The hospital will provide free services to people in Otago and Southland who would be unable to access care through the public or private health systems.
Board trustee Melissa Vining said it needed to reach $2.5million to start bowling down the former pub building interior to turn it into a hospital.
At full labour cost, $2million more was needed to complete the build.
Another $1million was needed for equipment.
It all felt very real as she struck a blow into the first wall to be demolished, she said.
Her journey, and the idea behind the charity hospital, began when her late husband was diagnosed with bowel cancer in 2018.
"I was thinking of Blair and how he would be so proud.
"Southland-Otago has the worst bowel cancer rates in New Zealand and one of the contributing facts to that is the low intervention rate."
She said between 1000 and 1500 Southland-Otago people were missing out on colonoscopies a year.
"That is a huge number we can try and cater for."
Catching cancer early was key to survival, she said.
To begin with, the hospital would provide free colonoscopy and dental care to patients meeting criteria.
Volunteers would be needed — from build right through to day-to-day operation of the hospital.
So far, more than 100 people said they would help, with 36 with medical backgrounds and 50 volunteers for the build.
The re-purposing build would begin in February and it was hoped to be ready by Christmas next year.
The latest donation was also given by New Zealand Aluminium Smelters chief executive and general manager Stew Hamilton on behalf of Rio Tinto.
As part of its global Covid-19 relief package to support communities, $100,000 was donated.
He said it was proud to support the initiative in providing Southlanders with healthcare they may not have had access to.
