Hospice chief executive officer Ginny Green said government funding through the Otago District Health Board was not keeping pace with increased costs.
Options for service reductions were given out to staff and unions yesterday. It will be August 1 before the consultation outcome is known.
It was possible there would be staff cuts and hospice services would be affected, but Ms Green could not be more specific.
She emphasised any changes in the level of service would not affect its quality.
The hospice, in Northeast Valley, in Dunedin, has 12 beds, but in-patient care accounts for only about a third of its work. It has about 150 patients at any time.
Last financial year was a record-setter for hospice fund-raising in Otago, with an estimated $1.2 million collected.
That level of support reduced a planned deficit of $230,000 to $130,000, but Ms Green said the hospice could not continue to fund such deficits out of other money such as that set aside in its depreciation reserves.
"The Otago Community Hospice is a community-owned asset and to protect its longevity we must ensure a break-even result in the future."
This year, expenditure is expected to be about $3 million, with $1.6 million expected from health board funding - according to its latest offer - and $1.1 million from fund-raising.
Ms Green said the board was sympathetic but unable to address the hospice deficit when facing one of its own.
Proposed board funding would cover about 53% of the total expenditure, compared with 63% two years ago.
The proposed board funding had risen 2.8% this year, but this was not enough to cover a forecast 10% increase in costs.
Operating expenses had increased about 10% for each of the past three years, due to increased staff costs and more patients requiring services, she said.
The number of new referrals to the service last year was 406 compared with 322 the previous year.
Health board chairman Richard Thomson said there was no simple solution to the funding issue.
There were issues which had to be addressed nationally about what level of treatment should be funded.
- Otago Community Hospice
• Employs 67 people (30 full-time equivalent staff).
• Has 250 volunteer workers.
• Services provided. -Care in the community (partially government-funded).
• Care at the 12-bed Northeast Valley hospice (funded ).
• Bereavement support (partially funded).
• Education services (unfunded).
• Day respite services (unfunded).
