The Nuffield Orthopaedic Centre could face delays in its bid to become a foundation hospital by April after failing to get the green light to press ahead with its application.
Health officials said the Oxford hospital was the only one out of 25 which had applied for the status not to have been given the go-ahead by Health Secretary Dr John Reid.
All the others have been allowed to take their applications to the independent foundation hospital regulator Bill Moyes, with the possibility of getting the status in April.
The Department of Health said the NOC still had to "iron out issues" in its application before Dr Reid would authorise it to proceed to the next stage.
The news was welcomed by campaigners against the application.
Mark Ladbrooke, of health union Unison, said: "In a way it's very good news that they've been delayed, because what we have to do now is keep up our campaign to keep the NOC off the foundation hospital list."
Foundation hospitals will be free of Government control and run by a board of staff, patients and community representatives.
Government spokesman Lee Bailey would not reveal why the NOC was the only applicant which had not been approved.
He said: "The NOC is just not ready yet, but that shouldn't be seen as a slight against it, because that's not to say it won't get support from the Health Secretary over the next few weeks.
"Assuming we can iron out the issues in their bid, then it will be up to the independent regulator whether the NOC is a foundation hospital by April."
NOC chief executive Ed Macalister-Smith said: "At this stage the NOC remains in active discussion with the Department of Health with a view to proceeding to foundation status as soon as possible."
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