Hospitals which try to cover up failings that lead to deaths or patients being seriously harmed will lose their insurance cover.
Under new moves to ensure patient safety, the Health Secretary also said that nurses and doctors will have an "explicit and consistent" duty of candour.
It means they must tell patients and relatives where a mistake has led to death or serious injury and even in cases of "near misses".
Failure to be honest will lead to action from the General Medical Council and the nursing regulator. Wilful neglect will also be made a criminal offence.
Speaking to the House of Commons, Mr Hunt said: "Nobody makes these mistakes intentionally but if you cover them up, lessons don't get learnt."
The measures are part of the Government response to the Stafford Hospital scandal, where up to 1,200 patients are thought to have died needlessly as a result of poor care between 2005 and 2009.
An inquiry by Sir Robert Francis QC, into the failings, highlighted "appalling and unnecessary suffering" of hundreds of people who were "routinely neglected".
Sir Robert made 290 sweeping recommendations for healthcare regulators, providers and the Government in his report - 281 have been accepted by the Government.
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