By Bloomberg News - 2012-06-24T16:00:00Z

China, where 260 million people suffer from cancer, diabetes and other diseases, is in a hurry to bolster its medical services. Investors are ready to help.

The latest is Carlyle Group LP-backed Concord Medical Services Holdings Ltd. (CCM), which last week completed a deal for a 52 percent stake in Changan Hospital, a 1,000-bed facility at the eastern end of the Silk Road. The acquisition comes three months after China announced it wants 20 percent of its hospital beds privately owned by 2015. Other investors in China include Kuala Lumpur-based IHH Healthcare Bhd. (IHH), Asias biggest hospital operator, which plans to build a hospital in Shanghai, to add to seven clinics it owns in Shanghai and one in Chengdu.

The push for private hospitals in China is part of a broader drive to improve care in a country where 95 percent of people had health insurance as of 2011. Chinas medical services market is growing 18 percent annually and projected to reach 3.16 trillion ($500 billion) in 2015, accountancy firm Deloitte China said.

Chinas gross domestic product has grown by leaps and bounds, but the quality of medical care has lagged far behind, said David Chow, chairman of Harvest Medical Investment and Operation Group, a Taiwanese private equity firm thats planning to buy stakes in mainland hospitals this year. The potential for Chinas hospitals to improve is massive, both in the overall number of beds and the fees charged for each bed.

As of last year, China had 3.7 million hospital beds, up 54 percent from 2005. Besides an increase in the proportion of beds run by private operators -- it was 12 percent last year -- the government wants at least one or two hospitals in each of its 2,853 counties by the end of 2015, according to an outline of the countrys health-care policies.

Annual revenue from private hospitals in China may reach 2.4 trillion yuan ($377 billion) by 2015, said Yvonne Wu, national life science and health care industry leader at Deloitte China in Shanghai.

The targets could translate to 400,000 new private hospital beds over the next few years, said Roberta Lipson, chief executive officer of hospital operator Chindex International Inc. (CHDX)

U.S- and European-owned companies previously had a hard time entering the Chinese hospital market and tended to invest instead in clinics and diagnostic centers. They have only been able to independently invest in hospitals since Jan. 30, when the government took the industry off a so-called restricted list that required non-Chinese investors to have a local partner and capped foreign ownership at 70 percent.

Chindex, based in Bethesda, Maryland, started Chinas first foreign-owned hospital in Beijing in 1997, six years after commencing negotiations with the government, Lipson said. It took only a year to obtain a license to operate Chindexs latest hospital, in the port city of Tianjin, she said.

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China Medical Services Market Seen Hitting $500 Billion