Health chiefs in Winchester are pushing ahead with plans for foundation status confident they can overturn a budget deficit of £13.1m and hang on to their three-star rating.

After a lengthy public consultation, the application document will go forward to the Secretary of State for Health on June 18th. Meanwhile, bosses are looking to make savings to balance the books and have drawn up a financial recovery plan.

They are considering a raft of money-saving measures, including a recruitment freeze, cutting down on the use of agency workers, merging posts and collaborating more closely with primary care trusts.

Eligibility to apply to become a foundation trust is restricted to NHS Trusts awarded three stars by the Department of Health. The trust was awarded the three-star status in July 2003, but the application could be frustrated if it fails to retain those stars.

The one area which could upset this is bed-blocking. The trust is still battling to meet the government targets in this area. This time last year, the number of beds blocked was around 70: in April, that figure was down to 46.

At a meeting of the board this week, financial director, Ross Dunworth, said: "Productivity within the NHS is under closer scrutiny and we need to ensure it moves to the "best of best" in all areas. Real targets for reductions in length of stay, improvements in day case rates, etc, need to be set."

Earlier this week, chief executive, Rod Halls told the inaugural meeting of the new health watchdog, the Patient and Public Involvement Forum, that the trust's application could be crucial in terms of the financial boost it could bring to the trust's ambitious expansion plans.

He urged the people at the meeting to support the bid. So far, letters have been sent to 140,000 people, urging them to support foundation status. To date, the trust has received 1,000 positive replies.

Mr Halls said the trust was unlikely to have the funds needed to complete a major expansion project at the Royal Hampshire County Hospital. But its bid for foundation status would enable it to have increased freedom to borrow, up to £14m, to finish the job.

The first phase of the scheme, a £6m treatment centre at the RHCH, is set for completion in early 2005. It will occupy the top floor of a £20m four-storey development, but the three floors underneath are likely to be empty for several years.

Speaking on Monday Mr Halls said: "At one point, we didn't have enough money to put bricks on them. But we have scrabbled enough for that. There won't be anything inside because we haven't got the money to finish them."

Defending the current building scheme Mr Halls said it it would be better to build a four-storey building now instead of a single-storey one and then have the expense of then re-developing it.

When it is able to complete the project the remaining three floors will house a new outpatients department, medical records, pharmacy, and the new cancer unit, which is the subject of a £2m public appeal.

The treatment centre will play a major role in reducing waiting times for thousands of patients, cutting bedblocking and hitting Government targets. Some 7,500 more operations a year and 7,500 endoscopies - internal examinations - will be carried out.

Other major changes are coming soon at the RHCH. In another centre, with hospitals in Southampton, a £3.5m medical school is being built at the RHCH, opening from October and training 40 doctors a year.