A NATIONAL audit has found no evidence to support allegations the Tasmanian government misused Commonwealth funding for the Mersey Community Hospital.
The Latrobe hospital, bought by the federal government in 2007, is the only Commonwealth- owned hospital in Australia.
In 2011, Tasmanian Liberal Senator Richard Colbeck requested an investigation into allegations the state government was using funds allocated to the Mersey hospital to cover staff, drugs and supplies at Burnie's North-West Regional Hospital.
The resulting audit, released last week, found no evidence to support the allegations.
However, it could not make a judgement on the use of funds for corporate services and cross charging between the Mersey hospital and other hospitals, as the Department of Health and Human Services had failed to maintain complete financial records as required.
The report found the Mersey hospital's emergency department was performing well against national benchmarks, and revealed positive results for in-patient management, and elective surgery wait times.
It said the hospital's costs for acute care were 43 per cent higher than comparable mainland hospitals, but 12 per cent lower than Tasmanian hospitals.
Drivers of higher costs at the Mersey hospital included a high staff-to- patient ratio, high medical and surgical supply costs, and the use of locum medical staff.
Other weaknesses were the hospital's obstetrics service and infection rates, with 48 per cent of first time mothers having caesareans compared to 22 per cent at mainland hospitals.
The Department of Health and Human Services said in a statement it had "accepted recommendations to strengthen processes to guide hospital operations and improve transparency of expenditure reporting".
Health Minister Michelle O'Byrne said Senator Colbeck should apologise to Mersey hospital staff for the allegations, but Senator Colbeck said he had done the responsible thing by following up community concerns, and considered the audit a worthwhile exercise.