The idea of setting up a community health care centre in Penang was first mooted by a few Chinese community leaders in 1876 and a fund-raising campaign was subsequently launched.

A traditional-style building was completed in 1883 on a plot of land about 10,600 sq. ft. at Muntri Street. This was known as the Lam Wah Ee Hospital.

Lam Wah means Chinese in the South and Ee means medicine. Twelve community leaders were elected to be the first Board of Directors. Free consultation and medication in traditional Chinese medicine was offered to the public. Within a few years, this became very popular as a source of medical services not only to the Chinese community but also to the other communities in Penang. As a result of this, Muntri Street has since become known as Lam Wah Ee Hospital Street. As the demand for these services became more popular, two branch clinics were set up, one at Beach Street and the other at Magazine Road.