By Nidal al-Mughrabi and James Mackenzie

GAZA/JERUSALEM (Reuters) -A first group of prematurely born babies evacuated from Gaza's biggest hospital were taken into Egypt for treatment on Monday, while Palestinian health authorities said people were killed inside another hospital encircled by Israeli tanks.

More than two dozens babies were expected to cross, according to the Palestinian Red Crescent and Egypt's Al Qahera TV. The newborns had been in north Gaza's Al Shifa hospital, where several other newborns died amid a collapse in medical services partly caused by power cuts when fuel ran out.

Israeli forces seized Al Shifa last week to search for what they said was a Hamas tunnel network built underneath. Hundreds of patients, medical staff and displaced people evacuated Al Shifa at the weekend, with doctors saying they were ejected by troops and Israel saying the departures were voluntary.

Live footage aired by Al Qahera showed medical staff carefully lifting tiny infants from inside an ambulance and placing them in mobile incubators, which were then wheeled across a car park towards other ambulances.

The babies had been transported on Sunday to a hospital in Rafah, on the southern border of Hamas-ruled Gaza, so their condition could be stabilised ahead of transfer to Egypt.

At a separate hospital, funded by Indonesia, Gaza's health ministry said at least 12 Palestinians were killed and dozens wounded by firing into the complex encircled by Israeli tanks.

There was no immediate comment from the Israeli military about the situation at the hospital where health officials said 700 patients along with staff were under fire from Israeli forces.

The Palestinian news agency WAFA said the facility in the northeast Gaza town of Beit Lahia had been hit by artillery fire. Palestinian health officials said there were frantic efforts to evacuate civilians out of harm's way.

Hospital staff denied there were any armed militants on the premises. Israel says its forces in Gaza are targeting "terror infrastructure" and accuse Hamas of waging war behind human shields, including in hospitals. The Islamist group denies this.

“We had information earlier that tanks were besieging the Indonesian Hospital. Unfortunately..., communications there are almost cut,” Nahed Abu Taaema, director of Nasser Hospital in the southern Gaza city of Khan Younis, told Reuters.

“We are very concerned about the fate of our colleagues and the fate of wounded and patients as well as (displaced) people who may have still sheltering there. No ambulances can reach them, and we're afraid the wounded will die,” said Abu Taeema.

Indonesia's foreign ministry said it had lost contact with three Indonesian volunteers at the hospital who are part of the group that set up the facility in 2016 with Jakarta's funding.

Like all other health facilities in the northern half of Gaza, the Indonesian Hospital has largely ceased operations but is still sheltering patients, staff and displaced residents.

Israel has ordered the complete evacuation of the north, but thousands of civilians remain, many seeking shelter in hospitals. Fuel and medicines have been running out across the entire enclave under Israel's six-week-old siege.

In the south, where hundreds of thousands of Gazans who fled the north of the enclave are sheltering, at least 14 Palestinians were killed in two Israeli strikes on houses in Rafah, according to Gaza health authorities. There was no immediate Israeli comment on the incident.

HEAVY FIGHTING AROUND MAJOR REFUGEE CAMP

Witnesses also reported bouts of heavy fighting between Hamas gunmen and Israeli forces trying to advance into north Gaza's Jabalia refugee camp, home to 100,000 people and, according to Israel, a significant militant stronghold.

Repeated Israeli bombardment of Jabalia, an urban extension of Gaza City that grew out of a camp for Palestinian refugees from the 1948 Israeli-Arab war, has killed scores of civilians, Palestinian medics say.

The Israeli military issued a statement with video of air strikes and troops going house-to-house in Gaza, saying they killed three Hamas company commanders and a squad of Palestinian fighters, without giving specific locations.

Despite continued fighting, U.S. and Israeli officials said a Qatari-mediated deal to free some of the hostages held in the Palestinian enclave and pause fighting temporarily to enable aid deliveries to stricken civilians was edging closer.

About 240 hostages were taken during a deadly cross-border rampage into Israel by Hamas militants on Oct. 7, which prompted Israel to invade the crowded Palestinian territory to wipe out the Islamist movement after several inconclusive wars since 2007.

Around 1,200 people, mostly civilians, were killed in the Hamas assault, according to Israeli tallies, the deadliest day in Israel's 75-year history.

Since then, Gaza's Hamas-run government said at least 13,000 Palestinians have been killed, including at least 5,500 children, by unrelenting Israeli bombardment.

The United Nations says two thirds of Gaza's 2.3 million people have been made homeless.

Israeli tanks and troops stormed into Gaza late last month and have since seized wide areas of the north and northwest and east around Gaza City, the Israeli military says.

But Hamas and local witnesses say militants are waging guerrilla-style warfare in pockets of the congested, urbanised north, including parts of Gaza City and the sprawling Jabalia and Beach refugee camps.

The armed wing of the militant group Islamic Jihad, an ally of Hamas, said its fighters ambushed seven Israeli military vehicles during clashes in the northern areas of Beit Hanoun, Beit Lahia, and Al-Saftawi and west of Jabalia. Reuters could not independently confirm the fighting.

HOPEFUL FOR HOSTAGE RELEASE DEAL

Even as fighting continued on the ground in Gaza, Israel's ambassador to the United States, Michael Herzog, said in an interview on ABC's "This Week" Israel was hopeful a significant number of hostages could be released by Hamas "in coming days."

On Sunday, Qatari Prime Minister Sheikh Mohammed Bin Abdulrahman al-Thani told a press conference in Doha that the main obstacles to a deal were now "very minor," with mainly "practical and logistical" issues remaining.

A White House official said the "very complicated, very sensitive" negotiations were making progress.

(Additional reporting by Clauda Tanios and Reuters bureauxWriting by Raju Gopalakrishnan and Mark HeinrichEditing by Peter Graff)