NHS at greater risk of fraud with new private providers in system, finds CHPI

CHPI | June 12, 2013 | Press releases

New independent think tank the Centre for Health and the Public Interest (CHPI) is releasing a report to-day in which it warns that the introduction of greater use of for profit providers of healthcare services as a result of the 2012 Health and Social Care Act is likely to substantially increase the amount of healthcare fraud in the NHS. This will result in less money for patient care when funds are already scarce in the NHS.


In Healthcare Fraud in the new NHS market – a threat to patient care, authors Professor Mark Button and Colin Leys find that the use of payment by results contracts with private providers in the new NHS market provides significant opportunities for fraudulent claims such as ‘upcoding’, whereby patients are categorised as having more severe conditions than they actually have in order to attract higher rates of payment. This has already been seen in the activities of some publicly owned hospital trusts.


This type of fraud is prevalent in the US, where private companies already provide healthcare services. A number of the companies which have settled major fraud cases there are currently delivering healthcare services in the UK or are seeking to do so.


The report also highlights the inadequacies of existing counter fraud measures and points out that the Government has not addressed the risk of fraud in the new NHS and calls for an effective counter fraud strategy to be developed quickly, in order to stop more money being drained away from NHS services. The authors recommend looking at the approach taken in the US to tackling healthcare fraud– where it amounts to costs £80bn a year.


Across all healthcare systems fraud accounts for between 3.29% and 10% of all healthcare expenditure, with an average of 5.59%. Within the NHS this translates as £3.5bn a year lost to patient care. Yet In 2011-12 the NHS Counter Fraud and Management Service managed to recover just £3.44 million in fraudulent payments. In 2011, when the service was transferred to NHS Protect, the number of staff was reduced by 21%.


Professor Mark Button co-author of the report, says:

“‘Upcoding’ by private companies is prevalent in the US healthcare market and the FBI has estimated that healthcare fraud in the US totals $80bn a year.

In the US ‘upcoding’ has also been found to be twice as high in for-profit hospitals as non-profit hospitals. This situation is compounded in the UK where opportunities for detection are weak and penalties for breaking the law, if found out, are insubstantial.

The Government has not devoted attention to the issue of increased fraud within the new NHS, nor the inability of NHS Protect to investigate and pursue all possible sanctions. To do so, an appropriately resourced unit dedicated to corporate fraud will need to be created within NHS Protect.”


Colin Leys co-author of the report, says:

“Under the 2012 Health and Social Care Act the new NHS is set to rely heavily on contracts between the government and private healthcare services, increasingly resembling the US healthcare system.

The use of Payment by Results contracts with private providers in the new NHS market provides significant opportunities for making fraudulent claims. Where NHS hospitals have maximised income by overcharging since the introduction of Payment by Results, in the past, the funds did not leave the NHS, whereas any overcharging by private providers will see funds shifted away from patient care to corporate profits. Private providers also have an incentive to overcharge because company law requires them to maximize the return to shareholders.”


Some of the companies central to the new NHS market have settled major fraud cases in the US, including UnitedHealth, McKesson, Aetna and HCA. Examples include:


  • From 2000-2009 UnitedHealth and United Healthcare Insurance paid out $406.4m in fraud cases or to settle class actions for non-payments of benefits. Until recently United Health was involved in the provision of GP primary care services in the NHS but has decided to switch its focus to supporting clinical commissioning groups (CCGs) which will put it at the heart of the new NHS market.
  • In 2003 the US parent company HCA UK paid over $1.7bn in settlements for a range of frauds against the government, Medicare and Medicaid, doctors and patients. In August 2012 the New York Times reported that the US Department of Justice was currently investigating HCA again. In England, HCA has set up HCA NHS Ventures, which operates six hospitals in London and 20 clinics or diagnostics centres around England.
  • In 2003 Aetna paid $170 m to settle charges of failure to pay doctors for services to Aetna patients, and for overriding doctors’ treatment decisions. In England, Aetna, like UnitedHealth, is involved in providing support for the commissioning of NHS health care by Clinical Commissioning Groups, and in reconfiguring health services in Birmingham.




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