The Arden development was scrapped in Tuesday's state budget after technical work showed nearby interference would wreak havoc upon sensitive medical equipment.
Premier Jacinta Allan said engineers provided updated advice the problem was worse than first thought.
"It was in the last couple of weeks as we were considering ... the delivery of the Arden precinct," she told reporters on Wednesday.
Labor committed $2.5 billion to the plan before the 2022 state election and was spruiking it as recently as January.
The Victorian budget scrapped or delayed a number of major infrastructure projects. (Diego Fedele/AAP PHOTOS)
Ms Allan said the government knew electromagnetic interference had to be managed before receiving the updated advice.
"At Arden, it was understood that there would be a level of EMI and that had to be managed within the precinct," she said.
"Our expert engineers have gone in and done further site examinations (and) the building envelope that was previously thought to be available at Arden has been reduced as a consequence of the EMI at that site."
She said the plan to instead redevelop the existing Royal Melbourne and Women's hospital sites at Parkville would deliver the same amount of space and the Arden site would be freed up for housing.
Treasurer Tim Pallas has flagged the Victorian government is "recalibrating" its infrastructure agenda due to the rising cost of building materials and worker shortages.
Melbourne's Airport rail link project has been delayed another four years, while level crossing removal works on the Upfield train line have been delayed six years.
The statewide rollout of four-year-old kindergarten will also be completed four years later than expected.
The budget provided a $400 credit for 700,000 of the state's school students. (Joel Carrett/AAP PHOTOS)
Ms Allan said the government could not stubbornly push on with the previous timeline.
"We've just had to take a more gradual rollout as we achieve a full 30 hours of four-year-old kinder in the years ahead because we need to be able to train and scale up the workforce," she said.
Opposition Leader John Pesutto said broken promises and cuts to services were becoming clear as the dust settled on the budget.
"We see commitments to schools, commitments to childcare, commitments to hospital projects all canned or put on the never-never simply because Labor can't manage money," he said.
There were few sweeteners in the budget other than a $400 credit for 700,000 students to spend on uniforms, excursions or extracurricular activities.
Reducing government advertising and relinquishing office spaces were among $1.79 million in "savings and efficiencies".
Victoria's net debt is forecast to reach $156.2 billion by 2024/25 and rise to $187.8 billion by 2027/28, leaving a daily interest bill of $25.8 million.
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