Bega MP Andrew Constance said several sites north and south-east of Moruya were being considered and talks were underway with landowners and neighbours.

Speaking in Moruya on Thursday, June 11, Mr Constance said an extra $50 million would be added to the state's original pledge of $150 million.

"The NSW Government will invest an extra $50 million to deliver a new, modern health facility for the communities of the Eurobodalla that is innovatively designed for the future," he said.

"The proposed sites are within the Moruya area, providing easy links to Batemans Bay, Narooma and surrounding villages, with Health Infrastructure to commence discussions with land owners and adjoining land holders.

"The new Eurobodalla Hospital will utilise the latest health care solutions and models of care to deliver patient-centred health services closer to home," Mr Constance said.

"This additional funding will deliver a health facility for the local community which is adaptable and resilient against future climatic events such as the devastating bushfires over the last summer."

There has been criticism that the plan may include just one mental health bed. The shire presently has no residential accommodation for mental health or drug and alcohol rehabilitation.

However Mr Constance said the investment would make the project "one of the highest funded regional hospital projects in the state".

Health Minister Brad Hazzard said extensive community consultation has resulted in a Clinical Services Plan for the new Eurobodalla Hospital which will deliver a first-class hospital.

"A site is now being selected for the new hospital in consultation with stakeholders and will consider a range of factors, including accessibility, proximity to local infrastructure and environmental impacts," Mr Hazzard said.

A health department spokesperson said sites north of Moruya or south-east of Moruya were likely.

"Sites within these two areas are being explored with consideration to key criteria such as road access and ensuring linkage to the future bypass, avoiding flood and bushfires zones, and ensuring close proximity to the airport," the spokesperson said.

"As part of this planning, Health Infrastructure is working closely with Southern NSW Local Health District and other government agencies, including Transport for NSW and Department of Planning Industry and Environment."

Health Services campaigner Dr Michael Holland attended the announcement. He has consistently called for a Level 4 hospital to be built.