A maternity unit in Bridlington is to close as an NHS trust attempts to claw back £7m of overspending.
Mothers-to-be in Bridlington will be encouraged to opt for home births
Hospital bosses say mothers-to-be in the town will be encouraged to opt for home births.
The move is part of a raft of measures announced by Scarborough and North East Yorkshire Healthcare Trust on Friday, in a bid to save £4.5m a year.
The trust also announced a recruitment freeze, but said it did not plan any compulsory redundancies.
It plans to cut the amount of time people spend in hospital, saying that on any one day as many as 40 hospital beds could be occupied by patients who do not need to be there.
The trust's interim chief executive, Iain McInnes, acknowledged that the cuts would be "painful", but insisted they would benefit patients in the long run.
He said the Bridlington maternity unit closure had been agreed after consultation with midwives who had told the trust that most mothers would prefer to give birth at home.
However, the cost-cutting measures have raised concern among patients' groups.
Leo McGrory, who chairs the Patient and Public Involvement Forum at Scarborough Hospital, said: "The savings they're talking about are colossal.
"I think overall finances are top of the list and healthcare is secondary.
"The overall danger is that healthcare will deteriorate."
In July, the Audit Commission ordered a review of the trust's finances, which were spiralling out of control.
The review was ordered after the commission concluded that inadequate leadership and ineffective management were the cause of one of the worst deficits in the NHS nationally.
The trust's chief executive Alison Guy and finance director Bernard Flynn were both told not to go into work as the review was launched.
NHS bosses have refused to confirm or deny whether Mrs Guy and Mr Flynn have been officially suspended, simply saying they had been told to stay away from all the hospital trust's buildings.
Announcing the package of measures on Friday, Mr McInnes, who took over on 4 September, said: "It certainly will be very challenging and potentially painful in terms of the changes we have to make.
"But I am confident it will result in an improved health service locally for patients in Scarborough and in Bridlngton."