NHS directors are drawing up contingency plans to save services at an Oxford hospital if it is declared financially non-viable.

Although managers at the Nuffield Orthopaedic Centre announced in the spring that its future was secure, business experts have now indicated that the specialist trust's long-term prospects are far from protected.

Accountancy firm KPMG has warned NOC chief executive Jan Fowler to develop a shortlist of alternative strategic options in case it becomes clear the hospital cannot cope as a stand-alone organisation.

KPMG was brought in last year to review the trust's future, after the now-defunct Thames Valley Strategic Health Authority claimed it was "fundamentally financially flawed" because of the NHS's Payment by Results scheme (PbR).

PbR is a national tariff which ensures hospitals are paid the same for the procedures they do. But it does not offer extra funding to centres doing high-cost specialist work, like the NOC.

An interim report by KPMG last March suggested the NOC's future would be safe if the Government made changes to PbR, but Mrs Fowler admitted it would not be clear what reforms would be made until at least the end of the current financial year.

She said: "The key would be to continue providing the services we already provide, and this could be in partnership with other organisations. I'm very confident services will be provided at the NOC and our buildings in Oxford in years to come. It's not an issue about the NOC closing."