Adult patients are being treated in the children's ward at one of Melbourne's busiest public hospitals due to a shortage of beds.

Southern Health has confirmed the situation, as the State and Federal Governments continue to argue about the funding model for state hospitals.

Health Minister David Davis says treating adults in a children's ward is against hospital policy.

"I understand that this might happen from time to time, but I understand the policy at Southern Health is not to have children with adults," he told.

"I've been given an undertaking that this won't be occurring."

Paul Gilbert from the Australian Nurses Federation says it is happening more often as a result of budget cuts which have led to a shortage of hospital beds.

"If someone needs to be treated and needs a bed, the policy of having a children's ward only for children will come to grief," he told ABC local radio.

"We don't that any child missed out on care as a consequence of that. [It's] not ideal.

"Until blame game is sorted out, these are consequences of having an underfunded system. And something has to give until all the current round of cuts is dealt with."

Public hospitals have closed beds and sacked staff in response a $107 million cut in federal funding to the state.

Mr Davis is meeting Federal Health Minister Tanya Plibersek on Friday do discuss the cuts.

"At the recent health ministers' conference all six health ministers made the point very clearly to the federal minister that none of [them] supported what the commonwealth had done." he said.

"To be fair to Ms Plibersek... I don't think she dreamed up this idea. I think it came out of federal treasury as a way of covering financial problems that the Federal Government has."

The Greens are calling for a Senate inquiry into the dispute.

Greens Senator Richard Di Natale says something must be done to stop the blame-game.

"I'm hopeful that we'll get support for it, out of the glare of the adversarial 'he said she said' politics," he said.

"I think there needs to be a bit of give and take from both sides."

The Federal Opposition leader has used a visit to the Royal Children's Hospital to criticise the funding cuts.

Tony Abbott says the $3.6 million cut to the hospital's budget is unnecessary.

He says a Coalition Government would make health savings by cutting bureaucracy, not frontline services.

"If the Gillard Government was a better manager of money it wouldn't have had to do this," he said.

"As far as the Coalition is concerned yes, by all means, minimise the beaucracy, but maximise frontline patient services."