Under the plan, South West Healthcare will build a new aged care facility at a cost of about $11 million. A further $18 to $20 million will be spent on rebuilding the hospital’s acute facilities.

South West Healthcare chief executive officer John Krygger said the project had been planned for some time.

“It’s been on our drawing board for some considerable number of years,” he said.

“It’s not a new project. It’s something we have been endeavouring to achieve for the last eight to 10 years and we’ve had various consultancies looking at how the proposal is going to proceed.”

Mr Krygger said the latest consultancy report “really crystalised” the board’s position to go ahead with the project, which could be completed within three years.

“There was some speculation that we were actually going to close the aged care sector, so the fact that we’re not closing, we’re actually rebuilding it is great news for our staff and great news for the Camperdown community,” he said.

The 36-bed Merindah Lodge aged care facility will be rebuilt. The consultant’s report also found the 26-bed hospital had fallen behind modern standards.

“It became apparent to all involved in this planning that it really does provide an opportunity… to do both projects as a single effort,” Mr Krygger said.

Funding for the aged care rebuild will be sourced from resident contributions, commercial borrowings and fund-raising.

Government funding will be sought for the acute facility redevelopment, which will include hospital upgrades to the 140-year-old building and consolidating primary care and mental health services on the site.

“The funding for the aged care component is very much within our control, the funding for the acute sector is solely reliant on government support,” Mr Krygger said.

Next year South West Healthcare plans to complete a comprehensive business case for the project, which it hopes will encourage government funding for the development.

“After that we will get into the detailed design phase and en route to construction phase.

“There’s no doubt that the project… is still two to three years away from completion,” Mr Krygger said.