A £140m plan to modernise NHS hospitals on Tyneside by using private finance is a step closer to reality.

The Newcastle Hospitals Trust has shortlisted three bidders who are interested in remodelling the trust through the Government's Private Finance Initiative (PFI).

The move will create cancer treatment and kidney care facilities at the Freeman Hospital, in Newcastle.

The city's Royal Victoria Infirmary (RVI) will see outdated buildings demolished to make way for an accident and emergency department.

The new facilities at the RVI will also house the Regional Neurosciences Centre, which will transfer from Newcastle General Hospital.

Other units to move across the city from the General to the RVI site will include the SCIDS (Severe Combined Immuno Deficiency Syndrome) unit, which provides specialist care for children who have to be treated in a protective bubble. Newcastle is the only city outside London with such a facility.

The North-East Infectious Diseases Unit will also transfer from the General to the RVI. The cancer and kidney centres are due to open in autumn 2005, with the RVI facilities opening the following year.

The shortlisted bidders, led by construction firms Amec, Laing and Sir Robert McAlpine, have until late August to produce competing bids. One will be chosen early in 2003 as the preferred bidder.

Under PFI the developments will be funded, designed and built by a private consortium which will then maintain the buildings as part of a 30-year contract