And a 12-bed short stay unit will be set up next month to ease pressure on the city's emergency department.

Health Minister Nicola Roxon announced federal funding for the dual improvements yesterday in a visit intended to showcase Wollongong's share of the benefit borne of NSW's signing of the health reform agreement.

The funding will come from a $1.1 billion kitty paid to the states over four years, with the Federal Government to also take over the running costs of seven about-to-come-online emergency beds announced by the state last April.

In all, federal dollars would support 21 new beds at Wollongong Hospital, Ms Roxon said.

The announcements are the first example of how the Federal Government's involvement in the health system will work.

All were put up for consideration by state authorities and approved and funded by the Commonwealth.

"The Government is not taking over these decisions," Ms Roxon said. "But we do approve those decisions."

Throsby MP Jennie George said the new teaching and accommodation facility would benefit students of medicine, nursing, midwifery, allied health including physiotherapy, speech pathology, psychology, occupational therapy, dietetics and social work.

Executive Dean, Faculty of Health and Behavioural Sciences Don Iverson welcomed the development, saying it would be "easier for students to fall in love with Wollongong" if they spent their stay in good accommodation.

The funds pay for the purchase of an as yet undetermined piece of land "adjacent to the hospital".

Prof Iverson said the site should be no more than a five-minute walk from the hospital. "You have to have it close or the doctors and nurses won't go and teach there," he said.

Wollongong MP Noreen Hay welcomed the funding.

"We have been a long time without the serious kind of federal assistance that we need in terms of health service delivery," she said.