Australia's biggest private hospitals operator, Ramsay Health Care, is urging patients to quit Medibank should a dispute with the insurer over funding not be resolved satisfactorily.
But Medibank, which is Australia's largest health insurer, says Ramsay's requests are excessive, and payments to hospitals are outstripping growth in health insurance premiums.
Ramsay said on Friday that Medibank had lifted health insurance premiums by 6.2 per cent in April 2013.
But the insurer had offered to pay Ramsay only two per cent more for the provision of healthcare services.
Ramsay said a two per cent increase was less than the inflation rate, far less than the rising rate of healthcare costs, and so low that it could threaten the quality of care for patients.
The hospitals group said Medibank appeared to want members' premium income but not actually spend it when members needed access to quality healthcare.
"To ensure that patients' choice is not compromised by Medibank's actions, Ramsay would be suggesting that patients transfer to another health fund," Ramsay said in a statement.
Ramsay said Medibank had not passed on sufficient increases to private hospitalS for some years.
In was essential that health insurers pay appropriate rates to private hospitals given the rising costs of wages and healthcare technology and infrastructure.
Medibank has written to 9,000 doctors at Ramsay Health Care, saying that each year its payments to hospitals grow by more than the increase in premiums.
"Medibank contracts more than 450 private hospitals across Australia on behalf of our members," Medibank group executive of provider networks, Dr Andrew Wilson, said in a statement.
"We believe Ramsay Health Care's current request is excessive.
"We will not simply sign a contract with a hospital at any cost."
Medibank said hospital charges must be affordable, otherwise they would not be sustainable and would affect member premiums.
Shares in Ramsay Health Care were $2.25, or 6.29 per cent, lower at $33.52 at 1531 AEST on Friday.
