A planned selloff of George Eliot Hospital in Nuneaton, Warwickshire, has been called off.
George Eliot Hospital was placed in special measures last year.
It was set to be the second hospital in Britain to face a private franchise takeover.
The final bidders in the running were private firms Circle Health and Care UK, both owned by Tory donors.
South Warwickshire Foundation Trust was the last NHS bidder for the hospital.
The U-turn came after the NHS Trust Development Authority said the hospital has made “significant improvements in clinical performance”.
But the turnaround has been hailed as a victory after a long campaign by local people and trade unionists.
One campaigner said, “It should give people confidence that if you fight you can win, and we still have power to change things.”