The $60 million Bendigo Health secured in Monday's state budget will complete a hospital project that began 13 years ago.
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Funding will see the east and north cream-brick towers of the John Lindell Building with rehabilitation services moving into the old hospital on Arnold Street.
"We want people to think of Arnold street on both sides. We have a new hospital, the universities in the middle and the old hospital where day rehabilitation centre will be," Bendigo Health chairman Bob Cameron said.
"It finishes the precinct and Bendigo Health has never been in a better position."
Mr Camera said Bendigo Health always had plans to move the rehabilitation services into the old hospital.
"Hospitals always want next step. The fact it has been achieved will be tremendous for Bendigo," he said. "It means we have state of the art facilities, not only with new hospital but with a new day rehabilitation centre.
"We are always aspiring to get ahead, that's what have with the new hospital.
"Inevitably, we would love to have all services in one place (with) better facilities - that's what's happening."
As well as the demolition of the two cream-break towers, the old hospital on Arnold Street will re-fitted for its new future as the day rehabilitation centre.
Construction is expected to started in 2021 and be completed by 2023.
"The new day rehabilitation centre will be based in the old hospital, which will be gutted and re- purposed (so) we end up with a state of the art facility," Mr Cameron said.
"This announcement finishes the job so Bendigo Health has tremendous facilities."
Mr Cameron said knocking down the east and north towers would be better that upgrading them.
"The problem with these old towers is if they are to be re-purposed, then we have to meet new fire regulations," he said.
"It costs over $20 million to do that. Realistically, once these buildings cease being used for this purpose, they have to come down.
"To do way with these buildings and move to a newly refurbished hospital is something Bendigo Health and the community can be proud of."
State minister for health Jenny Mikakos said the new rehabilitation centre would give patients easier access to services.
"For patients who have had an accident or injury and are on the road to recovery, it's so much easier to access all services in one location," she said.
"These buildings go back to the 1950s and the people of Bendigo (should be) pleased to see the East and North towers demolished and this opened up to green space.
"We have every confidence in Bendigo Health being able to work with us to deliver this next stage of the project.
"We want to make sure this is a world class hospital - it already is and staff do amazing job - but we want to make sure people have access to world-class rehabilitation services as well. We want to give them state of the art facilities."
More to come.