The 12-bed unit at OneCare aged-care facility The Manor will close at the end of next month - but Tasmanian Health Organisation chief executive John Kirwan has raised hopes it will return.

Mr Nikolic said federal funding was limited to four years under the previous government, and further funding was not included in forward estimates.

"It was an option to say, `we will come up with new funding', and we said we would fund what was in the forward estimates when it came to health and education, but to say that we cut the program is simply not true," Mr Nikolic said.

The service provides care to elderly patients well enough to leave hospital but not fit to return home.

OneCare chief executive Michael Powell said staff were disappointed to see the service go.

Mr Powell said he did expect the contract to end on June 30, but thought THO North would put a tender out beforehand to ensure it continued.

"We always expected that it would be tendered and if we were unsuccessful, the service would be picked up by another operator," Mr Powell said.

"I'm sensing there might be a delay in the tender coming out now."

Mr Kirwan said the closure was not related to the federal budget.

He said THO North would put the service out to tender, but didn't specify when.

Mr Kirwan said the John L. Grove Centre - a new sub-acute service - and other alternatives would help minimise the impact on the LGH and its patients.

"John L. Grove has the current capacity to accept five new patients, in addition to its current patient load," Mr Kirwan said.

He said Commonwealth funding for the John L. Grove Centre would expire on June 30, 2015, and further funding would be subject to negotiations with the Department of Health and Human Services.