MPs say soaring costs could threaten growth in medical spending, as study warns of dangerous pressure on consultants

The soaring cost of clinical negligence claims was highlighted by government auditors yesterday as MPs warned that the sums involved could threaten the growth of the NHS.

The total medical negligence bill facing the health service was £4.4bn at the end of 2001, an increase of £500m on the previous year, the National Audit Office (NAO) said.

The rise is equivalent to 10 per cent of the £5bn growth money given to the NHS for the current year.

Edward Leigh, the Conservative MP who is chairman of the House of Commons Public Accounts Committee, said: "This is a staggering sum, of immense significance to the future of the NHS, and efforts to reform the current system for compensating patients who have been negligently harmed must continue apace."

The NAO said the £4.4bn figure was its best estimate of the liabilities the health service faced, based on claims submitted up to 31 March 2001. On a worst-case scenario, the bill could rise to £8.4bn, enough to build 30 hospitals.

The NHS Litigation Authority, which handles claims against trusts, said the bill was driven by an increase in the value of awards rather than the number of claims, although the pace of increase was slowing.

Courts were awarding higher sums in damages after a change to the basis of the calculation, which had not previously altered for two decades. The sums had been further increased after a House of Lords decision changing the way interest was assessed.

A spokesman for the Health Department said a review of clinical negligence, begun last year by Professor Sir Liam Donaldson, the Government's chief medical officer, would report shortly.

He said: "We know the system is outdated, bureaucratic and doesn't deliver for patients or the NHS. In many cases the legal costs outweigh the amount in damages people get. Many claimants are not interested in the money, they just want an apology and a change in the system to ensure the same thing won't happen to someone else."

The NAO report also said millions of pounds were being siphoned out of the service by fraud. The NHS counter-fraud service, set up in 1998, calculated that £112m was being lost, with another £81m at risk.

By March 2001, 484 cases of suspected fraud with an estimated value of £18.3m had been reported to the counter-fraud service and a further 445 cases worth £17m had been reported since then. The frauds included patients evading prescription charges and GPs inflating their patient lists.

The report cites a case in which an NHS trust manager was jailed for three years after authorising timesheets for four relatives who did not work for the trust, netting £126,000.

In another case a GP fabricated drugs invoices and was jailed for three years after the judge granted a compensation order of £800,000.

The NAO said financial management in the service was improving, with 33 NHS trusts said to have "significant financial problems" at the end of March 2001, the lowest number for three years.

Only one health authority had overspent, and that was by less than 1 per cent of its total income.

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