The mid-morning attack in Merrylands on Tuesday came 10 days after the man left care while being transferred between a mental health hospital and Westmead Hospital's emergency department.
"NSW Police were notified, and contact was made with the patient's family, but all attempts by (Western Sydney Local Health District) to contact the person were unsuccessful," a district spokesperson said late on Tuesday.
"(The) district express our sympathies to the families and the victims of the confronting and deeply distressing incident in Merrylands."
The man is due to face court on Wednesday, charged with murder over the random stabbing attack on the main street of Merrylands, in Sydney's west.
The attack left two other people in hospital in critical condition.
The 25-year-old man stabbed two people inside a high-street shop and the third outside the venue, police have alleged.
The alleged attacker fled on foot but was arrested in a nearby street soon after, and was charged with murder along with two counts of causing grievous bodily harm with intent to murder.
A 38-year-old man was declared dead at the scene, while a 47-year-old woman and a 21-year-old man remain in hospital.
A peak body for psychiatrists on Wednesday defended mental health clinicians for supporting people through crisis and recovery under incredibly difficult circumstances.
It encouraged careful, accurate and sensitive reporting and public discourse of such incidents.
"The vast majority of people living with mental health conditions are not violent," Royal Australian and New Zealand College of Psychiatrists' NSW Branch president Ian Korbel said.
"Suggesting otherwise contributes to stigma, increases fear, and can discourage people from seeking treatment and support."
It was common for witnesses to experience emotional distress, Dr Korbel said.
He encouraged seeking timely support from trusted supports or health professionals.
On Tuesday, forensic police were seen entering and exiting a Nepalese grocer and a corridor leading to an accounting firm and training qualification organisation.
A knife about 25cm long was used in the stabbings, Superintendent Simon Glasser said.
"The alleged offender is known to police for petty crime and a number of mental health incidents," he told reporters.
"He's not linked to the address (where) he was located, however he is a local to the area."
Police did not find a relationship between the victims, and treated the attacks as random.
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