Health Minister Michael Ferguson said existing health department land located at 52 Frankland Street - across from the Launceston General Hospital - had been selected by the government.

Mr Ferguson said the site, which houses the ageing Mental Health Services buildings, offered the best opportunity for all stakeholders to achieve the benefits of a co-located private hospital for Northern Tasmanians.

"Importantly, this includes the ability to collaborate in the provision of services to the community and provide assistance to the LGH during periods of peak demand," he said. "Calvary has previously publicly indicated that the proposal includes a range of services, including palliative care, which is important for so many individuals and families in the North."

Calvary's plans for the hospital were first put to the state government in December 2017. The new build would replace the private health provider's St Luke's and St Vincent's hospitals.

Mr Ferguson said the government was committed to ensuring the community's best interests were at the centre of any future plans.

"The selection of this site will also complement the development of the LGH masterplan, which will lay down the blueprint for health infrastructure in Launceston and Northern Tasmania for the next century," he said.

"It is appropriate that the Howick Street corner be protected for future development of our public hospital."