Negotiations between the fund and the Catholic-affiliated hospital chain broke down in July after Medibank declared that it would no longer pay for 165 "highly preventable adverse events" and unplanned hospital readmissions within 28 days saying the crackdown would help eliminate mistakes.

"We had reached an agreement that will deliver enhanced clinical safety, quality care and affordability for members and patients," both parties said upon signing a new three-year agreement. "It is good for both our organisations and all other stakeholders, be they staff or doctors."

At the height of the dispute Medibank took out full-page newspaper advertisements to counter what it terms misleading and misinformed statements from Calvary.

"Unfortunately, unlike [other private hospitals] Calvary believes health insurers should pay for mistakes which can be prevented, like falls and pressure sores, even though they happen in their hospitals," it said in advertisement.

Last week it offered to introduce an independent clinical review process to clarify situations where responsibility for adverse events was unclear.

Although neither party will reveal the terms of the new agreement it is likely to put pressure on other hospitals to adopt the rules Medibank was proposing.

Consumers Health Forum chief executive Leanne Wells said the secrecy was "not good enough".

"Consumers pay thousands of dollars a year in health insurance premiums and the health fund involved is a publicly listed for-profit company."

"For all members know, Calvary may have weakened and agreed to 160 or the 165 claims – hardly a big win for consumers because differential costs will still fall to consumers. Basically Medibank private members don't know what they don't know."

Had the agreement not been signed, Medibank would have continued to pay for treatment at Calvary Hospitals, but the hospitals would have been free to charge patients extra where it felt it had not been paid enough.