Calvary Health Care pulls out of co-hospital proposal

But Health Minister Guy Barnett said the government was still committed to partnering with providers to see the project through.

He said they were progressing with the demolition of a number of buildings at the Launceston General Hospital (LGH) to make way for the co-located private hospital.

"I understand Calvary Health Care's decision not to proceed was based on cost escalations," Mr Barnett said.

"We are continuing to rollout our LGH masterplan, which sets out the future vision and direction for the LGH precinct and is supported by our commitment of $580 million over the next 10 years," Mr Barnett said.

Calvary Health Care chief executive Martin Bowles said the associated challenging budget escalations were "insurmountable" for Calvary at this time.

"Calvary did not make this decision lightly and acknowledges the outcome is disappointing for our staff, visiting medical officers, suppliers and the broader community," Mr Bowles said.

"Aligned with our mission, Calvary is committed to a commercially viable solution which meets our strategic goals, as well as contributes to serving the needs of the Northern Tasmanian community."

Labor Leader Rebecca White called for clarity on the future of the private hospital on Friday, and said failure to deliver would put some 1400 jobs at risk.

"There are real concerns that it won't get off the ground," Ms White said.

"This is the on top of the fact that government promised $580 million to upgrade the Launceston General Hospital, but Tasmanians haven't seen this project start."