"This will help to alleviate the stress of travel, especially while feeling the effects of treatments, where to park, financial costs associated with travel and supporting family at home while patients and supports are away."
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Currently, Whanganui patients have around 780 chemotherapy treatments each year at Palmerston North Hospital.
It is not known how many patients will benefit from the new Whanganui unit.
Whanganui Cancer Society Area Manager Jane Burgess said the organisation welcomed the announcement.
"When people receive a cancer diagnosis often time becomes quite precious and it's really highlighted so being able to have that at our doorstep instead of having to travel a two hour round trip is really awesome," she said.
The Whanganui Cancer Society makes on average 120 trips to Palmerston North in a month for chemotherapy, radiation, surgery and general appointments.
Out of those trips around 15 are for chemotherapy which Burgess said did not seem like much but it would decrease its need to transport clients over to Palmerston North and focus more on trips in Whanganui.
"For that to be in Whanganui, it saves on time and money gives you more time with your family."
As the project develops, a decision will be made on whether to have a purpose-built unit or to revamp an existing building.
MidCentral staff will be used at the unit as Whanganui Hospital staff get trained up.