Following the economic depression of the late 1920s, talk of establishing a 27–bed hospital in Lawrence County, Illinois increased. The Lawrenceville Chamber of Commerce named a special committee to investigate the feasibility of the project. J.P. Alexander, George W. Lackey, Perry McCullough, C.F. Stoll and G.C. Armstrong served on the committee. The group obtained a commitment from the federal government where the government would provide a cash grant equal to 45 percent of the project cost and allow a local bond issue to raise the remaining 55 percent. This deal never materialized because the country's economy showed signs of growth and the federal government withdrew their offer of a cash grant.
In the following years, several local groups (including the Lawrence County Medical Society) evaluated scenarios that would result in construction of a new hospital. A substantial bond issue was favored, but the increased cost of construction resulting from World War II put the project on hold. Funds set aside for construction efforts were instead invested in war bonds.
In 1945, under an amendment to federal Hill-Burton legislation, Lawrence County became eligible for federal and state aid related to construction of a non-profit, county-operated hospital. Plans to build a hospital were revived and the Board of Supervisors appointed people to the Lay Hospital Committee. (This committee was eventually renamed the Board of Directors.) The following individuals served on the Lay Hospital Committee between 1946 and 1950: C.P. Sherry, Harry Warner, Roy Mitchell, Burtis R. Stevenson, Louis Bloom, Mary Hamilton, S. W. Hancock, F.E. Brian, Bryan Buchanan, Tyler Andrews, Oran Calvert, Guy Richie, C.A. Porter, and Dean F. Campbell.
Construction of Lawrence County Memorial Hospital began on March 24, 1949, and a dedication ceremony was held on July 2, 1950. The hospital opened its doors with sixty-one employees and received the first patient on July 5, 1950. One of the original employees, Iva Mae Chism Carter, continued to volunteer at the hospital until her death in February 2019.
In addition to successful creation of a community hospital, Lawrence County built a cooperative arrangement between the Lawrence County Tuberculosis Sanatorium Board, the Lawrence-Wabash County Health Department, and Lawrence County Memorial Hospital. This cooperative arrangement constituted the first such project in the State of Illinois.