Until now, the department has opposed early compassionate release and has told the board that she is being adequately cared for in prison.
"Corrections chief executive Ray Smith has spoken to me today on this matter and advised me that he's asked the chief doctor at Corrections to review the decision," Collins said.
"It's ultimately a decision for the parole board but obviously Corrections makes recommendations. So they're reviewing [if] Corrections can properly look after the prisoner."
Asked what prompted the about-turn by Corrections, she said: "These things are apparently often reviewed, particularly when there's a terminal illness."
The review is expected to take a week.
In March this year, Vicki Letele, a former mortgage broker, was convicted of 10 charges of dishonestly using a document to enable low-income families to obtain home loans.
Her family, which includes boxer Dave Letele, was upset that she would not be released until she had a few days to live.