It is the centrepiece of the Liberals' campaign for election, and has been greeted enthusiastically by the Australian Medical Association.

"It's a bloody fantastic initiative, it is just really a great piece of policy and we would really like to support this," ACT president Professor Stephen Robson said.

"There's a very rapidly closing window of opportunity. The current facilities are only just holding and if you delay this sort of infrastructure any longer it may well mean the wheels will come off the cart and the hospital won't cope ... The hospital is at breaking point."

The Liberals have revived Labor's plan, which was deferred in 2013 by then chief minister Katy Gallagher. Labor had planned a $800 million hospital, and after it was shelved, Labor commissioned a report on how to stage the rebuild instead. That resulted in a 2014 a "proof of concept" report led by architects Silver Thomas Hanley. The report, which the government never released, sets out a five-stage rebuild with a total cost of $1.2 billion. Work was supposed to have started in mid 2016.

Mr Hanson is promising the first stage. It was costed at $375 million and he has added $20 million, plus $8 million a year for extra staff once the new hospital is operating in 2019.

The five-storey block, to be built beside the main reception block, would become the main entrance, facing Yamba Drive. The ground floor would house an emergency department, which, at 5800 square metres, would be about 60 per cent bigger than the temporary, expanded, emergency department nearing completion. Above would be floors housing medical imaging, space for 20 operating theatres, of which 10 would come on line immediately, an intensive care unit with 48 beds compared with the current 31, and day-patient space.

The 2014 report projected demand for emergency beds, day surgery and dialysis beds would fall well behind demand each year until the new building was ready in 2021-22, with demand in emergency rising from 69 beds in 2013-14 to 97 beds by 2020-21, but supply well behind, with just 57 beds available.

Mr Hanson said Canberra Hospital was old and "hobbled by compromise" with defunct and inappropriate facilities.

Almost all of the funding for his $395 million building would come from the $375 million lump sum the government had budgeted to pay the tram consortium at the end of 2018, he said.

The government is getting that money from the sale of a number of government buildings on Northbourne Avenue and nearby. Mr Hanson said he would continue with those building sales and he insisted scrapping the tram would not damage profits from those sales, with the Liberals also planning a facelift for Northbourne with a dedicated bus lane instead of a tram.

"It is a very clear choice for Canberrans," he said. "It is to spend money on a tram or it is to fix our health system."

Prof Robson, an obstetrician who has worked at the hospital for 15 years, said the main block was built in the 1960s and not designed as a surgical hospital. It was "old, poorly designed and very, very difficult to work with".

It was "dangerous and terrible" for patients, who had to share lifts with visitors and others as they were wheeled around.

A new building would improve surgical access, access to imaging and dignity and "bring patients into the new century", he said. It would mean a bigger emergency department and allow more surgery instead of having to outsource to private hospitals, he said.

"It's a hospital that will just revolutionalise care, and make it a much, much improved place for patients," he said. "It's taking a 1960s relic and bringing it up to match what's going on in other hospitals."

Much work had gone into Labor's design and there was "a great deal of disappointment" when it had not gone ahead.

The project director was Sydney consultant Justin Barrett, who said Mr Hanson's commitment "reflects, in our view, much needed infrastructure".

"The hospital is the one and only level 6 tertiary facility in Canberra and it's relying on 40 to 50 year old infrastructure which is at risk of failure," he said.

A business case was done after the 2014 report. Labor wanted to develop the hospital as a public-private partnership, but Mr Barrett said it was not suitable for a PPP because it was an existing hospital site rather than a greenfields project, and because of the complexity. It went no further.

Last year, Mr Barrett slammed the government's handling of the hospital rebuild as "unconscionable". He has taken a complaint to the Ombudsman.