Customers of Hunter-based health insurer nib may not be able to use their hospital cover for surgery at some of the nation's top hospitals, as contract negotiations with St Vincent's Health fall apart.
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The two parties have been at loggerheads for months as they attempt to negotiate a new contract, with the current contract set to lapse in October.
However St Vincent's announced it intends to walk away from the deal, claiming the offer from nib doesn't come close to covering the cost of providing hospital services.
Although there are no St Vincent's hospitals in the Hunter, the groups private facilities in Sydney and Melbourne are well-known centres of excellence that are home to some of the country's most skilled surgeons and specialists.
nib Group managing director and CEO Mark Fitzgibbon said his company would continue negotiations in good faith.
"It's disappointing they have elected to argue their position publicly," Mr Fitzgibbon said.
"But we will continue discussions with them, noting our partnership has several months remaining."
"nib has a long partnership with St Vincent's, is sympathetic to St Vincent's financial position, and that of other private hospitals, and has made a very fair and reasonable offer to St Vincent's."
If the negotiations collapse, nib customers would be unable to use their hospital cover for surgery at St Vincent's hospitals. Instead, they'll be forced to use the second-tier default benefit scheme, which could leave patients thousands of dollars out of pocket.
Private hospital sector as a whole has been under financial pressure for years, with operators stating the benefit payments provided by private health insurers falling well short of the rising cost to do business.
In March, nib announced an increase to its health insurance premiums by an average of 4.10 per cent, which was above the insurance premium average of 3.03 per cent.
The company says after two historically low rises, it had to factor in rising inflation.
NIB has recorded a 19.4 per cent jump in profits in the first half of the financial year, with a net profit after tax of $104 million for the six months to December 31.
The group's total revenue was up 12.4 per cent to $1.7 billion and underlying operating profit was up 21.7 per cent to $144.4 million.
