Companies supplying NHS could cost £1bn a year in fraud

Former top health mandarin says cutbacks leave service vulnerable to fraudsters

The former head of fraud detection in the NHS has said the healthcare system could be losing as much as £1bn a year from fraud while procuring services, often from private companies.

Jim Gee, the former director of counter-fraud services for the Department of Health and chief executive of the NHS Counter-Fraud Service, said the health service was missing out on huge potential savings by cutting the budget for research and investigations into the problem.

His report highlights how NHS Protect, the national fraud prevention and investigation body, has had its budget cut by about 30 per cent since 2006 and now employs only 27 expert investigators.

He also accused the Government of cutting back on fraud measurement exercises, meaning it now had little idea of how much it was actually losing.

The most common scams in NHS procurement fraud are where a company fails to deliver the goods and services it has been paid for, or overcharges for them. The most common involve “high-volume, low-value” transactions which can go undetected for long periods, but bigger attacks are not unknown.

Mr Gee’s report, conducted for the accountant PKF and the University of Portsmouth Centre for Counter-fraud Studies, cites Rochdale NHS managers Deborah Hancox and John Leigh, who were jailed for setting up sham IT companies through a network of offshore firms which would then overcharge the health service for products.

Mr Gee, who is now a healthcare investigator at PKF, said: “Fraud is one of the last great unreduced healthcare costs. Putting money into it makes absolute sense. It is one of the least painful ways of cutting costs, before you cut the quality, or extent, of patient services.”

He said NHS managers must “proactively design out the opportunities for fraud before spending the money. They haven’t done that.”

Other major areas of healthcare fraud were likely to involve dentists, pharmacies and opticians overcharging the health service. They received £3bn, £2.1bn and £523m, respectively, from the NHS in 2013.

From carrying out 15 fraud measurement operations between 1998 and 2006, the NHS has done only two since 2009. Given the resulting shortage of data, Mr Gee based his estimates on procurement fraud on the lowest average loss rate in other industry sectors: 5.8 per cent.

In the case of fraud by suppliers of dentistry, pharmacy and optical services, he used average losses identified in previous NHS inquiries, which showed suspected losses of 4.03 per cent, 3.9 per cent and 2.47 per cent, respectively. That would indicate losses of £137m in dentistry, £96m to pharmacists and £24m to opticians.

The report says that in the period 1998 to 2006 the NHS did invest properly in anti-fraud measures, with the result that losses were reduced by “up to 60 per cent”.

A Department of Health statement said: “We do not recognise the figures in this highly speculative report which is full of inconsistencies. We are determined to stamp out fraud in the NHS through better information sharing … and we are working with NHS Protect on crime risks and trends to do even more in the future.”