The letter said a staff member involved in the proposal had been sacked from her last job, at the health centre where Dr O'Sullivan used to work and also been threatened with dismissal, for submitting an allegedly fictitious invoice for $3000 to the same fund.
The GP, however, said he had full confidence in all his staff.
"The letter was written by someone from our community who had access to our proposal and was questioning the integrity of one of my team members who is leading this project. These brave anonymous authors want to sabotage a wonderful opportunity for improving children's health care in the Far North."
Dr O'Sullivan said the writer had intimate knowledge of his staff member's employment history and believed, wrongly, that it would derail the telemedicine proposal. He said he was going public to show the lengths some people would go to "protect their own patch".
"I'd be happy if we lost out on our proposal because there was someone who could do the project better. However, to know our children could miss out because there are some that are bitter about what I say and do angers me and should anger others too," he said.
If it goes ahead the proposal will create a virtual version of the MOKO health service. Children in remote communities, accompanied by locals trained in the basics of medicine and IT, will be seen by a GP or nurse using a high-resolution camera and a Skype-like application. Medication could be sent by rural delivery and administered at school.
It would save children and medical staff a round trip of up to 200km and allow treatment of common childhood problems such as scabies, sore throats and school sores. It would depend on the roll-out of the government's Rural Broadband Initiative, with high-speed internet not due to reach the remotest parts of the Far North until mid-2014.
Dr O'Sullivan said he had developed the proposal after talking with IT companies and an indigenous health service using telemedicine to treat patients in Alaska. "I'm really excited about it. We could start with kids with skin infections and sore throats, and end up seeing people with diabetes or other chronic conditions. It could change the way we deliver health care," he said.