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

Robert Jones and Agnes Hunt Orthopaedic Hospital (RJAH) in Shropshire said on Monday it had been told not to treat 40 patients from Powys until March.

The hospital said Powys Local Health Board (LHB) could no longer afford to pay for its services.

But a new agreement has been reached and treatment there will be honoured.

For generations people from mid and north Wales, particularly from north Powys, have been treated at the hospital, which is a few miles across the border in Gobowen, near Oswestry.

About 40% of RJAH's patients live in Wales.

'Working together'

A dispute over how much Powys LHB should pay the hospital for treatment during 2005 was settled through arbitration in August.

Following the latest row over funding, Powys LHB's chief executive, Andy Williams, said: "There had been concern that the contract between the two organisations would substantially over-perform.

"But further work has been undertaken and both organisations are now working together to ensure that patient care can be delivered within the existing agreement."

Mr Williams added it was "regrettable" concern had been caused to patients in Powys over their treatment.

Powys LHB will now write to patients to assure them that dates originally set for treatment at RJAH will be honoured, Mr Williams added.

The RJAH said the LHB had assured its managers that funds would be available to pay for treatment.

Conservative Mid and West Wales AM Glyn Davies said resolution to the problem would be a "huge relief" to dozens of people in Powys.