Dunedin Hospital chiefs admit major changes will have to be made to improve services for patients.
The South Island hospital is already under intense government scrutiny for a wide-range of problems to do with the delivery of services.
The Southern District Health Board released a report on Monday calling for sweeping changes at the hospital.
The highly critical strategic plan was prepared by a group led by the DHB's Dunedin chief operating officer Vivian Blake.
It says the debt-plagued hospital has struggled for years, failing to invest in its buildings - which are now seriously run-down - and keeping patients waiting too long for emergency and other treatment.
The report says 30% of patients routinely spend more than six hours in the Emergency Department and others may be left waiting for up to five days in a ward for a scan.
The DHB says improvements are needed and the deficit will have to rise to fund them.
A separate joint government review on hospital services in Dunedin is due to be released in August.