Health officials will no longer be able to prevent private hospitals from opening up in areas that are already well-serviced by the public system, under a bill before state Parliament.

Critics fear the move will allow private facilities to cherry-pick wealthier patients from the public system and will put public services at risk.

""The deregulation of health services planning will create a profit-driven gold rush.": John Kaye Credit:Andy Zakeli

But the Australian Medical Association has welcomed the change, which the government says could lead to more competition and innovation.

The changes relate to rules that were designed to ensure that public investment in new hospitals and other health facilities could be planned according to population needs, by giving the head of NSW Health the ability to prevent new, private facilities from opening up in areas that are well catered for.