The Care Quality Commission (CQC) has said Hinchingbrooke Hospital in Cambridgeshire "requires improvement" after a second inspection in January.
That month the hospital was put in special measures and rated "inadequate" based on CQC visits made in September.
Private firm Circle, which handed back management to the NHS in March, said the inspection was "flawed".
A spokesman for the health firm said the "inadequate" report was published just days after inspectors returned to the hospital in January for the follow-up visits.
"We're astonished. This entirely vindicates our view that the inspection was flawed," said the spokesman.
"We cannot understand why they published a critical report after an inspection that showed a different result.
"This was deeply misleading to patients and will inflame the sense of injustice we know many Hinchingbrooke staff feel."
But the health watchdog said the reports were each based on two separate inspections and the rating had been upgraded as improvements had been made during the four months.
However, CQC's chief inspector of hospitals, Professor Sir Mike Richards, said the hospital would remain in special measures.
"We have not backed down. When we inspected in September we found shockingly bad care the trust should be ashamed of," he said.
"We always report on what we find. Hinchingbrooke was inadequate and was put into special measures based on what we saw and because we did not have confidence the leadership could get the hospital from inadequate to good in a reasonable time.
"Our January inspection has resulted in the rating moving to "requires improvement", which still isn't good enough.
"People have a right to expect better care than this."
Circle ended its 10-year contract, which started in 2012, due to "unprecedented" increases in A&E attendances and funding cuts.
Standards at the first privately-run NHS hospital are still not "good enough", the health watchdog has said.