Mayor Vincent Gray (Alex Brandon/AP)

Mayor Vincent C. Gray will propose spending $300 million in public funds on a new medical center on the St. Elizabeths campus in Southeast Washington, replacing an aging and cash-losing city-owned hospital nearby.

Gray intends to include the funding in his fiscal 2015 budget proposal due to be delivered to the D.C. Council next week, according to two senior administration officials familiar with his plans. The officials spoke on the condition of anonymity because they were not authorized to speak publicly ahead of the budget’s submission to lawmakers.

The new hospital would replace United Medical Center, the city’s only full-service hospital east of the Anacostia River, which has failed to thrive under a series of private owners over the past two decades.

Gray’s proposal also represents a major new potential investment in Ward 8 as the April 1 Democratic mayoral primary approaches. His campaign has moved to shore up his voting base there as Gray seeks to win a second term amid new corruption allegations.

The city-controlled east campus of the former St. Elizabeths mental hospital has long been eyed for development, and Gray has put a particular emphasis on luring academic and corporate users to the site. But while a new psychiatric hospital opened there in 2010, his administration has not until now floated additional medical uses for the site.

By seeking to locate a hospital at St. Elizabeths, the officials said, Gray is seeking to jump-start development near the Congress Heights Metro station, while also undertaking a permanent solution to United Medical Center’s long-standing fiscal woes.

In 2007, the city assumed ownership of the hospital after the private owner defaulted on a loan obligation. Local tax dollars continue to subsidize its operations as a turnaround firm examines options for its future.

The former Greater Southeast Community Hospital has proved to be a nettlesome issue for Gray, as it has been for previous mayors, who have committed to maintaining an acute-care hospital east of the Anacostia but have found it difficult to make the hospital into a fiscally sustainable enterprise.

“This is like the mayor’s Afghanistan,” said one of the administration officials. “He needs to find a way out of this thing with no great options. . . . It’s time for a bold move.”

Last year, the city hired Huron Consulting Group to take over the hospital’s management and develop a plan for making it into a more sustainable enterprise. The consultants concluded in May that the only viable course was for the hospital to affiliate with a broader health-care-delivery network but that “structural challenges” would make an alliance difficult.

Among those challenges: A lack of specialist physicians affiliated with the hospital has kept patient counts low, and its 48-year-old building would mean high ongoing maintenance costs, even after a wholesale renovation. Also complicating its future is ongoing litigation between the District and the hospital’s former owner, the Specialty Hospitals of America.

The hospital’s board of directors voted in July to pursue the consultants’ recommendations, including “creating a state-of-the-art hospital through a significant renovation . . . or construction of a new hospital.”

Building a new hospital, the officials and the lead hospital consultant said, would make it significantly easier to recruit a private manager for the facility, which would remain city-owned.

Dawn Gideon, who is leading the Huron team tasked with turning around the facility, said potential partners “find the idea of a new facility very attractive.”

“We’re early in the process and just beginning these discussions,” said Gideon, a managing director for Huron. “But speaking as someone who is in the hospital business, I would rather be in a new hospital.” Newer facilities, for instance, would make it easier to recruit physicians, she added.

The new hospital would be smaller than the current facility on Southern Avenue SE, which is licensed for more than 350 beds and contains 443,000 square feet of floor space. Officials said the new hospital, which would be unlikely to retain the United Medical Center name, would be closer to 300,000 square feet and 150 beds.

Gideon said her team considered building a new hospital on the current United Medical Center site but ended up ruling it out.

“To build around it would end up with a facility that was far from optimal in terms of design,” she said. “Building a new hospital on this campus, in our humble opinion, really didn’t make sense.”

The administration officials said it was unclear where on the St. Elizabeths east campus the hospital would be located. But they said it would not interfere with the plans — frequently touted by Gray — of three multinational corporations, including Microsoft, to locate major new research and development facilities on the site.

The budget plan is set to be delivered on April 3, two days after the Democratic primary. The administration officials said the $300 million in funding would be spread out over five years and would slip underneath the city’s statutory debt limit without significant restructuring of the existing capital spending plan.

Should Gray win the Democratic nomination next week, the hospital plan could become a key point of contention in a general-election contest against D.C. Council member David A. Catania (I-At Large), who orchestrated several efforts in the past decade to keep United Medical Center and is highlighting those efforts early in his campaign.