Despite being a public facility, the hospital is owned by the council and run by Waitaki District Health Services Ltd (WDHSL).
Being disconnected from the national health system has led to clinical and financial instability during recent years.
Councillors today approved agreements negotiated with Health New Zealand Te Whatu Ora (HNZ) to return staff and services to the government from July 1.
As part of the deal Health NZ will buy WDHSL's clinical equipment, stock, and take over licences, equipment operating leases and service agreements. It will also lease the Oamaru Hospital facility from WDHSL, the council said in a statement.
"Today marks a bittersweet change for our community, as we confirm the conditional agreement with Health NZ to take back our Oamaru Hospital," Waitaki Mayor Gary Kircher said.
"It has been part of council life since the late 1990s and has seen its share of highs and lows. However, we have had to accept that now is the right time for it to go back into HNZ’s control . . . "
Last year, the hospital closed its emergency department three times due to staff shortages.
The hospital had been able to stabilise nursing staff numbers by achieving pay parity last year, but getting doctors was a big problem.
