K-Bro Linen Systems will build a new plant in Regina to handle linens from all areas of the province.
Health Minister Dustin Duncan says doing this will save the province about $93 million over the next 10 years.
He says the new service will provide a high standard of infection prevention and improved patient safety.
Duncan also says sharing services between health regions will also create efficiencies and contribute to cost savings and a more sustainable health system.
But the union representing laundry workers says the move means 300 people losing their jobs.
Barbara Cape, president of Service Employees International Union-West, said the union asked for the business case for the private, single operator, but was told the information is private.
"Where is the transparency for the citizens of Saskatchewan? They have a right to know as they will be the ones called upon to pay the extra cost associated with higher borrowing rates and profits.”
SEIU-West will be meeting with the Saskatoon Health Region to begin discussions as to employee options over the next several weeks.
In 2011, the Saskatoon Health Region closed its central laundry plant after a hoist fell from the ceiling.
The Valley View Centre in Moose Jaw, which currently processes linen for the Five Hills Health Region, announced in February 2012 that it was closing.
"The central laundries now serving Saskatchewan’s health care system, located in Regina, Prince Albert, Weyburn, Yorkton and Moose Jaw, are aging and outdated," said 3sHealth in a news release.
3sHealth was established in 2012 to provide shared services to regional health authorities and the Saskatchewan Cancer Agency.
"Several million dollars in capital expenditures would be required to improve all of the facilities. These plants will be replaced by the new state-of-the-art plant once it is operational."
It said smaller laundries that serve long-term care and other facilities will continue to be processed locally.