Private Healthcare Australia says the small number of medical specialists charging very high fees need to provide "greater justification and more evidence".
Speaking on Perth radio station 6PR, chief executive Dr Rachel David said by law private medical specialists can charge what they like, but around 56 per cent of patients with private health insurance are treated in a hospital with no gap.
Dr David said that, of the 44 per cent of people that pay a gap for treatment in a private hospital, only two per cent are "being charged these five-figure sums."
"But they do tend to be in areas where patients are pretty vulnerable," she said, pointing to prostate surgery, brain cancer and breast reconstruction as "some of the areas that we are a little bit worried about."
"I think that Chief Medical Officer Brendon Murphy is absolutely justified in calling these people out and asking for at least more information about why they are doing this."
Dr David said insurers "want to signal" patients "that they actually do have a choice."
"They can talk to their GP and talk to their health fund about other practitioners that might be able to offer the service for no gap in the private system or in fact in the public system, because the number of doctors that are doing this is actually quite small, and they are not always the best person to secure a good outcome," continued Dr David.
She said health insurers do have evidence that some people think higher cost means better treatment.
"That particularly very vulnerable people, who have been diagnosed with cancer or other serious illnesses, often believe that by paying a large amount they secure a better outcome.
"Unfortunately, you mentioned a situation which is just utterly heartbreaking of, you know, a child that has been diagnosed by a group of medical specialists as having a terminal condition, and you know, in the pursuit of hope which is an absolutely human thing to do, the family have sought a second opinion and they have been offered surgery, but at a very high cost.
"Now there is no evidence that surgery for terminal brain cancer is any better than doing nothing or more conservative treatment. But they have been sold the promise of hope at a very high cost and that is where we have an ethical issue rather than a clinical issue about whether that should be allowed to happen in Australia."
Dr David said adding transparency to the market will enable GPs and their patients to make better-informed decisions about care.
Health minister Greg Hunt announced earlier this year the government would fund the development of a national searchable website to provide the public with greater access to information about the costs of specialist services.
The announcement followed the release of a report from the ministerial advisory committee on out-of-pocket costs comprised of stakeholders and chaired by the Commonwealth chief medical officer Professor Brendan Murphy.