"Our capacity to manage everything else has ... really changed," said lung specialist Lucy Morgan, who works at Nepean and Concord Hospitals, on Monday.
"In the short term, that's OK. But in the long term, and (the pandemic has lasted) two years now, this is bad."
The state's hospitals are caring for 2776 patients, an increase of 126.
Some 203 people are in intensive care, of whom half are unvaccinated. That figure has nearly doubled in the past two weeks: a fortnight ago, there were 105 ICU patients.
With the Omicron variant spreading rapidly through the community, health workers are being exposed and left unable to come to work to help out with the growing caseload.
About 6000 health workers were isolating after being exposed to the virus on Sunday, Dr Morgan said.
On January 9, the date of the most recent official data, there were 5536 health workers in isolation, most of whom were exposed to the virus in the community.
That was up from 3159 on January 3.
Health leaders are now thinking "way outside the box" to find ways to cover the staffing shortfall, including asking administrative staff to help in caring roles.
Dr Morgan urged NSW residents to get a booster shot to protect themselves against Omicron and alleviate the burden on the health system.
The Greens are calling on the NSW government to make urgent $5000 cash payments to nurses and paramedics to stop burnt-out workers resigning.
Premier Dominic Perrottet said there was nothing more he could do to stop the spread of the virus.
"The best way out of this pandemic is to continue to stand strong and to push through," he told reporters on Monday.
"It's not the easy approach but it's the right approach."
The "only alternative" was a lockdown, he said.
In contrast to Dr Morgan's warnings, he said the health system was tracking well - "better than the best case scenario" in modelling published last week.
Meanwhile, Chief Health Officer Kerry Chant and Health Minister Brad Hazzard have condemned those spreading misinformation about COVID-19 and vaccination.
Dr Chant called it "just incredibly dangerous" and urged people to rely only on trusted sources of information.
"I'm aware of the social media rumours and misinformation ... particularly targeting parents of children, but also pregnant women and also our Aboriginal communities," she said.
Mr Hazzard said those spreading the "wrong, spurious, misleading" misinformation could "cause someone's death".
The state reported 29,504 new cases on Monday along with a further 17 deaths.
The majority of deaths were people from south west or western Sydney where cases continue to surge.
The 12 men and five women were all in their 60s or above.
Of the newly reported cases on Monday, 17,646 were traditional PCR tests and 11,858 were the results of at-home rapid tests reported to the government.
More than 1000 of the rapid test results were more than a week old, but newly reported through ServiceNSW.
Dr Chant said data suggests 95 per cent of new cases are the Omicron variant.
Meanwhile, Mr Perrottet on Monday announced a $43 million fund would support music festivals and events that are cancelled under public health orders.
Greens MP Cate Faehrmann said it would do nothing to help artists and organisers who voluntarily cancel events.
