Insurance plan to limit payout for beleaguered hospital

A backup plan is in the works to avoid a potentially massive payout over a beleaguered hospital following the operator's collapse.

Private equity-backed Healthscope's parent company appointed receivers in May, which the NSW government believes has opened the door to terminate a contract covering Sydney's Northern Beaches Hospital.

Two-year-old Joe Massa died after he and his parents spent three hours waiting in the emergency department there in September, prompting the government to outlaw similar private-public partnerships in the future.

The government is still seeking an agreement to exit the hospital contract but is looking for an option to terminate it without paying compensation potentially worth hundreds of millions of dollars.

Treasurer Daniel Mookhey announced on Friday the government would move amendments to a bill before NSW parliament to provide a way out of the contract and have an independent person determine the final bill within a reasonable time.

Mr Mookhey has repeatedly said the government would seek to avoid any "windfall" gain from the contract exit.

"This is not a decision we take lightly," he said.

"While an agreed exit from this failed (public-private partnership) contract remains my preference, I must ensure the government has the right to step in and protect the northern beaches community from this dragging on."

Healthscope chief executive Tino La Spina told AAP the company was not seeking any windfall gain in proposing to return the public hospital's operation to the government in April.

The move to outlaw public-private partnerships meant continuing to operate under one was inconsistent with the government's objectives, he said.

Before receivers were appointed, local MP Michael Regan introduced a bill in the NSW parliament providing a path to terminate the contract without paying compensation.

"In doing so, it moves us a step towards what the people of the northern beaches deserve and what the staff at the Northern Beaches Hospital deserve - a not‑for‑profit, local public hospital," he said.

Terminating the contract without compensation could damage the state's reputation for future contracting and lead to potential drawn-out legal challenges that could delay a resolution.

Health Minister Ryan Park said the hospital's future was under negotiation as the government attempted to clean up a "mess" created by a partnership it never supported.

"This is a complex contract but the community deserves certainty," he said.

Healthscope operates 37 facilities across Australia. The federal government has ruled out footing the bill, but banks have stepped in to provide loans and assistance to receivers attempting to sell the business.