The Cambrian Heritage Railways organisation in Oswestry is hoping to win money in the third and final round of the funding to bring back some of the lines closed in the Beeching cuts.
It wants to reopen a mile-long stretch of line from the mainline at Gobowen Railway Station to the former Park Hall halt, just a few hundred yards from the Robert Jones and Agnes Hunt Orthopaedic Hospital.
It would mean that patients, staff and visitors could travel from across Britain to the specialist hospital by rail.
The halt was used for both the hospital and the Park Hall Army Camp before the line was axed by Dr Beeching in the 1960s.
Both Oswestry Town and Shropshire Council have backed the bid for funding and North Shropshire MP Owen Paterson has urged transport minister, Grant Shapps to allow the line to reopen.
Volunteers have organised Covid secure work on the line, which is still intact, with just some sleepers under the rails needing replacing.
Roger Date from the Cambrian Railways said: "The project is all ready to go. The track is there and over the past few years the railway has secured all the land and the buildings including the goods yard at Gobowen.
"We have been promoting the community railway but funding is very hard to come by and there is a need for a feasibility study to develop our aspirations and create a business case.
"We are not talking about great distances, about 0.8 of a mile to the Park Hall halt and then 2.4 miles to Oswestry station. For the first phase it is simply upgrading the track and doing some work to the Whittington Road bridge."