The A&E department at Lewisham hospital in south-east London is to be downgraded and made smaller as part of cost-cutting measures.
Health Secretary Jeremy Hunt said the maternity unit at Lewisham would be replaced with a midwife-led facility.
The cuts aim to help tackle debts of £150m at the neighbouring South London Healthcare NHS Trust (SLHT).
At least 15,000 people took part in a protest march against the plans on Saturday.
Mr Hunt told MPs: "I respect and recognise the sense of unfairness people feel because their hospital has been caught up in the financial problems of its neighbour.
"However solving the financial crisis next door is also in the interest of the people of Lewisham because they too depend on the services which are currently part of South London Healthcare Trust."
Mr Hunt accepted six of the seven proposals put forward by special administrator Matthew Kershaw.
He said £36m would be allocated to expanding capacity at the hospitals which would take on high-risk births from Lewisham.
'Dangerous precedents'He said the SLHT, which is in administration, was the "most financially challenged in the country", as it spends £60m a year, or 16% of its annual income, to service two PFI contracts signed in 1998.
Mr Hunt confirmed that the SLHT will be dissolved by October 2013 and its hospitals re-configured.
Up to three quarters of those currently attending Lewisham A&E could attend the new service at the hospital, he said.
Patients with more serious conditions could be taken to other hospitals.
He said overall the proposals could save up to 100 lives per year through higher clinical standards.
He said it was on the advice of NHS Medical Director Professor Bruce Keogh that the decision was taken to retain Lewisham Hospital's A&E in the best interests of patients.
Andy Burnham, shadow health secretary, said the move would "set dangerous precedents".
Joan Ruddock, Labour MP for Lewisham Deptford, said: "Today's proposals are a sham and a shambles and unacceptable to those who represent people in Lewisham."
Mr Hunt responded: "A sham and a shambles is what I inherited, not what I'm bequeathing."
The changes are part of a radical overhaul proposed in response to SLHT losing around £1.3m a week.
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