The convicted murderer was transported from his solitary confinement cell in Goulburn supermax prison earlier this week to the Prince of Wales Hospital in Randwick, where he underwent tests on lumps found in his stomach and throat.

On Wednesday the ABC reported Milat had lost 20 kilograms over the past few months, quoting a source close to his family who said he was suffering from geriatric anorexia and was "dangerously thin".

According to the ABC, Milat's rapid weight loss prompted his admission to the Randwick hospital, with possible organ failure being examined, however tests instead revealed the 74-year-old was in the advanced stages of cancer.

The former road worker was sentenced in 1996 to seven consecutive life sentences for murdering seven backpackers whose bodies were found in makeshift graves in NSW's Belanglo State Forest in the 1990s.

He also kidnapped British tourist Paul Onions, who managed to escape from Milat's vehicle.

Milat is being held in a secure annexe of the Randwick hospital where inmates are treated, with at least two guards maintaining 24-hour surveillance. He is also restrained to his bed.

It is understood he will not return to Goulburn supermax, but will instead be transferred to a hospital ward at Long Bay Prison.

Earlier this week, Corrective Services NSW Commissioner Peter Severin said prisoner transfers were done in the "most secure and safe way possible".

High-risk and terrorism-related inmates are always guarded by specialist staff from the extreme high-security escort unit, a corrective services spokeswoman said.

"Extensive security planning and assessment is undertaken before such movements occur".

- SMH/The Age