Martin Lawrence Phillipp, 70, is facing four counts of sexually touching two women without their consent on four separate occasions while he was a patient at the facility last year.

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In Wollongong Local Court on Thursday, Phillipp's defence lawyer Danny Lagopodis asked for the charges to be dealt with under the Mental Health Act rather than the criminal law jurisdiction.

Mr Lagopodis presented evidence to the court of Phillipp's mental health state at the time of the alleged offences and foreshadowed his client may be unfit to enter a plea to the charges.

Mr Lagopodis also suggested the nature of the alleged sexual touch was "more towards the bottom of the scale than the top".

Police prosecutor Sergeant Coby Davis opposed the application noting the seriousness of the charges.

Magistrate Brett Thomas said there was "no doubt he was mentally unwell" with diagnoses of a number of conditions.

However due to the serious nature of the allegations, Magistrate Thomas dismissed the application noting it was not appropriate to refer him into the care of mental health treatment providers.

The case was adjourned to next month at Port Kembla Local Court where a date will be set for the charges to be defended at a hearing.

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