A new hospital will be built in Canberra's north on Calvary's Bruce site, with the government committing $1 billion to the project.
Construction on the new hospital will start by the middle of the decade.
The hospital will be run by the ACT government and not Calvary. The government will launch a compulsory acquisition of the Bruce hospital in order to build the new facility.
The money for the hospital will be allocated in next month's territory budget.
The $1 billion does not include the money needed to acquire Calvary.
The government has said the hospital would be developed to ensure there is no disruption to existing services.
Chief Minister Andrew Barr said the hospital was being built to meet the needs of the growing city.
"Canberra's northside will continue growing in the coming decades. Planning now for a bigger modern hospital on the northside will provide all Canberrans with access to more healthcare services close to home," Mr Barr said.
Canberra's northside will nearly double in population size over the next four decades to house more than half a million people.
The buildings and infrastructure at the Calvary public hospital are reaching their end of useful life, documents have previously revealed.
The government hopes to demolish buildings around 2024-5, start construction mid-decade and open the new hospital in about 2030.
The ACT government had promised to start construction on a new northside hospital by mid-decade at the 2020 election.
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Canberra Hospital will remain the biggest hospital in the territory, and the primary hospital for trauma and tertiary referrals.
A new hospital is expected to focus on similar specialties that are currently at Calvary, such as endocrinology, general medical services, geriatric, maternity and general surgical services.
Health Minister Rachel Stephen-Smith said consolidating hospital services would allow the system to be better coordinated.
"Consolidating our public hospitals to create a single network will allow us to better coordinate our health services, distribute resources effectively, strengthen the capacity of our workforce, plan infrastructure on a territory-wide basis, and improve health outcomes for all Canberrans," she said.
The new hospital will be built next to Calvary Bruce, with the current hospital continuing to operate as normal during construction.
Those buildings may then be knocked down or re-utilised. The government wants to the capacity to expand the northside hospital in the future.
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