Keira MP David Campbell and the region's health boss are making the case for incorporating the funding, which was set down at the last budget for an integrated elective surgery unit at Wollongong Hospital.

Mr Campbell said the unit would have most impact from within the University of Wollongong's proposed health and medical precinct, which would include a 180-bed private hospital contracted to treat public patients.

"I'll be arguing ... that the surgical block that has got $83 million in the budget is a key component of the [University of Wollongong] proposal and should be considered as the State Government setting a priority for the project and as the State Government's contribution to the project," Mr Campbell said.

The $83 million represents just over 40 per cent of the $200 million required from governments to get the precinct off the ground.

If secured it could set the stage for the Federal Government to provide the remainder from its Health and Hospitals Fund, which provides 60 per cent of funding for health infrastructure projects prioritised by the states.

A further $100 million would be contributed by the university and the private sector.

Asked if he was confident the public component of the hospital was enough to justify the contribution of taxpayer dollars, Mr Campbell pointed to potential flow-on benefits of linking health care with the university, which is in talks with the St Vincent's and Mater Health Sydney group to run the hospital and precinct.

The association with the group, and the promise of professorial arrangements with the university, is intended to help bring 20-30 senior specialists to the region.

"What we need to focus on is outcomes - getting more facilities, more health infrastructure and getting more doctors and nurses in our region," Mr Campbell said.

"I can't for the life of me see why the model can't work in Wollongong as it works in St Vincent's."

South Eastern Sydney Illawarra Area Health Service Terry Clout strongly supports the proposal and the use of pledged state funds.

"The success of the Illawarra Health and Medical Research Institute and the Graduate School of Medicine is evidence of the ... quality working relationship ... between the university and the area health service," he said.