About 20 rest home residents will be forced to move from the central North Island town of Taihape to homes in Whanganui after the town's health service went broke.
Otaihape Health, a community trust set up to run all of Taihape's health services in 2006, is now in liquidation.
Whanganui District Health Board says it will not fund the town's rest home and hospital beds, and the future of midwifery and maternity services remains undecided.
The DHB says it has already spent more than Taihape's fair share of public health money, and keeping the rest home open would drain money from services affecting many more people.
It expects to be able to offer residents places in Whanganui rest homes.
Wendy Campbell - whose father, 96, and mother, 93, are both in the rest home - says its closure is gut wrenching.
She says the family will now look after her parents rather than face a three-hour round trip to Whanganui to visit them.
Kiwi Rowlands has been a Taihape midwife for 30 years and say staff are devastated women may not be able to give birth in the town.
Otaihape Health previously faced insolvency in July when a last-minute deal avoided a pay cut of 30% for about 20 rest home nurses. Trustees and employees agreed to a pay cut of less than 10%.