Developers behind a £50m hospital and retail project are considering their options after a landowner refused to sell them a crucial piece of land.
A new hospital and housing was planned for the Bathhouse site
Liberty Mercian plans to build a new hospital, housing, a supermarket and a doctors' surgery on the Bathhouse site in Cardigan, Ceredigion.
But it hinges on a plot of building land owned by T Ieuan Davies, who is refusing to sell it to the company.
He said he feared the scheme would add to traffic problems in the town.
Health officials said they were now reviewing their options, which could mean relocating the hospital elsewhere.
Managing director of Liberty Mercian Chris Towers said the firm was "considering its position".
He added: "It's not dead. We are not pulling out and we are still interested in the project."
Planning for the project has been granted conditionally, and in 2005 it was the subject of a public inquiry.
But Mr Davies said the extra traffic generated would be too much for Cardigan's road network.
"It's not going ahead as far as I'm concerned," added Mr Davies, who owns the access to the Bathhouse site.
"I'm very happy for the land to be used in combination with the hospital, but not for another supermarket, which would simply draw traffic into an already congested town.
"Liberty Mercian say the one can't be built without the other."
Ceredigion and Mid Wales NHS Trust said it was "disappointing news", and it was now reviewing its options.
A spokesman said: "The trust has been informed that the land required for the provision of an entrance to the Bathhouse site from Gwbert Road is not going to be made available to the developer."
He said as a consequence the trust would need to "consider other options" for proceeding with the scheme to replace Cardigan hospital.