Medibank has hit out at private hospital operator Ramsay Health Care, accusing the group of unfairly driving up the cost of a night in hospital.
The insurer says the amount of money Ramsay is asking for in renegotiations of a 12-month contract with Medibank is too high and not a fair reflection of the real cost of care.
It says if Ramsay refuses to come to the negotiating table with a lower number, its members may incur higher out-of-pocket costs if they attend one of the Ramsay Health Care hospitals.
"We will not simply sign a contract with a hospital at any cost," Medibank executive Dr Andrew Wilson said.
"Each year our payments to hospitals grow by more than our premiums increase. In the last 10 years our hospital payments have grown by more than 97 per cent."
Medibank has written to 9000 doctors working at Ramsay clinics in Australia to express its "disappointment" over the matter.
But Ramsay has countered Medibank's claims, saying negotiations had stalled because it "would not be coerced into accepting pricing which could threaten patient quality".
"Medibank have not passed on sufficient increases to private hospitals for some years," Ramsay's manager of corporate and commercial operations Paul Fitzmaurice said in a statement.
"To meet the rising costs of wages, as well as the ever-increasing costs of healthcare, technology and infrastructure, it is fundamental that health funds pay appropriate rates to private hospitals or the whole value proposition of health insurance would be undermined."
The contract in dispute relates to the "unit cost" that patients are charged when they stay a night in hospital, and rise depending on the cost of treatment.
The current contract is due to expire at the end of the month.
"This is a serious situation that needs to be resolved," Dr Wilson said.
Ramsay controls 30 per cent of the private beds in Australia. Last financial year it reported a net profit after tax of $244 million.
Negotiations went public on Tuesday when Medibank - Australia's biggest health insurer - took out advertisements in The Australian and The Australian Financial Review newspapers, saying it was "working hard to keep costs down" as hospital costs rose.
It comes amid suggestions that Medibank is tightening its belt ahead of an expected listing under a Coalition government. The insurer denied this was playing a role in delaying negotiations.
"What may or may not happen in 12 months or future time is really speculation," Dr Wilson said.
A Medibank spokeswoman said patients could expect to pay 15 per cent of the covered cost of an overnight stay in out-of-pocket expenses if the contract expired.
Carol Bennett, chief executive officer of the Consumers Health Forum of Australia, said the focus of both parties should be to reduce consumers' out-of-pocket expenses.
"Whatever the outcome of this dispute, we would want to know that out-of-pocket costs for the consumer are kept to a minimum," she said.
Mr Fitzmaurice said Ramsay would be advising its patients to "choose to transfer to another health fund" if necessary.
"Ramsay Health Care has contracts with all other health funds and patients covered with these health funds are not affected."
Ramsay operates 16 private hospitals in Victoria, including The Avenue Hospital in Windsor and Mitcham Private Hospital.
Ramsay shares fell 6.5 per cent to close at $33.44 on Friday.