Labor has shelved a controversial proposal to introduce a benchmark pricing model for private hospital procedures following opposition from the biggest operator, Ramsay Health Care, to what would have been the biggest shake-up to the private health system in decades.

Instead, the Albanese government will look at changes to private health insurance product tiers, maternity and mental health care and hospitals in the home as part of a public consultation process designed to make the hospital sector more viable and stave off ward closures.

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