Health minister Jenny Mikakos will today announce that Hepburn Health Service and Kyneton District Health will begin operating with a combined management structure under the name Central Highlands Rural Health this week.

Hepburn Health Service and Kyneton District Health have been operating under the same Chief Executive, Maree Cuddihy, for the past two years.

Following extensive community consultation about ways to better share resources and improve clinical services, it was decided to merge the two health services.

The single entity will service a wider catchment area in order to cater to the health needs of a growing population and will deliver new services locally, such as chemotherapy in Kyneton from early 2020.

It comes after Kyneton District Health made the decision in August this year to suspend its labour and birthing services, stating a decline in births and a shortage of obstetricians.

The government has ensured there will no reduction in services, staffing or funding and all locations - Kyneton, Daylesford, Creswick, Clunes and Trentham - will continue operating as is while donations will continue to remain within the communities that raise the funds.

The merger will also allow for opportunities for health professionals to share knowledge, skills and expertise across locations in order to improve care, while it is hoped it will also allow for stronger abilities to recruit and retain existing staff.

Funding for the combined health service will increase by 34 per cent, or $6.41 million, on top of what was invested in the year 2014-15.

Ms Mikakos said the merger of the two health services would mean the communities would be better serviced.

"This will ensure people living in these towns have greater access to high quality health services now and into the future," she said.

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