Health Secretary Patricia Hewitt has insisted a new £550 million hospital will be built in Birmingham despite uncertainty over funding.
Her comments came after managers at the Queen Elizabeth Hospital in Edgbaston revealed they were concerned about delays in signing the contract for a new 1,249-bed superhospital.
The plans are still awaiting authorisation from the Government, even though an agreement was expected last March.
The Treasury is said to have concerns about the scheme used to fund the rebuilding programme, called the Private Finance Initiative.
But Ms Hewitt said negotiations about the hospital, which will replace the existing Queen Elizabeth, were nearing the end.
She said: "Every large capital investment, whether it is PFI or not, is very carefully scrutinised to ensure it is going to deliver the best results.
"The particular proposal in Birmingham is at a very advanced stage indeed.
"The final discussions are taking place between ourselves and the hospital now.
"That is part of the normal process of checking, before we finally commit to a large capital project."
She insisted the national hospital building programme would go ahead - and expand in the future.
The hospital building programme was cast into doubt when Ms Hewitt ordered a review of the £1 billion plan to rebuild the Royal London Hospital in Whitechapel and partly rebuild St Bartholemew's in Smithfield, London.
At the same time, the Department of Health said every PFI project would be thoroughly reviewed before it could be authorised.
Although Ministers insist the reviews are routine, they come as NHS finances are in a state of turmoil.
Ms Hewitt has sent financial hit squads to manage the budgets of three Midland health trusts which are heading for major deficits.
Her department has warned that the NHS as a whole could be heading for a deficit of more than £600 million.
But sources at Westminster have suggested delays to the PFI building programme are not caused directly by the DoH
but by the Treasury, which has lost confidence in the ability of the NHS to manage its finances and is unwilling to authorise major expenditure until it has been assured budgets are under control.
A survey by the NHS Confederation, which represents more than 90 per cent of NHS organisations, found some hospitals had been forced to freeze recruitment, temporarily close wards, and delay operations to save money.
A quarter of health trust chief executives said their biggest problem was no longer being able to borrow money from other parts of the NHS, according to the survey.
The DoH has banned overspending trusts from borrowing funds from those with surpluses, arguing the practice removes any incentive to budget properly, and unfairly penalises trusts which limit their spending.