St Michael's Hospital has 70 beds

The proposals also include ending emergency work at West Cornwall Hospital in Penzance and creating a "nurse-led" minor injuries unit.

The Trust, which is facing a �31m deficit this year, has already decided to cut 300 jobs and trim costs.

Now a memo leaked to the BBC talks about closing the 70 beds St Michael's "in the shortest possible time".

Debt warning

The document, from the Trust director of planning Mike Coupe, asks what effect any possible reduction of services at West Cornwall Hospital would have on the decision.

Managers spoke to staff at the hospital on Wednesday afternoon.

The Trust currently has a debt of almost �16m and it is predicted to grow to �31m.

The Strategic Health Authority has told managers the debt must not grow beyond �20m by the end of this financial year.

A recovery plan is already in place designed to save about �9m, but on Tuesday the Trust said this will now have to be extended so that a further �10m can be clawed back.

The NHS in Cornwall is spiralling out of control Graham Webster, West Cornwall Health Watch

In a statement, the Royal Cornwall Hospitals Trust, said: "As part of our turnaround plan, we are reviewing the way we provide all of our services and as part of that we are considering site rationalisation.

"Work to assess whether it is possible to reduce the number of sites we operate from, whilst maintaining the same levels of activity and patient services, has yet to be undertaken.

"It is clear that operating costs at our three sites vary considerably and our smaller sites are contributing a significantly larger proportion of our overall deficit.

"However, we must complete a full option appraisal, in conjunction with our clinicians, before any formal consultation and decision on the closure of St Michael's Hospital can be considered."

Graham Webster, spokesman for West Cornwall Health Watch, said: "It's very disappointing.

"The NHS in Cornwall is spiralling out of control.

"It is a catalogue of underperformance and failure, which is unacceptable to the people of Cornwall."

Separate documents released last month under the Freedom of Information Act revealed the future of the West Cornwall Hospital in Penzance and St Michael's Hospital was under discussion.