NHS trusts in England are creeping deeper into debt, forecasts show.
Over one in three hospitals and primary care trusts, which pay for local services, are not expecting to balance their books this financial year.
But NHS bosses said overall the health service will break even - as promised by Health Secretary Patricia Hewitt.
Health chiefs have built a contingency fund by making savings from training and public health budgets, and holding back money due to the NHS this year.
"There are more NHS organisations, saddled with worse deficits, than there were last year"
Three-quarter year forecasts show that the health service will finish £13m in surplus.
But this masks the increasing deficits hospitals and PCTs are predicting - up from £1.2bn three months ago to £1.3bn.
Financial balance can only be achieved by taking money from elsewhere and using the small surpluses some trusts are running up.
The NHS budget grew by £5.4bn to £75bn in 2006-07.
But nearly £2bn of this has not been passed on to trusts as expected.
Some £698m was used to pay off deficits from previous years.
Regional health bosses have also top-sliced £1.1bn of the extra money PCTs were expecting in a bid to off-set the deficits.
Added to this is the £450m contingency fund and nearly £200m in surpluses some trusts are amassing.
Pledge
David Nicholson, NHS chief executive, insisted the financial situation was improving - but admitted significant numbers of trusts were facing problems.
"The impact on patient care around the country could be very damaging"
He said: "These numbers represent the NHS doing what it said it would do - we will get in balance overall."
At the end of last year Health Secretary Patricia Hewitt promised the health service would break even in 2006-07 after posting a £547m deficit in 2005-06.
Andrew Lansley, Shadow Health Secretary, said: "Labour are able to claim that the NHS will finish this year in surplus, but the surplus they have generated is a sham.
"There are more NHS organisations, saddled with worse deficits, than there were last year.
"Patricia Hewitt's skin is being saved only by savage cuts to centrally-held budgets, which will all need to be restored in the years to come."
Norman Lamb, for the Liberal Democrats, said a lot trusts were being forced to take very tough measures to get their finances back on track.
"The impact on patient care around the country could be very damaging."
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