Illawarra Shoalhaven Local Health District chief executive Margot Mains said the NSW Health investigation highlighted "gaps in service delivery" that would now be addressed.

Paul Hindmarsh, 31, of Gerringong, is in jail accused of killing fellow patient, 47-year-old Joseph Gumley, with an electric guitar at the Eloura West facility on July 31.

According to reports, the pair was not checked for hours, with investigators told that staff regularly signed observation sheets without actually seeing patients.

The NSW Health report also showed failed attempts to have the accused patient transferred to another facility.

"It is absolutely critical that our mental health consumers and their families can be assured that they will be cared for safely," Ms Mains said.

"... I acknowledge that this incident is entirely unacceptable and we have taken this matter extremely seriously.

"Our local health district will take the lessons learnt from this tragedy, to ensure that we continue to improve our mental health services and the capacity of our staff and systems to provide high quality care."

Ms Mains said action had been taken against the staff members involved, although the focus was on changing the systems in place that had allowed the incident to occur.

This would include better management of observation practices - and randomised audits of those - plus improved education and training for staff. The district would also be reviewing the risk management procedures for items in consumers' rooms.

Ms Mains said the district would be working closely with the new NSW chief psychiatrist, Dr Murray Wright, to address the issues.

The unit was temporarily closed after the incident and when it reopened in mid August only six of the nine beds were available.

"We need to define the role of the Eloura West mental health unit to develop an appropriate model of care, including reviewing types of observation, single versus dual room occupancy and line-of-sight requirements," she said.

"... We will be working with the chief psychiatrist to make sure patients get to the right place, with the right level of care, at the right time."

Shellharbour MP Anna Watson said she would be asking Minister for Mental Health Jai Rowell to clarify the status of the facility, with ongoing confusion as to whether it was an "observation" or a "high dependency unit".

"It is evident from the report that there have been deficiencies in the care of patients and fear on behalf of staff of particularly aggressive patients," she said.

"This would appear to indicate that staff levels should be increased at Eloura West's mental health unit."

Mr Rowell said the report provided a number of "sound recommendations" aimed at strengthening care for patients undergoing treatment for mental illness.

"The ISLHD is currently working to implement these recommendations, which will be shared with other local health districts across the state."