The email, sent by Robin Paul, "in no way reflects the attitudes of our staff toward our patients," Roudebush VA Medical Center Director Tom Mattice said in a statement posted on the hospital's Facebook page.
Paul, a licensed clinical social worker, had been managing the Seamless Transition Integrated Care Clinic, which is responsible for assisting new veterans with their VA benefits, services and programs, to include mental health, according to the Veterans of Foreign Wars.
Her email, first published by the Indy Star
this week, was sent December 18 to members of her team and shows four photos of an elf in different scenarios. Two of the photos have struck a nerve with the veterans and mental illness communities.
In one photograph, the elf appears leaning over what looks like a straw and coffee grounds on a paper plate, with a post-it note that says, "Out of XANAX - Please help!"
The caption reads, "Self-medicating for mental health issues when a CNS would not give him his requested script."
In another, the elf is hanging from a string of Christmas lights.
"Caught in the act of suicidal behavior (trying to hang himself from an electrical cord)," the caption says.
John Thomas is a veteran of the Korean and Vietnam Wars and serves as a leader at an Indianapolis American Legion post.
He said the email makes him sick and angry.
"I can't understand anybody who would do anything like this to us," Thomas told CNN affiliate WISH.
Hospital leadership was allegedly made aware of the email a couple of months ago, according to the Indy Star, and had "administratively addressed" the incident with Paul.
But since the story went viral, the Roudebush VA Facebook page has been inundated with commenters calling for Paul to be fired.
Matthew Conrad on Facebook said, "Robin Paul's continued employment is an insult to every Veteran who has served this country."
Mattice announced Paul's leave, and a pending investigation, Tuesday evening. But many say it's not enough.
"FIRING her would be the first step in showing you are truly committed to the veterans' health and well-being. Action speaks louder than words," Elizabeth Sanchez wrote on Facebook.
Two of the country's largest veterans organizations have also criticized Paul's actions.
"It is absolutely inexcusable that a VA supervisor would make light of any issue that veterans face," VFW National Commander John W. Stroud said in a statement.
"The VFW demands she be replaced as program manager."
The American Legion also expressed their discontent, saying they take "health care for veterans very seriously."
"Veterans suffering from TBI and PTSD should not be held up to ridicule," their statement read.
John Crimmins was one of a few who came to the hospital's defense.
"As a veteran who receives care at the Rodebush VA Medical Center, I find this apology to be acceptable. We're all prone to doing stupid things. I'm sure Ms. Paul has received a reprimand for her actions. She doesn't need to lose her job. Now, let's move on," he wrote on the VA's Facebook page.
Mattice, who was not available for comment Wednesday, did not elaborate on the investigation into the incident, or why it took so long to move forward with placing Paul on leave, but instead asked for forgiveness.
"I ask veterans to accept my apology for this failure, and to allow us to continue to demonstrate to you our commitment to your health and well-being," he said.
This incident is the latest in what has been a tumultuous year for the Veterans Affairs Department. CNN's months-long investigation into deaths due to long wait times for veterans at VA hospitals led to the resignation of Veterans Affairs Secretary Eric Shinseki.
CNN's attempts to reach Paul were unanswered as of Wednesday afternoon.