The hospital is a specialist unit treating people from around the UK

Robert Jones and Agnes Hunt Orthopaedic Hospital (RJAH) in Shropshire says it has treated more Welsh patients this year than it has been paid for.

It said 1,400 patients from Powys would be referred to other hospitals unless the problem was resolved.

Powys Local Health Board (LHB) said it was unable to comment at the moment.

Unfortunately our hands are tied as we have a statutory duty to stay within our budgets Heather Lewis, hospital finance director

The hospital in Gobowen, near Oswestry, is only a few miles from Wales, and about 40% of its patients - thought to run into the thousands - are from Powys and north Wales.

But it said an estimated 600 patients on waiting lists and a further 800 out-patients from Powys could be referred to other hospitals unless it received more money.

RJAH trust finance director Heather Lewis said: "It must be very distressing for patients from Powys to find that their LHB will not pay for their treatment here.

"Unfortunately our hands are tied as we have a statutory duty to stay within our budgets and remain financially viable."

The hospital said it would hold talks with the LHB next week.

Powys LHB said it would make a full statement about the situation on Monday.

'Wildest nightmares'

Conservative Mid and West Wales AM Glyn Davies said the NHS in Powys was "disintegrating before our very eyes".

The LHB has no money to pay for operations and the people who are going to suffer are my constituents Mick Bates, Montgomeryshire AM

He said he was told last week by First Minister Rhodri Morgan "that patients from Powys may not in future be referred to the Royal Shrewsbury Hospital because it is in England".

"Never in my wildest nightmares did I think they would be refused access to 'our hospital' at Gobowen," said Mr Davies.

Montgomeryshire Liberal Democrat AM Mick Bates said he had spoken to Welsh Health Minister Brian Gibbons about the problem several times.

"The LHB has no money to pay for operations and the people who are going to suffer are my constituents," he said.

On Monday, Mr Davies criticised a decision by the Shrewsbury and Telford Hospitals NHS Trust to delay announcing how to repay a �30m debt.

Its hospital in Shrewsbury treats about 50,000 people from north Powys and there are fears services could be cut.

A Welsh Assembly Government spokesman said it had kept in contact with the Department of Health about the impact of charges from English hospitals on the NHS in Wales.

He added: "Agreement has been reached with the Department of Health that cross-border activity between England and Wales will not be subject to the English tariff in 2006-07, and guidance issued by both the Department of Health and the Welsh Assembly Government confirms this agreement."