The long-delayed plans for a £27 million health facility at the town's eco park seems now to be hanging by a thread after health chiefs voted against bailing it out to the tune of £1.1 million annually for the next 25 years.
A miscalculation over the amount of people who would be using the new hospital instead of going for treatment at Telford's Princess Royal or the Royal Shrewsbury Hospital has led to the shortfall.
The Shropshire Community Health NHS Trust had hoped the county's Clinical Commissioning Group (CCG) would come up with the cash.
But 14 of the 15 CCG board members voted against the proposal at a packed meeting held at Ludlow Racecourse on Wednesday after it was revealed 22 district nurses would lose their jobs if it went ahead.
The Community Heath trust must now decide whether to pursue a scaled-down scheme or scrap it altogether at its next board meeting on September 19.
Health chiefs claim the existing hospital could carry on with some investment.
But Mr Dunne has vowed the fight must go on.
He said: "I have been determined since first becoming Member of Parliament for the Ludlow constituency to ensure that local residents were able to access quality healthcare as close to their home as possible.
"I have taken a strong personal interest in supporting this project.
"Now is not the time for scaremongering, recriminations and witch-hunts as to who is responsible for this volte face by the NHS in Shropshire.
"The time will come for people to be held to account.
"But for now we should focus on what decisions the Community Health Trust board should take when it meets on September 19 to determine the future of this project.
"The options seem to be to find additional activities which can take place in the proposed scheme or to consider how to scale back the building to reduce its running costs to meet the newly projected revenues.
"We also need to ensure that in the meantime the existing Community Hospital and GP surgeries remain safe for services to continue to be provided for local residents.
"For my part, I remain determined to ensure that every step is taken to secure modern health facilities for South Shropshire residents.
"I urge those who share in this vision to work together to make this happen."