The plan would close both Dorothea Dix Hospital in Raleigh and John Umstead Hospital in Butner. The new hospital would replace the two aging facilities and save the state money.
N.C. officials estimate that the costs of fixing the two hospitals totals $160 million, $77 million for Umstead and $83 million for Dix. The cost of building a new hospital is estimated to be $98 million.
According to plans, the new hospital would include 426 beds and serve 26 counties.
The hospital would be funded by selling certificates of participation, which entitle people who purchase a share to receive a portion of the hospital's lease revenues.
The hospital is planned to be completed in five to six years if passed by the N.C. General Assembly.
Debbie Crane, public affairs director for the Department of Health and Human Services, said the proposed hospital is vital because it would benefit patients by providing more outpatient treatment and specialized care.
Crane said the new facility would be more centrally located, making treatment more accessible.
Plans for the new hospital are part of the state's compliance with a mental health reform bill passed last fall by the General Assembly.
The bill calls for health officials to treat some patients in the community instead of in a mental institution.