Kerema Hospital in Gulf Province says it is carefully rationing water supply at the hospital.
Operations have been scaled down and staff are only taking in emergency cases.
Director of Medical Services Michael Kasau says the hospital does not have piped water and depends on rain water.
The hospital has eight 10, 000 litre water tanks but the lack of rain over the last three months has stressed the water supply.
He says although the hospital has not seen any major outbreaks of diseases they are bracing for the worst case scenario.
Kasau says the provincial disaster office is aware of the water situation at the hospital and elsewhere in the province.