Canton Zurich has torpedoed an inter-cantonal convention that supports a policy of decentralising top-level hospital surgery.
The Zurich government indicated on Thursday that it would not back down from its demand to concentrate surgery such as transplant operations in Zurich and Geneva.
Zurich's health director, Verena Diener, said the "network strategy" preferred by several cantons would weaken research and was bad for the economy.
"If top-level surgery is carried out in six different places, we will lose our competitive edge internationally," said Diener.
She said it would also lead to higher costs and reduce quality.
The conference of cantonal health directors said Zurich's refusal to sign up to the convention meant that the ratification process was at an end.
The conference had proposed a policy of supporting several small but strong specialised medical centres.
The plan was supported by health authorities in Geneva, Lausanne, Basel and Bern.
Zurich had cantons in eastern Switzerland on its side.
For the agreement to come into force, at least 17 of the country's 26 cantons - including all the cantons with universities - would have had to agree to it.
Diener has called for the creation of an independent panel, which would include foreign experts, to look into the issue of top-level surgery in Switzerland.
swissinfo with agencies
The inter-cantonal convention on the coordination and concentration of top-level surgery was to have come into force in 2008.
Zurich wants such surgery to be concentrated in just two centres, Zurich and Geneva, while other regional health authorities would prefer to spread it over six cantons.
Top-level surgery includes organ transplants, heart operations and burn surgery.