Under the agreement, Wuhan Asia Heart will be responsible for the costs and capital investments of the No 7 Hospital, which will entitle it to profit from it, said Huang Ning, executive manager of Wuhan Asia Heart.

The hospital has already earmarked between 300 million yuan (HK$355 million) to 500 million yuan to revamp No 7 Hospital's facilities.

In November it acquired another private hospital, Xinjiang Cardiovascular Hospital, in Urumqi, for 300 million yuan.

'There will be a boom in the private health care sector because of the recent medical insurance reform,' Huang said, referring to the latest five-year plan's pledge to increase medical insurance coverage to up to 70 per cent of the bill and allowing select private hospitals to admit insured patients.

The State Council this month issued a circular asking governments at all levels to simplify procedures to facilitate private and foreign investment in the health care sector. Public hospitals still dominate the sector on the mainland.

'If patients are paying the same at a public hospital as they are at a private hospital, of course they would opt for the one with better service. It is an immense business opportunity,' Huang said.

Wuhan Asia Heart plans to turn the hospital into a chain and is targeting 10 to 15 acquisitions of private and state-owned hospitals in the next 10 years. It is now in talks with several private equity firms for venture capital and equity listing.

Jacqueline Mei, a CLSA analyst specialising in China's health-care industry, said private hospitals and health care service providers are still new in the capital market. At the moment, such companies listed on the stock markets in Hong Kong and the mainland are mostly related to pharmacy, health products and research and development.

But Mei said she expects service providers to expand more aggressively as Beijing opens up the sector to private and foreign players.