Yesterday board members and the organisation's chief executive Michael Powell informed staff.

"Despite a very good government offer to substantially increase funding of public palliative care patients, it would still run at a substantial loss," Mr Powell said.

"Existing patients will be cared for until they no longer require hospice care."

OneCare would offer the facility at a peppercorn rent to the new operator, he said.

There are 10 State Government funded palliative care beds in Hobart's Whittle Ward.

Health Minister Lara Giddings said: "It is important to ensure there is no interruption to public in- patient palliative care services in the North."

Philip Oakden's director of medical services Dr Robert Parkes said he believed the Health Department was the best option for the service's future.

"If there are people in the Health Department who want to retard the process, they would be very much in the minority.The minister has given her support," Dr Parkes said.

The board members present - Diane Fowler, David Plumridge and Phil Butler - gave a commitment that the building would not be turned into aged-care beds after June 30, or into the future.

"We have refused to discuss putting aged-care beds into POH," Mr Butler said.

"We reject totally putting aged-care beds into this facility," Mrs Fowler said.

"The board has not discussed a time frame," Mr Plumridge said.

They said that once the June 30 date had passed, they would continue searching for an alternative operator.

Bass Liberal MHA Sue Napier said OneCare's decision was disappointing and unfortunate.

"Northern Tasmania is already suffering a shortage of public palliative beds, and the Australian Medical Association has indicated that it would qualify for at least 25 public palliative beds," Mrs Napier said.

"The State Government must begin negotiations with OneCare to take over the running of Philip Oakden House."