Major NHS hospitals in England have vetoed a proposed "tariff" of payments for next year because they believe reductions in the amount they receive for treatments will leave them unable to guarantee "sustainable and safe care".
Watchdog Monitor announced it was delaying the implementation of the national tariff for 2015/16 in response to the level of objections received.
Although objections came from only 37% of service providers - such as hospitals, mental health units and ambulance services - the complainants included large teaching hospitals delivering high levels of specialised care.
Between them they deliver 75% of the total healthcare services in question, meeting the 51% threshold required to block the tariff.
Monitor and NHS England are now considering whether to consult on revised proposals or to refer the issue to the Competition and Markets Authority.
The NHS Confederation, which represents commissioners of health care, said the delay would have an "unacceptable impact" on planning for 2015/16, while the group NHS Clinical Commissioners said it would have "significant cost implications" for commissioners, such as GP practices.
The organisation NHS Providers, which represents acute hospitals, community, mental health and ambulance services including 94% of foundation trusts, said the proposed tariff amounted to the fifth successive year of 4% cuts in payments to providers, at a cost of £1.7 billion, and would require "unachievable" efficiency savings at a time when demand was rising by 4% a year.
NHS Providers chief executive Chris Hopson said: "The fact that 75% of NHS providers, measured by activity, have vetoed the NHS 2015/16 tariff is hugely significant.
"It is a clear response from the NHS frontline that they can no longer guarantee sustainable and safe care and meet constitutional performance targets from April 1 2015 unless immediate changes are made to the way they are paid for their services. "
Under the tariff, hospitals would only receive 50% of the cost of increased demand for A&E services, and ambulance, mental health and community trusts would not be paid properly for the emergency patients they treated, while providers of complex care for rare conditions would only be paid half the price of additional activity in 2015/16, Mr Hopson said.
NHS bodies are not able to walk away from operations which are not proving financially sustainable, as private company Circle announced it was doing at Hinchingbrooke Hospital in Cambridgeshire, he pointed out.
"This isn't a decision that provider leaders have taken lightly," Mr Hopson said.
"Triggering the objection mechanism has repercussions for them, creating uncertainty over the contracting round and service plans for 2015/16 which starts in just two months.
"But after five years of unprecedented price cuts, with NHS providers realising more than £20 billion of savings over this parliament, objecting to the tariff for many represents a last resort to have their concerns heard as they can no longer guarantee safe and effective care unless they are properly and fully paid for the patients they treat.
"We have now reached the point where patient care is at risk.
"Either we fit the money to the care provided - NHS providers being paid fully for the patients they treat - or we fit the care to meet the money available - ensuring that providers are commissioned for realistic levels of care to reflect the static overall NHS budget.
"What we can't carry on doing is pretending that NHS trusts can achieve the impossible and then berate and criticise them when they inevitably fall short."
NHS Providers is demanding a revised tariff to ensure hospitals are "fully and properly" paid for the care they provide, with all emergency work paid for at 100% of tariff cost, f inancial risk equally shared between commissioners and providers and a shift away from penalising providers for failing to deliver on targets.
Some 13% of Clinical Commissioning Groups objected to the proposed tariff.
Dr Steve Kell, co-chair of NHS Clinical Commissioners, said: "This is a really disappointing situation for CCGs and patients at a time when the NHS needs effective planning and service improvement.
"This is a crucial year for the NHS and it is essential NHS England and Monitor reach an agreement soon which addresses the concerns of providers and commissioners.
"We need a national tariff system that enables and supports local relationships not undermines them.
"This delay is likely to lead to significant cost implications for commissioners and it is vital that CCGs do not have additional financial pressures in a year when we need to deliver real change for patients."
Rob Webster, chief executive of the NHS Confederation, said: "A lot of time and effort has gone into engaging with Monitor and NHS England on the 2015/16 National Tariff and the situation we have ended up in suits no-one.
"While it is right that a fair solution be reached, the timelines set by Monitor and NHS England means this delay has an unacceptable impact on planning for 2015/16.
"Furthermore, they must be disappointed that we could reach a point where an external body needs to come in to arbitrate."
A spokesman for Monitor said: "Monitor and NHS England are now considering the feedback received from the consultation and possible next steps, in the context of what the legislation permits in the event that an objection threshold is breached.
"Amongst the options available are engaging with the sector then re-consulting on revised proposals or referring the method to the Competition and Markets Authority.
"Meanwhile, commissioners and providers will be expected to continue planning for 2015/16 on the basis of the timetable and guidance that has already been issued."
An NHS England spokesperson said: "Just over a third of providers objected to the Monitor tariff consultation.
"Since the overall NHS funding totals for 2015/16 are now agreed, any fundamental changes to benefit one set of providers would in practice mean robbing Peter to pay Paul.
"This consultation underlines the need for a more wide ranging cross-NHS approach to the inescapable efficiency challenge ahead, including the forthcoming work of the Carter review."
Richard Murray, director of policy at health think tank The King's Fund, said: " The rejection of the proposed national tariff for next year is very significant. It signals that the policy of implementing year-on-year reductions in the prices paid to hospitals for their services has reached the end of the line.
"This is an unprecedented development. It is not clear what the outcome will be but, with just three months to go before the start of the financial year, it will throw financial planning in the NHS into disarray.
"With signs that it is becoming increasingly difficult to maintain downward pressure on staff pay, it indicates that the two main ways used to reduce NHS costs over the last few years - limiting staff salary increases and reducing payments to hospitals - have now been largely exhausted.
"With financial problems among hospitals now endemic, waiting times rising and staff morale a significant cause for concern, this once again indicates that the situation facing the NHS is becoming critical."