Deputy mayor Ben Shields and Dubbo MP Troy Grant dispute the reason for why Playmates may have to leave its premises as part of a $91.3 million redevelopment of the Dubbo Hospital.

Cr Shields yesterday claimed he and others were told by health authorities this month the centre had to make way for administrative staff from another site.

Mr Grant rejected the claim, saying Playmates had been advised the property it currently leased was required for primary and community health services as defined by the hospital master plan.

Non-profit Playmates has a lease that expires at the end of 2015.

The war of words first broke out on radio and continued into a second day yesterday.

Mr Grant issued a media release late on Thursday expressing "disappointment at misleading comments" made by Cr Shields on 2DU.

"Cr Shields said he had seen the master plan and went on to say and I quote 'this is about putting bureaucrats from Hawthorn Street on the Playmates Cottage site'," Mr Grant said.

"I have seen the same master plan which clearly identifies the site currently occupied by Playmates is to be used for primary and community health services, a fact confirmed by the local health district and hospital planners.

"There are no plans to bring any administrative services on the site currently leased by Playmates."

Yesterday Cr Shields said he stood by his statement the local health district was closing Hawthorn Street and Palmer Street.

"Whether Mr Grant wants to admit it or not, there is a bulk of employees at Hawthorn Street that are administrative staff - bureaucrats in other words, that will move to the hospital site which will indeed cause a lack of available land causing Playmates Cottage to close," he said.

"The discussion which I, along with members of the Playmates committee, had with the health authorities... was primarily about telling us that Playmates had to go because the Hawthorn Street and Palmer Street sites had to move onto the hospital site.

"Granted, that would include a scattering of clinicians who do operate from the Hawthorn Street head office."

Discussion of a petition calling for Playmates Cottage to be saved is set to take place in the NSW lower house on September 18.