The sale of the Nuffield Orthopaedic Centre, Oxford, to a private company was ruled out this week.

Fears about the future of the world famous hospital were sparked when the South Central Strategic Health Authority signalled that the NOC did not have a future as an independent trust.

It said it was looking to identify organisations interested in taking over the Headington hospital, saying it was ready to explore "a partnership with the private sector or a possible merger with a private provider".

But new Government guidance says that assets, buildings and staff of the specialist hospital cannot be transferred to a private company. And the strategic health authority confirmed that the new Government manual meant it could only listen to bids from other health trusts and NHS organisations.

But Chris Evennett, SCSHA director of strategy and reform, said Government policy still held out the possibility of the management of some NHS trusts being handed over to private companies under franchise agreements.

Mr Evennett added that the SHA was not opposed to the NOC becoming part of a 'super academic health trust'.

The NOC board wants to join with Oxford's other major hospitals and Oxford University in forming a pioneering academic health science centre, which would help the city's hospitals to capitalise on Oxford University's international reputation.

Mr Evennett said work was under way to see how academic centres could function. But with no detail available, the strategic health authority would take a "two-track approach" and continue with a plan to find the best organisation to take over the NOC.