From July 1, the SPHO may no longer fund the $11,000 needed annually to hold two-hour weekly nurses' outreach clinics, and they may be axed.
Resident Ian Kirkland said if the SPHO "got rid of a couple of their bureaucrats who are job-creating down there in Dunedin", the subsidy could be easily covered.
The funding was "peanuts", his wife Elaine said, and cutting the subsidy could put the isolated town's 450 residents in jeopardy.
"The effects of not having it is that people might let health problems go, or people will have to go to Queenstown ... then further down the track their condition worsens, which is then an increased cost to the Government," she said.
"It's more cost effective for them to have something on the ground than the alternatives."
The Glenorchy Community Association is weighing up how to continue funding the service if the SPHO pulls out. The association already raises $3500 a year towards the service.
SPHO chairman Dr Conway Powell said the new unitary authority, created in October when Otago and Southland's nine PHOs amalgamated, had inherited many existing health-related programmes.
"Our budget is tight ... It's just a consequence of the merging of the PHOs," he said.
Cutting funding for Glenorchy's visiting nurse was a matter of providing "equality of access", across the SPHO area, Dr Powell said.
"Wakatipu PHO thought the Glenorchy programme was important. What we've come up with is a different set of priorities across the region," he said.
Programmes like Glenorchy's had to be capable of "rolling out across the region" and could not exist in isolation, he said.
Dr Powell said one solution the Glenorchy community could consider to save the service was applying to the SPHO's contestable $150,000 health innovation fund for 2011-12.
SPHO community advisory board chairman Tony Hill said the future of the programme would remain uncertain while consultation about other clinical programmes was undertaken.
"I don't think it's the death knell, but it's a tough one to judge ..."
