This is the most advanced children's hospital in the land and cost pounds 17m to build. Yesterday, during the opening ceremony, they talked of its closure

An award-winning children's hospital, the first to be built in Britain this century, was opened yesterday - under the threat of closure from budget cuts.

The 77-bed Derbyshire Children's Hospital, which cost the National Health Service pounds 15m to build, boasts an innovative approach to the welfare of its charges, and has already won at least one design award.

But even as it conducted its ceremonial opening yesterday, and took in its first ten patients, it has been hit by a funding crisis. Southern Derbyshire Health Authority is being forced to consider proposals to save pounds 10m - and two of the four proposals recommend closing the hospital.

A public consultation document issued by Southern Derbyshire Health, Health Services in 2000 and Beyond, says that the two general hospitals in Derby, the Derbyshire Royal Infirmary and the Derby City General, are duplicating many services, while the funding system brought in by the Government means that the authority has "less money for new initiatives each year than we used to".

In the document's "Option 2", one of the two proposals which suggest that a single hospital should replace the two general hospitals, a list of "disadvantages" states that the new children's hospital "would not be used" under that option.

The Derbyshire Children's Hospital took two years to build, has the most advanced paediatric equipment in the country, and should be able to treat 35,000 patients a year. Running costs have been estimated at pounds 10m annually.

Wendy Dawe, business development manager at the new hospital, said that medical staff throughout the Derbyshire area had been very concerned by the prospect of closure since the consultation process began last December.

"It's very worrying," she said. "We are just hoping that people will look at what we've got and see that there's got to be a future for the children's hospital and the Derby City [hospital]." Ms Cope admitted that the services offered by the new hospital were "very similar" to those of other hospitals, but said that its innovative approach to the children's environment made the hospital unique.

"For years and years the guidance has been that children should be nursed in child-appropriate surroundings," she said. "The hospital was built based on research that showed children get better quicker [in a sympathetic environment]."

For that reason, the hospital was designed following consultation with children and parents, and features child-height reception desks and facilities to allow parents to stay over. "We talked to [schoolchildren], asking what would make the difference. They said children tend to look up at the ceiling or down at the floor so we have special murals and floor coverings around the hospital," she said.

"Everything on the walls is co-ordinated so that it breaks up the clinical look. And we have a fountain, because children said they found the water reassuring."

In the outpatients' department, traditional rows of hard seating have been replaced by a "Loch Ness monster" with seating cushions for a spine. Wards are named "Ladybird", "Puffin" and "Snowflower".

"Everything is very bright, very colourful... Signs are done in pictures. There are lots of outdoor play areas. They're all things to take the edge off," Ms Dawe said.

She added that they had been able to make the hospital "so special" because pounds 1.5m of the money used to fit out the hospital, on top of construction costs, had been generated by an appeal conducted by local people.

"It's a community-built hospital," Ms Dawe said.

A spokeswoman for the health authority said yesterday: "Any closure would probably be more than 10 years ahead. And it's not definite that it's going to close - at the moment we're looking at all our hospital services."