As you approach Anglia Ruskin University's Rivermead campus in Chelmsford, a huge billboard screams out: "150" – one-hundred-and-fifty years of Anglia Ruskin. The university might have been around in some form or other since 1858, but today, everything feels impossibly new.

Even the staff are new. The vice-chancellor, Mike Thorne, has been in charge since early last year and he and fellow newbie David Humber, dean of health and social care, are excited about yet another new development: the postgraduate medical institute.

Launched last month by Bill Rammell, the Minister of State in the Department for Innovation, Universities and Skills, the institute is just a hole in the ground between the stunning health and social care faculty building and the ultra-modern sports complex. The finished project will feature state-of-the-art laboratories and will focus on, among other things, cosmetic surgery.

The twist, Thorne tells me, is that it is a medic-led, not an academic-led operation. Although it has postgraduate in the title, and will be driven by post-docs and PhD students, it's very much an employment-focused operation aimed at regional medical staff.

The institute will incorporate education and training facilities to enable health professionals to specialise and get promotion. Two MScs in health promotion and public health are also being developed.

But its raison d'être will be research – market-oriented research, that is, as opposed to atom-splitting, academic research. "That area of health research is more than catered for by the Imperials, the Cambridge Universities and the UCLs of this world," says Humber. "What we're looking at is a directly applied sort of research that will, in a relatively short period of time, deliver improvements in care to the public."

For all this newness, the idea of Anglia Ruskin serving the local health service is nothing new. The university is the largest single supplier to the NHS in the east of England, churning out nurses, midwives, mental health carers – basically everything except doctors. "If you took us away from the east of England, the hospitals and the whole health system would collapse here because we're so big," says Thorne, beaming at the mention of his health faculty and its £28m turnover.

The institute has two main thrusts. The first is to provide the local area with medical training. "The support that the clinicians get in Essex has been largely through the London universities," Humber says. Once the institute is in place, local health practitioners will be able go to Anglia Ruskin for a half-day course and return to the operating theatre or the GP's surgery the same day.

The second purpose of the institute is to draw together the research that Anglia Ruskin has been conducting since the turn of the millennium, particularly in aesthetic surgery, orthopaedic medicine – particularly prosthetic implants – cancer control and mental health. Thorne says that the idea for the institute came from an award-winning surgeon who, on visiting the university, noticed the good research that was going on. He recommended pulling it together, to create a critical mass effect, and to attract more investment from the NHS.

Finances are a factor. Medicine is where the money is in higher education and the new institute will enable Anglia Ruskin to take advantage of £6m worth of funding each year from the National Institute for Health Research. Essex receives only £1m today.

Anglia is also creating other sources of income. Its optometry team has invented and patented a new kind of contact lens. Thorne is frank about this so-called near-market research. "We hope to sell some of these technologies," he says. "You don't do research to make money, because research just costs money. But if we came up with some technologies that were successful, that would be just great," he says, adding, "We're hoping the institute will be self-sustaining."

But still, Thorne makes plain that the project is not about the money: "For us, it's where the need is, OK?" he says. He also rejects the charge that Anglia is trying to follow the example of Plymouth and Keele, who set up postgraduate medical research institutes as a way of getting an undergraduate school through the back door. "We've clearly said this isn't about a medical school," Thorne says. "Apart from anything else, I think there are probably enough medical schools, so that's not on our agenda."

The project is being spearheaded by the university, which is putting £1.5m into the kitty, alongside a steering group of nine local NHS Trusts and two private hospital trusts. The institute will comprise four research departments, each centre being peopled by a dozen post-docs and 40 to 50 PhD students. There will also be business incubator units, with an eye actually to delivering health care to the local community. GPs' surgeries and operating theatres will be simulated inside the building.

The institute, which hopes to have a director in place by the summer, is only in the planning stages. But if it's anything like the existing health faculty building, which focuses on the training of nurses, midwives, mental health nurses and social workers, it will be impressive. Every effort has been made to replicate a hospital situation. Mannequins that can respond, have cardiac arrests, drop in blood pressure – even talk – lie in wait for students. Anaesthetic machines, ultrasound equipment, heart monitoring, are all there. Plasma screens are in place, with video equipment to come, which will enable lessons to be transmitted to other campuses.

"Taking people from the trusts round this building, their jaws drop when they see the facilities," Humber says. "It's as real as you can get without putting real patients at risk."

And what are his hopes for the new institute? "I would like to show the world how universities really are working in partnership and developing local activities. That ethos of 'We're the university, we know best' is all changing. We're trying to develop what the health services want."