Bupa is to cut ties to individual hospitals within hospital groups, in an attack on the sector's business model.
Bupa is now to assess the value of private hospitals on an individual basis, refusing business to some in high capacity areas or with high pricing models.
The private health insurer noted that £300m of debt interest is removed from the system annually by the private hospital sector.
Dr Natalie Jane Macdonald, managing director of Bupa Health and wellbeing, said: "That money is our subscribers'. We are fed up that clients pay substantial sums for their employees and too much of what they pay is captured by suppliers.
"The hospital groups are charging medical inflation plus what they need to maintain their margins. We are challenging them in their assumed business model of uniform price for hospitals with a variance in care and in markets.
"We have watched as the hospital groups buy up smaller hospitals and introduce all-in-one-in negotiating. These hospital groups are not at capacity and are not value. They are not asking how they can compete, enough is enough."
Bupa gave the example of certain private hospital groups refusing patients cheaper and more convenient chemotherapy at home, so as to be able to charge the insurer hospital inpatient fees.
Macdonald said: "They live in another world where they can continue what they are doing off the back of our customers asking for change."
Although the move to cut ties with certain hospitals has already begun, the policy will be rolled out over time to minimise consultant and patient inconvenience.
"We will give time to those consultants that may need to make arrangements to work elsewhere if necessary and we will not be asking any current patients to change aspects of their treatment," said Macdonald.
The move goes hand in hand with Bupa's recent announcement that it was moving to an open referral model for consultants.
The open referrals process means that, instead of referring these patients directly to a consultant, GPs provide an open referral for a procedure with no named consultant. Bupa then provides a list of available consultants.
"We are championing those consultants that do good work at reasonable rates," said Macdonald. "We want more power in the hands of clients to choose through moving to open referral. It is a myth that GPs make informed choices on the outcome of care, on charges or on overall cost."
She added: "The private healthcare supply chain model has run its course. It lives in another world where it can carry on as it is on the back of our customers."
