Cranford Hospice is reeling from an estimated $193,000 funding cut as the Hawke's Bay District Health Board tightens its purse strings.
The Hastings hospice's chairman, Ken Gilligan, said the cut was "a huge amount" for a charity that already had a shortfall of $2 million a year.
He said the hospice may have been targeted because it had managed to run a surplus for the past two financial years.
"We're trying the self-help thing and we're getting penalised for it," Mr Gilligan said. "If DHBs are redirecting hospice funds to something else, just because we are succeeding in getting community support, then we will have to limit our services. Who would want that to happen?"
The hospice had a contract to the DHB, but provided "far more".
"That's why we try to lift the community amount, with things like the wine auction on Saturday."
Hawke's Bay DHB chief executive Kevin Snee said the cut, estimated about 7 per cent, was not related to Cranford's budget surplus.
He said the DHB needed to catch up on deferred capital expenditure and the only way to find the money was by making savings in the hospital and non-governmental contracts. The roof leaked in Intensive Care and buildings had become "dilapidated".
"The mental patient in-patient unit is one of the worst - in terms of the building fabric - in the country. We now have just over $20 million to spend on that.
"Those investments in infrastructure have been partly paid for by things like the sale of the Napier hospital but also from surpluses."
This year the DHB was projecting a $3 million budget surplus.
Cranford would be expected to give the same level of service and the DHB could suggest "efficiencies", Mr Snee said.
"The same conversation" was happening with Presbyterian Support, Cranford's parent body, but there could be new opportunities. "We would like to spend more money on keeping elderly patients, for example, in their own homes and not having them end up in hospital - and then getting older people out of hospital more quickly."
Mr Gilligan said Cranford would probably lose its planned independence and the ability to grow. Reserves for an endowment fund had been "sliced off before we even get it going properly".
"Who knows what we will need in the future. We have an ageing population - the demand for our services will never lessen."
Cranford was involved "extensively" with families whose loved ones had a terminal illness, Cranford communication manager Graeme Milne said: "Typically, from diagnoses to death it is a two-year journey and we provide bereavement counselling for what can be up to two years after."
About 160 people were being cared for at any one time.
Cranford Hospice manager Helen Blaxland said a cut of 5-8 per cent had been indicated to all major DHB community contract providers. How the organisation would cope with the cut would be discussed at a board meeting tomorrow.
Immediate past-chairman of Age Concern Flaxmere, Neil Hatcher, said the cut was typical of poor planning for the ageing population: "We have known about it since 1945 and what have governments done about it? Nothing.
"In the next five years it's going to be colossal."