Health chiefs in England claim an extra £1m from Powys Local Health Board (PLHB) to fund treatment for Welsh patients is not enough.
Health chiefs in England say they need more money to treat Welsh patients
The Royal Shrewsbury Hospital (RSH) said an extra £1m was needed to bring payments up to an "English level."
The hospital is warning some patients' treatment may be affected because of the problem.
PLHB responded by saying it was "committed" to working with health officials in Shropshire.
At a board meeting of the Shrewsbury and Telford NHS Trust on Tuesday, hospital chairman Phil Homer said the extra £1m from PLHB, after arbitration, was only half of what was needed to bring payments up to the English level.
The hospital's business plan for the coming 12 months also noted that it might have to "significantly reduce the routine elective and out-patient activity we undertake on their (PLHB's) behalf."
Hip and knee operations
A spokeswoman for PLHB said that patients from Wales would be treated within the targets set by the Welsh Assembly Government.
She said: "Powys Local Health Board remains committed to working with the Shrewsbury and Telford NHS Trust to ensure that Powys patients continue to be treated in accordance with Welsh Assembly Government targets."
In October last year, figures from the hospital in Shrewsbury showed that patients from Wales were waiting up to twice as long for routine surgery than those in England.
Last December, the RSH said it would stop treating patients from Wales who were waiting longer than three months for hip and knee operations.
In 2003, the RSH treated more than 7,500 patients from Wales - 1,000 more than planned.