Business experts have told the Nuffield Orthopaedic Centre, in Oxford, that its future is secure as long as the Government changes the way hospitals are paid for treating patients.

Accountancy firm KPMG has concluded that the Headington-based unit would be safe if the controversial 'payment-by-results' system (PbR) was reformed.

In a debate at Westminster Hall today, Health Minister Andy Burnham admitted the scheme had left the NOC underfunded, but warned it would have to survive on stop-gap measures for at least two more years.

Hospital managers said they were still making £4.4m-worth of cuts to safeguard their future, as there was no guarantee that PbR would be changed.

PbR was introduced to ensure hospitals were paid for each treatment they carried out, instead of by annual block funding.

A national tariff states what individual procedures cost, although it does not take into account more complex cases carried out at specialist units like the NOC. As a result, the hospital's future was questioned in a Thames Valley Health Authority report last year.

But an interim report completed by KPMG on behalf of TVSHA's successor, South Central Strategic Health Authority, has contradicted the findings, stating the NOC is not "fundamentally financially flawed".

The consultancy has claimed the NOC compares well to similar specialist orthopaedic units and changes to PbR would iron out problems at the hospital.

Opening the debate, Oxford East MP Andrew Smith demanded urgent action to lift the "dark shadow of financial uncertainty".

He said: "These problems have been evident for a long while, and haven't been resolved so far. Do not underestimate the corrosive effect that has on morale and the ability of the hospital to plan for the future."

Mr Burnham responded: "I accept there are still gaps between the full cost of the work, and the system we currently have doesn't fully reflect the full cost of some of the more specialist work carried out by specialist hospitals."

He added top-up payments would be the only relief until 2009.

NOC acting chief executive Jan Fowler said savings must be made to ensure the hospital's continued operation.