Neerim District Soldiers' Memorial Hospital has not closed.
Neerim Health board chair Sean Dignum said the hospital was closed temporarily to allow for demolition and renovation works for its new $5 million community health hub.
Putting an end to scuttlebutt the hospital had closed, Mr Dignum said "we haven't closed and we haven't been forced to shut the doors financially."
The hospital's theatre is continuing to operate with day surgical staff on site.
Mr Dignum said the theatre facilities were not impacted by the works being undertaken for the new community health hub.
He said it was always the plan to close the hospital for a period while works were undertaken.
"To comply with standards, we have to do some major works and we can't do that with people in there.
"We are doing the best we can. Ninety-nine per cent of the community understand our position," he said.
Mr Dignum said the works were six months behind schedule, and they had initially hoped to begin demolition in July last year.
"Because we are rebuilding the building, we had to get in a structural engineer," he said. "Unfortunately some of the works are going to require more than we expected.
"We are rebuilding the existing structure to repurpose it for more medical facilities and services.
"We have fought hard to keep this hospital open," he said.
Mr Dignum said hospital services were suspended just before Christmas.
He said staff had either been redeployed, taken redundancy or taken long service leave.
"We couldn't afford to have staff sitting around with nothing to do...the staff were very supportive and understanding.
"We don't want to lose those staff, we still need people once we are open again.
"We are following all the rules and trying to do our best. It's a headache for the board and management but our ultimate aim is to get a new facility. We will expand services as works progress but at the moment we don't have a firm timeframe," he said.
The Neerim Health board announced at the end of 2023 that it would be closing Tarago Views Aged Care at the end of June.
Mr Dignum said those plans progressed and all residents had transitioned to new care arrangements by April.
He said it had been a difficult decision to close the residential care unit but "the financials don't add up to run the aged care."
"We have put in an application for $32 million for a new aged care facility but we missed out on the first round of funding.
Mr Dignum said the federal government provided $250 million to regional health services for aged care and received 300 applications totalling $200 billion.
"The sector is desperate for funding. The facility we want to build is needed in Baw Baw Shire, the demand is massive," he said.