The first 82-year-old Maeve O'Connor heard of her GP practice closing was when she read about it in the local paper. She had been going to the doctor at the 142 Camden Road surgery in London for more than 20 years but in the last four she had seen the practice change from a stable NHS service run by longstanding local GPs to a privatised business taken over not once but twice. By the end it was staffed by locums and serving about 4,700 patients.

In February this year, O'Connor discovered from the Camden New Journal that The Practice plc, the UK's largest operator of privatised NHS GP practices, was terminating its service in the area. "I felt very angry about it being taken over. It changed almost immediately with doctors leaving and by the end there was no one permanent. I felt angry about the closure; it was sneaky, we weren't consulted," she said. Finding another practice at short notice was hard. Whereas the doctor had been a 10-minute walk from her home before, the new one is 20 minutes, not ideal in your 80s as your mobility declines, as she points out.

For The Practice plc, the closure of the Camden Road surgery was a rationalisation that followed its acquisition of the business from the American healthcare company UnitedHealth (UH), which had originally won the contract from the north London PCT. For many patients, doctors and local politicians the experience is a warning of what can go wrong when you privatise parts of the NHS.

The Camden saga has a familiar ring to patients of The Practice plc in Woking, Leicester and Nottingham. Riasat Khan is chairman of the Pakistani Muslim Welfare Association based in the Maybury Centre on a housing estate in Woking, Surrey. Last month, he heard that the company was terminating its contract to run the GP surgery on the estate. As a patient representative he was involved in the selection process when his PCT put the contract out to competitive tender. "The Practice plc were very enthusiastic about how they would invest when they were bidding but then they didn't deliver. Then we heard they were terminating the contract and our worst fears came true. The PCT is disappearing in March, there's a large patient list and other practices nearby are full. We've been let down," he says.

The Maybury surgery is in a deprived area, and 95% of the patients are Pakistani. Patients of the Brandon Street practice in Leicester and the Arboretum surgery in Nottingham have made the same accusation: that the Practice plc is walking away from contracts in areas of high deprivation where it finds it cannot make money.

The Practice plc defended terminating the contracts and closing services, saying loss-making activities were unsustainable, but that it has "at all times worked closely with the commissioners to find a suitable alternative provider".

It said it has partnered GPs for the remaining term of the contracts, and where necessary beyond, to ensure a smooth transition. The company holds contracts for more than 50 GP surgeries and health centres. It said its official scores for quality were consistently high, often above average for the PCTs involved. "A large proportion of our surgeries serve deprived communities and we regularly receive excellent patient feedback," it said. The use of locum GPs is kept to a minimum and is not a cost-saving measure, it added.

UH made its first foray into the UK health market in 2003 under the Labour government, but by 2010 it was making a loss of £13.9m on it. In April 2011, it pulled out of primary care in the UK and transferred shares in its six practices, including the three in north London, to The Practice plc. It had decided that it would be more profitable to invest in a different part of the potential NHS market — providing commissioning support services to the new clinical commissioning groups that will handle most of the NHS budget from next spring.

The north London PCT thought it had a clause in its contract with UH preventing subcontracting of GP services. But after legal advice it found the contract came under national rules that allowed the contract holder to engage another "suitable provider".

The NHS could not object and UH did not even have to consult the PCT on the change. An inquiry by Camden council's health scrutiny committee expressed astonishment at the loophole. "In our view primary care by GPs should not be a commodity traded in the private market," its report said. The PCT has now amended its contracts.

Labour councillor Angela Mason, who chaired the inquiry, was appalled by the lack of accountability. "The contract was inadequate; it couldn't prevent UH from upping sticks and handing over to another provider. It makes a farce of the whole tender process. We had to use freedom of information requests and appeals justto get the contract.

Dr Paddy Glackin, secretary of the local medical committee for six years, was concerned at what he saw as a deterioration in the quality of the service and lack of monitoring by the PCT. He examined two measures of how well doctors are looking after their patients: diagnosis of depression and atrial fibrillation to prevent strokes. "These are things that take time to diagnose; you need to be adequately staffed, not running late, and you need to chose to do it. There was a decrease in the numbers of patients diagnosed for these in the Camden Road practice from 2008. The prevalence of chronic disease appeared to drop spectacularly in the community, which means they were either brilliant doctors preventing it or they stopped diagnosing it," he says.

The PCT rejects Glackin's suggestion that the contract was not adequately monitored or that service deteriorated at any point. "Monitoring did not indicate problems with the contract; on the contrary a number of indicators improved," it said.

Other GPs in the area found themselves left to pick up the pieces once The Practice plc withdrew. Several have told the Guardian the closure was "chaotic". Patients' records were not transferred and several claimed patients arriving from the Camden Road surgery had received "appalling care" and were often on the wrong medication. Sorting out their cases put enormous pressure on their practices, reducing time available for their existing patients, they say.

The council's inquiry found the "manner of the closure, particularly lack of consultation with other GP practices, led to unnecessary anxiety for patients and increased pressure on receiving GPs".

Mason is calling for much more transparency and monitoring of private sector operators in the NHS. "The NHS has always worked outside most formal democratic structures in this country. That didn't matter so much when the providers were a public service. But when you have unelected structures with great freedom to run a service that is not publicly but privately provided democratic controls matter ."

She says the council had to fight hard for an inquiry and neither UH nor the Practice plc would attend. The PCT admits it consulted only a few patients on the planned closure at first, in order to avoid a run on other practices, but says it notified all patients and found those identified as vulnerable a new practice close to their homes.

The Practice plc's accounts suggest it too is finding it hard to make providing NHS services profitable. It has received £3.4m financial backing from MMC venture capitalists since 2006. The accounts for the period to March 2011, only signed off in January 2012, show its revenue increased from £8m to £25m over that period but losses increased from £55,000 to £2.5m. The company declined to comment on whether it was ending some GP contracts to cut losses ahead of investors exiting the business.

A UH spokesperson said: "Improvements were made at all Camden practices during our time – quality indicators improved, new services were introduced and opening hours extended. All our dealings with NHS Camden were transparent. Camden council's report largely investigated events which occurred after our work in the area so we did not feel it appropriate to comment."

• Additional reporting: Raekha Prasad. Additional research: Hannah Al-Othman and Joshua Boswell.