Maternity services will end at Gosford Private Hospital in March due to rising costs and falling demand on the Central Coast.
Private hospital operator Healthe Care announced the move on Wednesday, saying "cost of living pressures" were a factor.
The rising cost of fees charged by obstetricians has also been raised as an issue.
Another factor was private hospitals receiving what they consider to be inadequate payments from private health insurers.
Healthe Care said eight other private maternity services had closed across the nation in the past 18 months.
Gosford Private had provided private maternity services for more than 30 years.
But in the past decade, there had been "a steady decline in the number of local families choosing to have their birth privately".
Births had fallen by almost 40 per cent at the hospital during that time and there were forecasts for fewer private births in the years to come.
"We have now reached the point where it is no longer sustainable for us to continue to operate this service," Gosford Private Hospital CEO Stephen Johnston said.
"We are very aware of the impact this decision will have on the local community and expecting families in particular."
Families who were booked to give birth at the hospital will "be supported until the end of March 2025".
"We are fortunate to have a dedicated team of obstetricians and a strong public maternity service locally," he said.
The company was working with Central Coast Health to "ensure ongoing access to maternity services".
The peak body for health funds, Private Healthcare Australia, said in July that "obstetricians are charging some of the highest out-of-pocket fees of all doctors in Australia" - up to $10,000 in major cities.
"Under Australian law, this is a fee that health insurance is not allowed to cover," said Dr Rachel David, CEO of Private Healthcare Australia.
Such fees were the "major barrier to people choosing private maternity services".
The cost of scans and pathology and out-of-pocket fees charged by anaesthetists were other factors forcing people into the public sector.
The peak body also cited a shortage of obstetricians and paediatricians in some regional areas as "causing private maternity units to close".
Healthe Care said its decision to close the Gosford maternity service was not related to a shortage of obstetricians.
However, the decision would "directly affect the service's 27 staff, with redeployment opportunities being explored across the Healthe Care group and in the local health district".
"I want to express my gratitude for the tireless work of our maternity services staff," Mr Johnston said.
"This decision in no way reflects the work they do and the exceptional care they provide for our patients."
The company added that Gosford Private would continue to provide women's health services, paediatric surgery and paediatric services.
Healthe Care last year closed Tuggerah Lakes Private Hospital at Kanwal, which had opened in 2019
Rising operating costs, poor private health fund rates and the pandemic affected the financial viability of the 20-bed hospital.
