Diverging health policies in England and Wales are causing English hospitals to lose millions of pounds.

The Welsh Assembly government has instructed local health boards not to pay for elective treatment unless it is authorised in advance. Even then they will only pay a negotiated price rather than the tariff under payment by results.

Cross-border NHS agreements across the UK establish that commissioners should pay the payment by results tariff for any treatment in England.

A number of English acute trusts, particularly specialists or those near the Welsh border, have been affected.

Countess of Chester foundation trust deputy chief executive Jane Tomkinson said some 20 per cent of the trust's work was for Welsh patients, but the hospital was losing around£1.5m a year because Welsh commissioners would not pay the full price.

The annual audit report for Hereford Hospitals trust reveals that by the end of 2006-07, the trust was in dispute with Powys local health board over more than£1m of unpaid bills. The report recommended that the trust considered discontinuing some services to Welsh patients. Hereford and Powys confirmed the disputes but declined to comment.

Auditors have noted similar problems at North Bristol.

Health minister Ben Bradshaw told HSJ he was aware of the problem and had discussed it with his Welsh counterpart. He said: "There are some devolution issues here that need to be resolved and we are working actively with the administration in Wales to try to do so.

"There are members of Parliament across the border in Wales who complain that their patients have to wait longer than patients in England, but that is a result of devolution and Wales taking different decisions on spending priorities."

But a Welsh Assembly spokesman said it was not aware of any disputes over cross-border payments between the Welsh and English NHS. "All Welsh commissioners are able to enter into agreements with English trusts," he said.

Disputes with Welsh local health boards emerged after the assembly was accused of seeking an "all Wales" solution to the nation's hospital care by Welsh MPs, where patients living near the English border could be forced to travel further into Wales for acute care.

NHS Confederation policy director Nigel Edwards said: "It is worrying if these disputes are part of a more general trend in which the Welsh government is shifting care to within Wales, even where this appears to be highly inconvenient for patients."