The 24-bed hospital, which was revamped four years ago, is run by Central Otago Health Services Ltd.
Health Services chairman Russell McGeorge, of Wanaka, said the population of the area served by the facility had increased more than 25% since 2001, but funding had remained the same for about five years.
"We're hoping to start the negotiation process for a new contract with the [Otago] District Health Board as soon as possible and the capacity of the hospital is certainly something we've been talking about."
The board owns the hospital building but the equipment and chattels are community-owned and were provided through fundraising.
The health company has delivered hospital services through Dunstan, under contract to the health board, for the past decade.
"Dunstan is very busy as a rural hospital and we've exceeded our capacity on a regular basis," Mr McGeorge said.
The most patients it had through in a day was 37, with some only spending part of the day in hospital.
"There's some extra capacity and we can cope with a few more than 24 if we need to, but with population growth, we'll inevitably need more beds.
"At the moment, we cope by managing the position. If we're getting near being full, we contact GPs to warn them we're nearly full, so they take that into consideration when referring patients."
There were only 18 days a year when Dunstan had fewer than 50% of its beds full, he said.
The number of beds was one of the factors used to decide funding for the facility.
Funding constraints had already led to limits on outpatient clinics and physiotherapy services.
The hospital would benefit from having a CT scanner.
It could be readily bought through community fundraising, but operational costs were unaffordable, Mr McGeorge said.
A scanner would be important for development, particularly to help with staff retention and recruitment.
