It is feared the move, designed to reduce costs, could leave young people at the institution without vital support.
Penelope Gibbs, director of the Out of Trouble programme at the Prison Reform Trust, said there is already an unmet need for young people in custody in terms of mental health provision.
"Cuts to healthcare are a little difficult to understand," she said. "It won’t help with the issue of assessing those who really shouldn’t be in custody at all and it won’t help with behaviour management within the YOI, suicide risks or reducing reoffending."
A spokeswoman for NHS North Lancashire said it had received confirmation of "intended realignment of the budget allocated for the commissioning of prison health services" at the YOI in January by the Ministry of Justice and Department of Health.
"NHS North Lancashire has worked with prison and service provider stakeholders to consider a number of options for achieving budgetary requirements, while still ensuring service users receive the healthcare provision they need," the spokeswoman said.
"These options include plans to decommission the in-patient unit at the prison. Work is currently ongoing in this area and a formal consultation is currently taking place with staff affected by the options. This is due to end on 21 July and therefore NHS North Lancashire is not in a position to confirm further details at this time," she added.
It is understood as many as 20 jobs could go if the ward shuts. Details of potential cuts were first revealed in an inspection report by the YOI’s independent monitoring board.
The report found that cuts of 58 per cent to the healthcare budget were to be made. "Needless to say, this totally alters the future outlook for this service and if such a savage cut goes ahead, or anything like it, recent developments and improvements will be reversed," it stated.
The institution, which can hold around 500 18- to 24-year-olds, previously held children as well and has been the subject of controversy in the past.
Gareth Price, 16, from County Durham, hanged himself in his cell there in January 2005, a day before he was due to be sentenced for rape. He died in hospital the next day.
Fifteen-year-old Liam McManus was found hanging in his cell at the YOI in November 2007.
