Scarborough Hospital is facing a bill of about £100,000 to re-plumb two wards after traces of a bacterium that causes Legionnaires' disease was found.
Routine quality tests showed Legionella pneumophila was present in the water supplies to a children's ward and the Haldane ward.
Hospital officials stressed it was not an outbreak of the disease. The work is expected to take several weeks.
The Haldane and Duke of Kent wards were closed and patients moved elsewhere.
Inhalation of the bacterium can be deadly, especially in the elderly or those with compromised immune systems.
Scarborough and North East Yorkshire Healthcare NHS trust, which runs the hospital, said there were no signs of any patients being infected.
Patients transferred
Additional beds have been opened on other wards to accommodate the transferred patients.
The trust's medical director, Dr Ian Holland, said: "As soon as the problem was identified we immediately took precautions, such as ceasing admission of patients with weakened immune systems, who are less able to fight infection.
"We have now been advised that, to fully resolve the problem with the water supply, we will need to re-plumb the affected areas.
"This is a significant task which will take several weeks, and cannot be undertaken whilst we have patients on the wards."
A week ago the trust approved plans to axe 600 jobs - a third of its workforce - at its hospitals in Scarborough and Bridlington.
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