Part of St Helier Hospital is to be rebuilt with a local care centre as part of a massive £264m reshaping of health services in Sutton and Merton.

Locating both health facilities on the same site offering different levels of care could end up as a pilot for the whole NHS, said Wallington and Carshalton’s MP Tom Brake.

Although there has been a huge increase in the cost of the St Helier redevelopment – up to £219m from an original cost of £140m, NHS London’s capital investment committee has given approval for the scheme to go ahead.

As well as the rebuilding of part of the ageing St Helier with a local care centre on site, a local care centre will be built at the Nelson Hospital in Wimbledon at a cost of about £21m and local care and intermediate centres at the Wilson Hospital in Mitcham at a cost of £24m. A new £13m centre at Shotfield is already under way and will open its doors in 2011.

The next stage in the St Helier rebuild is for the formal approval by the Department of Health.

Tom Brake said: “I have had assurances this is one of the highest priority projects in London.

“I want to push for this to proceed as soon as possible because public spending is getting tighter and tighter.

“We need to see the first sod dug as soon as possible so there is no option of going back on it.

“This is a trial-run of how to restructure the health service and make health care more accessible to local people.”

Bill Gillespie, chief executive of Sutton and Merton PCT, said: “This is great news as we know there is considerable support for the Better Healthcare Closer to Home programme. By providing more care closer to home and re-developing St Helier we can make a huge difference to how healthcare is delivered in Sutton and Merton.”

Peter Coles, chief executive of Epsom and St Helier University NHS Trust, said: “We are delighted NHS London is recommending the Department of Health approves our plans to redevelop St Helier.

Patients will be treated in a modern and welcoming environment, which is right for the 21st century.”

But there are still obstacles to be overcome including financing preliminary works and clarifying plans to sell off Sutton Hospital.

And there are major concerns from people in Surrey that Epsom General Hospital is being neglected with the lion’s share of Epsom and St Helier’s resources going to St Helier.

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