Doctors, nurses and midwives were seeing patients in tents at the Winnunga Nimmityjah Aboriginal Health Service in Narrabundah on Thursday, protesting over what they say is a critical lack of space at the facility.
But ACT Health said it was aware of the issues at the service but did not have the money to fund the capital works.
Winnunga chief executive Julie Tongs said the service urgently needed $1.3 million to build three clinic rooms and a training room which would double as a waiting room for clients. She said three midwives were working out of one room, which meant they had to juggle which times they could see patients to ensure privacy was not breached.
''Our clients are very, very good and adaptable, but it's not the best use of resources to have staff only having access to one room,'' she said.
Ms Tongs said another room was shared by three nurses, and with the service seeing between 80 and 120 clients a day, many of whom had complex needs, an overcrowded waiting room sometimes led to volatile situations.
''Particularly mental-health clients or clients with a comorbidity or dual diagnosis, that have got a mental illness and are self-medicating through drug use, it can become very threatening very quickly,'' she said.
''Fear often turns quickly to aggression.''
Ms Tongs said the service had only one counselling room, so if a patient experienced a psychotic episode in the waiting room they often had to be taken outside.
''Sometimes there are clients outside as well, standing around. [Instead of] trying to get them outside it would be easier to bring them through into a counselling room,'' she said.
Five tents were set up outside the facility on Thursday housing doctors and nurses, and a midwife was working from a small campervan.
The service planned to continue the protest on Friday.
Ms Tongs said she had approached the ACT government for funds to extend the existing building and the service had applied for money to fund the service's expansion under the Regional Development Australia Fund but had been knocked back.
''As far as I'm concerned we are a regional health service, 23 per cent of our clients do come from New South Wales and 18 per cent of our clients are not Aboriginal,'' she said.
ACT Health said it could not afford to fund the expansion, but the ACT government had provided the service with access to the old Narrabundah Centre for its premises and granted a Crown lease over the property, which facilitated Commonwealth funding of $1.5 million of capital works.
ACT Health provided $1.6 million to the service each year and would work with it to identify other funding opportunities, including through Commonwealth programs, it said.
Ms Tongs said the service had 68 staff, 4000 clients and delivered more than 40,000 episodes of care a year.
Psychiatrists, psychologists, drug and alcohol counsellors, dentists and an opiate nurse all worked out of the service.
''We are an integral part of the overall health system here in the ACT and region,'' Ms Tongs said.