A report released by the SA government suggests an extra 200 mental health beds are needed in the state.

About 200 extra beds are needed to adequately care for older South Australians with dementia or complex mental health needs, Health Minister Stephen Wade says.

Speaking about the release of a report by the Oakden Oversight Committee and the government's response, Mr Wade said the state faces a "huge challenge" to ensure top quality care is delivered.

"(The report) suggests that not only is there a need for 20 to 24 intensive beds in relation to dementia, but there's is a need for more than 150 beds for people with lower severity dementia and another 36 for enduring mental illness," he told reporters on Tuesday.

"I think the very strong message from this report is that it provides a clear pathway for quality care, it tells us what quality care looks like for people with dementia."

The Oakden mental health facility was shut down last year after several failings were brought to light, and a review was prepared for the government by chief psychiatrist Dr Aaron Groves.

Mr Wade said six working groups have spent nearly 12 months developing strategies to implement Dr Groves' recommendations.

He said while the government supports the recommendation of 24 beds for extreme dementia, it may divide the services across two sites.

"Rather than focusing solely on a single service at Modbury Hospital... we are now looking into options of establishing the service on the site of the former Repatriation Hospital," Mr Wade said.

"At the time of the deliberations, the Repat was not considered because the former Labor government had put it under contract for sale - but that contract has since been terminated."