Completion of Launceston General Hospital's Ward 4K redevelopment will be halted indefinitely, once stage one is completed.
Stage one of the $20 million project, including an eight-bed adolescent mental health unit, has been delayed further.
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A government spokesman said the COVID-19 pandemic had presented multiple challenges on site including the availability of materials, sub-contractors and disruptions to normal work arrangements.
"Completion of stage one is now expected next month, although this may be subject to further challenges as we work through COVID-19," the spokesman said.
"In order to minimise disruption and maximise service availability in response to COVID-19, the decision has been made to halt works on Ward 4K following the completion of stage one.
"This decision has been made in consultation with the onsite clinical and hospital leadership."
Stage one was initially due for completion in October last year, but works were delayed.
Construction for the broader Ward 4K precinct was expected to be completed by the end of 2020.
Stage two will deliver upgrade single-bed rooms for paediatric patients, sleep study rooms, support areas and a parent's lounge.
Stage three includes a mix of upgraded single-bed rooms and shared rooms, a refurbished indoor playground and a playroom for paediatric patients.
A spokesman said the government would be in a position to provide a further update on expected completion timeframes, once the response to COVID-19 had concluded.
Meanwhile, the LGH masterplan project - expected to set out the infrastructure requirements for the next 50 years of health service delivery in Northern Tasmania - has also been put on hold.
The government aims to recommence community and stakeholder consultation later this year. This includes releasing a public communique, although this will "depend on developments over the next few months".
"The project team was able to do some targeted consultation with key stakeholders in early March, which built on the feedback from community and staff submissions, and some limited background planning by service and facility planners is able to continue over the next few months," a spokesman said.
"Detailed consultation with Northern Reference Group and Clinical Planning Taskforce will then follow, along with a community forum."
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