UP to 50 beds will be closed across Eastern Health — including at Maroondah Hospital — due to federal budget cuts.
The move could also mean cuts to both elective surgery and nurses' jobs.
Eastern Health chief executive Alan Lilly said an $8.5 million funding cut in the 2012-13 financial year had hit the service hard.
"The matter is becoming more serious as time progresses without any funding solution," he said.
Mr Lilly acknowledged this was a "challenging period" when there were "no easy decisions". He said redundancies were a possibility.
"Eastern Health will endeavour to redeploy any staff affected by these outcomes elsewhere throughout our health service."
Australian Nursing Federation Victorian branch secretary Lisa Fitzpatrick said budget cuts were straining the system.
"Nurses now face employment uncertainty, which creates significant financial anxiety and stress," she said. "While the state and federal governments blame each other, the Victorian community will be the innocent victims of their political point scoring. We want both sides to show leadership and negotiate a solution."