The Department of Health has clawed back £1bn from troubled supplier CSC in a legally binding agreement.
The deal will see Lorenzo electronic patient record systems used in just 10 trusts, down from 160.
CSC will retain responsibility for rolling out its Lorenzo Electronic Patient Record system currently being used in the existing trusts in the North, Midlands and East of England, to the NHS.
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But the original contract with CSC had promised more than 160 deliveries of the Lorenzo patient administration software by July 2016.
Under the deal NHS organisations will no longer be committed to using Lorenzo, and will have the freedom to decide what IT systems are most suitable for their needs, said the Department of Health.
In a filing to the Securities and Exchange Commission, CSC said it will be recompensed just £68m for the loss of exclusivity in providing Lorenzo software. Last year the company wrote-off its entire $1.5bn investment in the contract.
The Department of Health's £1bn in savings will be reinvested into the NHS as a whole rather than back into IT services.
Health Minister, Simon Burns said: “By dismantling the National Programme for IT, this new agreement will save taxpayers over £1 billion which will be reinvested in patient care and front line services.”
If eligible local NHS organisations wish to use Lorenzo they will be able to access centralised support and funding but will first need to develop a robust business case and demonstrate value for money in order to gain approval to do so, said the DoH.
In a statement CSC remained upbeat about the deal. “This agreement is a significant milestone in our relationship with the National Health Service and represents a renewed commitment by the NHS and CSC to a long-term partnership as well as CSC’s healthcare solutions,” said CEO Mike Lawrie.