The former Koroit Hospital building will be demolished after engineering assessments found insurmountable structural issues.
Moyne Health Services announced the decision but said the move would not affect its provision of health services in Koroit.
"Health services will continue to be provided at our 102 and 127 Commercial Road sites," a spokeswoman said.
The building was evacuated in 2020 after ongoing structural issues led to a partial roof collapse. An engineer's report at the time stated the building had reached the end of its service life.
Moyne Shire councillor Jim Doukas said he was surprised at the development.
"We had a zoom meeting this morning because a group of councillors and officers were heading to Melbourne to have meetings with the state government and Moyne Health Services wasn't mentioned," he said.
"I would've thought that would be something worth raising with the government."
Council was evidently aware the demolition decision was imminent, putting aside $50,000 in this month's draft annual budget to help MHS develop a master plan for the site.
A Moyne Shire spokesman said the hospital demolition was "discussed at length during the morning briefing" and he didn't know why Cr Doukas wasn't aware of it.
The spokesman also said the future of the hospital site would be raised with several government figures during the Melbourne advocacy visit, with former Member for Western Victoria Cr James Purcell leading the efforts.
MHS interim chief executive Katharina Redford said she wasn't aware of council's budget proposal or plans, but the service aimed for the demolition to be completed by the end of June.
MHS interim chief executive Katharina Redford said she wasn't aware of council's budget proposal, but planned for the demolition to be completed by the end of June.
"Our priority is to make the site safe and then we will speak with the Koroit community about the next steps," she said.
The Koroit District Memorial Hospital opened in 1955 with 20 per cent of the construction costs raised by the local community. In 1994 the building was converted into a nursing home and mental health facility.
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The nursing home closed in 2011 and MHS took over the building, running a range of services from podiatry, physiotherapy, speech and occupational therapy and short-term rehabilitation.
The building itself still has personal significance for many older locals, especially those involved in funding its initial construction.
Cr Doukas said many locals he had spoken to wanted the site to become a nursing home once more.
"What we really need is a retirement home, like it used to be," he said.
Cr Karen Foster, who was MHS chair when the building was evacuated in 2020, said the area deserved a dedicated health service.
"Koroit is expanding and growing and it's really important that they have health services close to home," she said.
"Its just a matter of how and where."
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