The Care Quality Commission (CQC) placed Eldertree Lodge near Market Drayton in special measures following an inspection in March.
The hospital, which provides specialist services for adults with a learning disability or autism, was inspected due to serious concerns about the care being provided – some of which were raised by the service’s new provider that took over the hospital months before the inspection.
The CQC said it had found "widespread and significant shortfalls in the way in which the service was led".
The unit said it received a variation of registration notice, meaning changes to the level of care it can legally provide.
More than 40 patients will have to find new accommodation within a month.
A spokesman for Coveberry, which runs Eldertree, said: "Coveberry can confirm that Eldertree Lodge, a high-dependency rehabilitation service, has been issued with an urgent notice for variation of registration by the CQC, under Section 31 of the Health and Social Care Act 2008.
"As a result of the action, all patients at Eldertree Lodge will be transferred to alternative care providers by July 17, when the facility will be de-registered and closed to patients.
"Eldertree Lodge recently came under Coveberry’s control as part of a wider transfer completed at the end of November 2020.
"Upon taking control at Eldertree, Coveberry, alongside other stakeholders, recognised the need for improvements at the site and initiated an action plan to upgrade the standard of services, facilities and the environment as well as enhance training support for staff.
"New leadership was also put in place.
"While Coveberry is confident that improvements were being made to the service offering, the company believes that there was insufficient time available to implement the necessary improvements to the service and its philosophy of care to the satisfaction of the regulator.
"Our priority now is to work with other agencies including with commissioners, NHS England and CQC to ensure a safe transfer of care for patients and to provide high standards of individualised care until each patient is transferred."
Coveberry said it was putting measures into place to ensure that staff are fully supported at this time.
Eldertree Lodge was rated 'inadequate' after the inspection by the CQC in March.
In a report that was published earlier this month, inspectors said ward environments were not safe and clean, staff did not always adhere to Covid-19 national guidance, there were staffing issues and risk to patients was not always managed well.
The CQC said it was unable to comment on enforcement proceedings while Eldertree Lodge still has the option to appeal.