The hospital will have the same capacity as the existing site but will be completely rebuilt. 

Construction of the hospital is expected to start in November.

Health Minister Michael Ferguson joined Premier Will Hodgman and Break O'Day mayor Mick Tucker to make the announcement on Tuesday.

The funds will be allocated in next week's state budget.

"The existing site is not fit for purpose and is not adequate for the future," Mr Ferguson said.

The budget will confirm an additional $4 million to complete the project, on top of funding in previous state budgets.

”The St Helens District Hospital has long been an integral part of the St Helens community, however continued flooding at the current site has meant that we need to rebuild,” Mr Ferguson said.

The new hospital will be just two minutes from the current site and features 10 in-patient beds, four emergency bays, four consultation rooms, two physio rooms, as well as three separate rooms to provide education/training, community nursing/treatment and community activities.

There will also be a range of new facilities to provide diabetes care, radiology and oral health.

A development application has been lodged with the Break O’Day Council and a construction tender is expected to be advertised in August, with works to begin in November.

The hospital is expected to be completed by December 2018. Importantly, the current site has room to expand as future care needs and service priorities arise.

The existing hospital site has been plagued by flooding events in recent years and is 40 years old with outdated infrastructure.

"This is a significant development for the economy," Mr Hodgman said.

"It shows a government who places a high priority on health."’

All staff will be relocated from the old site to the new site. It is unknown what will happen to the old site at this stage in the process.

Mr Ferguson said the new hospital would help to address demand on city hospitals and was part of the government's strategy for health in regional areas.

The new site, in Annie Street, at St Helens, has been bought from the council by the state government for the build.

Break O'Day mayor Mick Tucker said the new hospital would provide security for the region.

"The old hospital is 40 years old, at the time it hadn't experienced flooding or climate change that we've seen," he said.

Cr Tucker said the council had invested heavily in trying to address the issue, with $2.9 million spent on stormwater upgrades but it hadn't mitigated the flooding at the hospital.

He said the council was delighted the state government had delivered on their pre-election commitment for funds to build the hospital.

A construction tender process will be conducted to build the hospital.