The breakdown in mediation means thousands of ACT patients may be forced to pay more for hospital care unless the two parties can reach a final agreement before August 31.

In July, Medibank Private initiated termination proceedings after months of unsuccessful negotiations and a disagreement about quality criteria and market rates.

Medibank executive general manager Dr Andrew Wilson said a mediation meeting with the Private Health Insurance Ombudsman on Thursday failed to resolve disagreements about market rates and safety criteria.

"While we were hopeful for an agreement that would pave the way for a continued relationship between us, this outcome has regrettably left us with no other choice but to part ways," he said.

"We just hope Calvary eventually changes its position and decides to partner with us to help reduce these unfortunate mistakes and keep costs down – like so many other hospitals have done already."

Around 4700 Medibank Private members used the territory's Calvary hospitals last year, at Bruce and John James. There are no Medibank-contracted alternative hospitals for obstetrics and psychiatry.

The health insurer was sold by the federal government in a $5.7 billion float last year.

Calvary national chief executive officer Mark Doran said both parties failed to reach an agreement during a mediation session on Thursday despite their best efforts.

"Discussion between the parties will be ongoing in an attempt to reach a mutually satisfactory outcome," he said.

"In the event that a satisfactory outcome cannot be reached, Calvary will communicate clearly with stakeholders as to the next steps, most particularly with doctors and patients."

Medibank said members would still be able to receive treatment at Calvary hospitals after August 31 although Calvary could charge members with additional costs if it wished to.

Those who had already booked treatment will have extended cover beyond August 31, from two months to nine months for pre-booked pregnancy care.

Dr Wilson said Calvary had been unwilling to agree on measures to reduce the "unfortunate mistakes" that sometimes occur in hospitals.

But Australian Medical Association president Professor Brian Owler dismissed these claims and said Medibank had confused mistakes with known complications.

"The healthcare industry accepts that health insurers should not have to pay for mistakes such as wrong site surgery, but hospitals and health professionals are managing known complications, such as infections in patients who are undergoing chemotherapy and who are known to be susceptible," he said.