Napier mental health facility Jacaranda House will close in 2015 and some services contracted out once the new $20 million mental health at Hawke's Bay Hospital in Hastings is complete.
Napier spokesman on health Stuart Nash said that, for a high number of Jacaranda's patients, travelling to Hastings was "not an option".
"These are some of the most vulnerable people in society" he said.
"The Hawke's Bay District Health Board [DHB] are moving back into the institutional service away from the community model - it's really about saving money and not community outcomes.
"Jacaranda is not broken - with 60-70 patients per week it just goes to show the extent of the problem.
"It has been there for 20 years and does a fantastic job.
"This is another case of the hollowing out of Napier."
He said staff had complained that consultation had been poor and the climate at work was tense.
"They said if you put your head above the parapet it is likely to be shot off."
DHB clinical director of mental health and addictions Simon Shaw said there had been "numerous meetings and consultations as part of this development".
"Jacaranda House currently provides a number of different therapies and activities for clients, but as part of the consultation it was recognised that such activities could be delivered in other ways and made accessible to more people than at present," he said.
"Therefore some therapies that are delivered from Jacaranda House will be provided from other organisations leaving the DHB to provide for and develop more intensive therapies like an intensive day programme.
"This change would mean Jacaranda House will no longer be needed and will be closed .
"There are no plans to reduce the number of staff, but staff will work from the new mental health Unit on the Hawke's Bay Hospital campus.
"The development of the mental health unit is the most significant spend in health care in Hawke's Bay since the amalgamation of the Napier and Hastings Hospitals in 1999," Dr Shaw said.
A free bus service for hospital patients currently runs from Napier to Hastings.