Nuffield Orthopaedic Centre trust is considering a merger with the neighbouring Royal Berkshire Hospitals Foundation trust, HSJ has learned.

Nuffield Orthopaedic Centre trust was refused foundation status in 2004 because it is set to make losses in 2009 under payment by results.

The loss stems from the fact that in 2009 the Department of Health will axe temporary financial protection for specialist trusts; this currently plugs the gap between the tariff and true cost of their services.

Although the trust is still working on a plan for foundation status, it predicts a£5m debt in 2009-10 unless the DoH tackles the anomalies of payment by results.

A Nuffield spokeswoman said: 'In the event that we are not be able to progress a foundation trust application, we are working closely with the strategic health authority and Oxfordshire primary care trust to assess the Nuffield Orthopaedic Centre's specialist role and consider the option of working more closely with partner organisations to secure the services we provide.'

A Royal Berkshire Hospitals spokeswoman said its current partnership with the trust would remain unchanged while Nuffield again tried to progress its foundation bid.