The legal challenge was made by resident Nick Mitchinson after Bishop's Castle Community Hospital closed its doors last October.
Today the chief executive of the trust said it had decided not to contest a judicial review brought against it into the closure of the inpatient beds. Patricia Davies stressed the decision to close was made because of significant patient and staff safety concerns.
Mr Mitchinson and other campaigners say they are committed to securing a future for the community hospital.
Outpatient physiotherapy clinics restarted at the hospital last month and a diabetic eye screening service is expected to return, but the inpatient beds remain closed.
Those welcoming the decision include local councillors, Shropshire Defend our NHS and business owner Tahira Paul.
Explaining his decision to take legal action, Mr Mitchinson said: "The trust apparently took a decision to close our local hospital behind closed doors, in a private board meeting on October 7 last year. They told staff on October 14 and they closed outpatient services and started moving patients out. By the end of October, everything was gone."
He said the trust provided no evidence of safety and did not work with residents to try and find an alternative to closure.
"What a shame we had to go to these lengths when the trust could have just worked with the local community in the first place," he said.
Patricia Davies, chief executive, said: “Shropshire Community Health NHS Trust has decided not to contest a judicial review brought by a local resident, into the closure of the inpatient beds at Bishop’s Castle Hospital, in October 2021. The decision to close the [inpatient] ward was made because of significant patient and staff safety concerns.
"However, we recognise that there should have been service user involvement before the decision was made and apologise that this was not done.
“Since the closure, we have been in communication with many key users and interested parties. We are absolutely committed to engaging and involving our communities to help us consider the future provision of services at Bishop’s Castle Hospital.
"To that end, we have been meeting with key stakeholders in the community to help plan a series of wider community engagement events to assist in the development of service options.”
Campaigners said the hospital is an essential facility not just for Bishop’s Castle, but for everyone living in rural South West Shropshire.
They now hope to see public consultation lasting a minimum of six weeks to be led by a working group that includes Councillor Ruth Houghton, Councillor Nigel Hartin and Councillor Heather Kidd, with an invitation also extended to the GP Practices in Bishop’s Castle and Clun.
Councillor Houghton said: “Our commitment is to finding solutions that will keep the hospital open. It seems that staffing has been the big issue in the past. We’re confident that the trust will now want to work with us in this very open and inclusive way.
"This is how we’ll tap into local community resources, recruit people who will want to stay, and also – by working together and by including local GPs – take a good look at how the hospital is working and how we can build the really good services that local people want and need.”