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Mercy Hospital chief executive Richard Whitney said overnight beds would increase more than 50%, from 41 to 67, and the work was expected to be completed by next August.
The latest hospital redevelopment, at the main ward block’s second storey, was positive news for Otago’s future, as was the planned major rebuild of Dunedin Hospital, he said.
"It’s great for the region to have growth in the health sector," he said.
The various developments reflected confidence in the future and increased health treatment capacity.
About 5% to 10% of Mercy admissions was work undertaken under contract to the Southern District Health Board, including to help clear some backlogs.
However, the overall increase in Mercy’s admission capacity was prompted by an increase in demand for the hospital’s services, partly from an ageing population, he said.
Before the current redevelopment, Mercy Hospital had undertaken an extensive 10-year, $30million capital development and expansion programme to ensure the hospital was "purposely fit for the future".