A new mental health centre will be built at the Maitland Hospital campus with forensic services moved from Morisset Hospital, the NSW government said on Friday.
Planning was underway for the Maitland centre at Metford, which will provide mental health support for adults.
NSW Minister for Mental Health Rose Jackson said in a statement that the plans involved "relocation of the Morisset Kestrel medium secure forensic unit to the new Maitland Hospital and the addition of new low secure forensic beds".
Ms Jackson said this included "the relocation of the adult acute and older persons services previously provided at Morisset" to Maitland.
She said the new centre would "change the way we deliver mental health services in the Hunter".
The centre will offer a "transitional model" of care, which a spokesperson said related to "transitioning" patients into the community. It will include general, as well as forensic, mental health services.
The design will involve consultation with staff, carers and people with "lived experience of mental health".
She said the Maitland centre would "improve the future capacity of our mental health system" and ensure patients can be "treated in an environment that best supports their journey to recovery".
The project is part of the NSW government's $700 million mental health infrastructure program, which aims to support mental health care reform.
Minister for the Hunter Yasmin Catley said the Maitland centre would "provide accessible and expert care to people across our region".
"This is a valuable investment and one I hope will make a big difference to the lives of some of our most vulnerable," she said.
Maitland MP Jenny Aitchison said the project was an "opportunity for our region to provide integrated and holistic health care".
Ms Aitchison said the centre would enable "timely and coordinated access to other health and clinical care and specialists".
The decision to move Morisset services to Maitland came as the NSW government announced it was making "vital investments in mental health with an additional 109 forensic mental health beds to be delivered in NSW".
This was aimed at making sure "more people with severe mental illness can get treatment".
"Expanding the existing NSW network of forensic and mental health units is a crucial step to improving the system," Ms Jackson's statement said.
Forensic mental health units are part of the justice system, enabling offenders to receive treatment after committing crimes due to mental illness.
Ms Jackson said forensic mental health units were "vital in reducing the risk of repeat offending".
The government said its plans would increase the 209 beds in forensic mental health units across NSW by 50 percent.
The new beds will be provided in Maitland, Concord, Freshwater and Blacktown over the next four years.
For more information about the Maitland project, visit www.hneinfra.health.nsw.gov.au/projects/maitlandmh.
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