The ACT government has long made it clear it would prefer to own and operate the Calvary public hospital at Bruce, having previously sought to buy the facility.
But those past efforts came to nought and now the government has said it would use compulsory acquisition laws to take over the hospital.
The hospital, which opened in May 1979, is operated by an Australian-based arm of the Sisters of the Little Company of Mary, a Roman Catholic institute founded in 1877. Little Company of Mary Health Care also operates a private hospital at Bruce and the private John James Hospital in Deakin.
The Commonwealth government struck a deal with the Little Company of Mary in 1971 to construct and operate a public hospital on Canberra's northside. The hospital site was granted to the Little Company of Mary.
The Commonwealth and the ACT government, since self-government in 1989, have solely funded services at the public hospital since its establishment.
The Catholic-controlled hospital does not offer general abortion services and has said it would not offer voluntary assisted dying services once it becomes legal in the ACT, which is expected to happen later this year.
Negotiations began in August 2008 to transfer the ownership of the public hospital to the territory government.
The government reached in-principle agreement in 2009 to take ownership of the hospital, releasing legal advice at the time which the government said justified buying the site.
Critics of the sale had argued the Little Company of Mary was not entitled to compensation if it surrendered or terminated its lease before it ended in 2070.
But advice from the ACT government solicitor said unless the Little Company of Mary waived its right to compensation, it was entitled to payment for prematurely giving up its rights to the land and assets.
But the deal was met with opposition from the Catholic church, which was concerned about the loss of their hospital assets.
Calvary withdrew its support for that deal in February 2010, which was reportedly worth $77 million, citing long delays for Vatican approval.
The deal included a $200 million investment in health facilities for Canberra's north by the ACT government and a commitment by Calvary to build a new 75-bed private hospital from the proceeds of the sale. The deal included the sale of Clare Holland House to Calvary for $9 million.
The government expected the transaction to save the territory $145 million over the next two decades.
Then ACT health minister Katy Gallagher said the territory would need to negotiate a new funding agreement with the owners of the Calvary public hospital, but warned compulsory acquisition would be a disaster.
"That would cause a lot of conflict, it would put the system into disarray," Ms Gallagher said in February 2010.
Tom Brennan, Little Company of Mary Health Care chairman at the time, said Calvary had withdrawn from the sale after it was made clear to them by the then Archbishop of Canberra and Goulburn, Mark Coleridge, a deal to sell the hospital would be met with long delays.
"They believe it would not be in the interests of the community of Canberra to apply for approval for the sale to the Holy See," Mr Brennan said.
Archbishop Coleridge in February 2010 said: "I think it would be an impoverishment for the entire community if there was growing pressure to push Catholic providers out of public hospitals ... I don't want to play either the sectarian card or the obstructionist card, but I have a job to do as archbishop and some people don't seem to understand that."
Work then started on a new agreement, but the government was advised it could capitalise on the Calvary hospital assets without legal ownership. Calvary disagreed with the government's advice.
The ACT government still believed that it should operate and own Calvary but since the transfer of ownership was no longer an option, due to the change in accounting practices, the government was forced to reconsider its position.
The government began conversations with Calvary Health Care last year about its potential involvement in a new hospital for Canberra's north. The government has a contract with Calvary to run a hospital for more than three quarters of a century.
Authorities were considering whether the new northside hospital will be built on the existing site of Calvary Public Hospital Bruce or on a new site.
The government's announcement on Wednesday confirms it will take ownership of Calvary and build a new public hospital on the Bruce site.
Compulsory acquisition laws allow the ACT's executive government to take over leases in exchange for "market value" compensation when that land is needed for a public purpose.
