Monitor launched the probe because of Oswestry Orthopaedic Hospital's failure to meet its targets to reduce the number of patients waiting over 18 weeks.
The watchdog says its formal investigation will look at whether the award-winning hospital has breached the conditions of its licence.
But the hospital's chief executive Wendy Farrington Chadd today defended the organisation and said: "We are a high quality centre and patients choose to wait for complex surgery. This is their choice and we wish to respect that choice.
"Despite these challenges we will be in a position of achieving access times in orthopaedics from July."