WakeMed won approval from state regulators to expand its nursery for premature and at-risk newborns.
The $8.9 million project will add 12 beds at WakeMed's main Raleigh campus, giving it 48 neonatal intensive care beds.
But a similar expansion proposed by WakeMed's crosstown Raleigh rival, Rex Healthcare, was rejected by the state office that reviews major medical projects.
Rex has appealed the decision, plans to supply additional data to the state and expects to win approval by the end of the year, said spokeswoman Melody Hunter-Pillion.
"It was nothing I would consider major," she said. "The state thought we should provide some better data. We still feel like the community needs this."
Gene DePorter, the analyst with the state certificate of need office who reviewed the bid, declined to comment because the decision is under appeal.
Rex had proposed adding six beds to its neonatal nursery, which now has 15 beds.
WakeMed's expansion will convert more of its existing neonatal rooms to private rooms with extra space for parents and doctors.
The project is tied to a new children's hospital on the top floor of a four-story patient tower that WakeMed is building on its main campus. That building is scheduled to open by early next year.
Hospital officials say the need for intensive care for infants is increasing, fueled by factors such as this region's growing population and women having babies later in life.