bodies looked at.
Surrey and Sussex NHS Trust, which runs the Redhill hospital, was quick to remind patients that the assessment was undertaken only for the last financial year, from 2005 to early 2006.
Irene Scott, the trust's director of nursing, said: "Our weak score is a true reflection and a reminder of how we performed over a year ago and we are not at all surprised that we have been scored weak for this period. I would like to reassure our service users and our staff who have worked so hard that we are in fact a trust which has significantly turned itself around in the last ten months."
East Surrey MP Peter Ainsworth was also unsurprised by the results. He said: "I know the hospital has been struggling in recent years with successive management changes. The underlying problem is debt, which the Government should have cancelled before it mushroomed into the unmanageable proportions it has reached today. Unless radical change occurs, we are likely to see a continuation of the financial struggle and a reduction of services."
The Healthcare Commission's report, known as the health check, replaced the flawed restaurant-style star ratings of hospitals, using financial reports, hospital self-assessments and patient feedback to judge efficiency and care. The results for East Surrey were mixed.
It was rated excellent for its inpatient hospital care for children, had a good rating for daycare for children but could not be sure medicines were always handled securely and safely. All or most cancer patients were treated within a month of diagnosis. The hospital had more MRSA infections than it should. As a result, its quality of services was weak.
Weak hospitals have to now produce a 30-day plan to the Healthcare Commission with clear steps laid out to bring them back up to the health watchdog's desired standard.
Surrey and Sussex NHS Trust believes changes are already in place and the hospital is already being reformed, thanks to an overhaul of management that brought in a new board and executive team and a new layer of management with the hospital's first clinical directors.
Professor Scott said: "We now have one of the lowest MRSA rates in southern England and we have also dramatically cut waiting times for cancer treatment, making us one of the best trusts in the country. I am confident that, if this assessment were done today, our overall score for both quality of service and use of resources would be dramatically improved."
Surrey Primary Care Trust, or East Surrey PCT as it was known when being assessed, fared better, receiving a fair rating for quality of services and fair for its use of resources. The only two standards it did not meet were for reducing MRSA and providing safe and secure working environments. An infection control nurse was appointed in January 2006.
Marion Heron, interim managing director for East Surrey in the still new Surrey PCT, said: "While our performance ratings are not as good as we had hoped for, it is important to understand that they should not undermine the dedication of our staff or our commitment to providing first-class health services to local people."
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