By Jim Gee
28 January 2010
More than £3.3bn of NHS funds could be lost to fraud each year. But there are ways to curb this without harming patients, Jim Gee explains
The world spends approximately £2.9 trillion a year on providing health care to its citizens, according to the World Health Organisation’s latest figures. But estimates published last week suggest that more than £160bn (5.59%) of this is lost to fraud and error.
This is the equivalent of more than one and a half times the budget for the entire UK NHS or enough to build more than 1,500 new hospitals (at developed world prices). Cutting back on fraud could make an enormous contribution to the country’s health budget and put a smile back on the faces of stressed NHS finance directors.
In the UK, some progress has been made. The NHS’s Counter Fraud Service, which I ran between 1998 and 2006, helped to reduce fraud losses in vital areas by up to 60% over that period. We were the first country in the world to measure and reduce health care fraud losses, but it is worrying that no
figures have been published since 2006.
The budget of the NHS for 2010/11 is £102bn. Our current analysis finds that percentage losses to health care fraud and error across the globe range between 3.29% and 10%. So, if we conservatively assume that the NHS’s losses are at the bottom of this range, they will still equate to more than £3.3bn.
This will be a surprising figure to those who quote the total value of cases that are detected and come to court. However, the value of detected fraud is only the tip of the iceberg. No unlawful act has a 100% detection rate and the essence of fraud is deception and concealment. Organisations that have accurately measured their losses have realised that successful detection rates rarely get above 1 in 30 cases. This is something that also shows that reactive work alone – to detect, investigate and prosecute fraud – is not the answer.
In the UK and globally, health care fraud is caused by four main groups – patients, managers and staff in health care organisations, health care professionals and contractors and suppliers.
Patient fraud most commonly concerns providing false information so as to avoid paying prescription and dental charges. This type of fraud is generally low in value but high in volume.
Managers and staff have been found to falsify their qualifications and employment histories. Neil Taylor, a former NHS trust chief executive from Solihull, received a 12-month prison sentence in 2005, suspended for two years, after faking his qualifications to obtain the £115,000-a-year post.
Health care professionals have been found to claim fees for work that has not been undertaken. For example, in 2006 a dentist carried out one of the biggest frauds in NHS history. For six years, Mohammed Shiekh ran a racket based on claiming for thousands of false emergency call-outs, totalling £1.3m.
Contractors and suppliers have been found to overcharge, under-supply and sometimes to join together to rig markets. The NHS’s Project Holbein culminated in a civil legal case in 2008 concerning a number of drug companies that were alleged to have formed a cartel to fix the supply and price of vital drugs such as warfarin and penicillin. Fraud was never proven but the companies paid back tens of millions of pounds to the NHS.
Internationally, the drugs giant Pfizer was ordered late last year to pay $2.3bn for making false claims about four prescription medications – the US’s largest health care fraud settlement. Eleven whistleblowers became so concerned that the company was asking them to break the law that they informed the authorities.
So how can we stop similar events from happening in the future? The reduction in NHS fraud losses in the UK between 1998 and 2006 was achieved doing two things. We used the accurate measurement of the nature and scale of losses both to target counter-fraud specialists exactly where they were needed and to convince the vast, honest majority of patients, staff and professionals to work with us.
This worked successfully in the first areas of expenditure considered, where the processes and systems could be redesigned and controlled centrally – fraud by patients and professionals, especially. To build on this work, there are five things that the NHS can do now.
First, extend the fact-based approach based on the measurement of fraud losses into the big budget local areas such as payroll and procurement; this is where the greatest financial benefits lie.
Secondly, build awareness among chief executives and senior NHS officials that there really are concrete, positive financial benefits to be achieved from countering fraud; the point is to reduce the losses and not just detect, investigate and prosecute a fraudulent minority.
Thirdly, ensure that the vast, honest majority of staff, managers, professionals and patients see a share of the financial benefits from reducing fraud losses.
Fourthly, put in place a much stronger resource to pre-empt fraud and to design and redesign systems to ensure that losses are not incurred in the first place.
Finally, recognise the increasing international dimension to health care fraud; at present, only health organisations in Scotland and Northern Ireland are active in this way alongside colleagues from Europe. England and Wales need to get involved.
Because of the direct, negative impact on human life of health care losses, it is never easy to admit that fraud and error take place. However, the first step to reducing losses is to stop being in denial about them. If an organisation is not aware of the extent or nature of its losses, how can it apply the right solution and reduce them?
Cost reduction is an everyday fact of life in most organisations – however, fraud and error costs rarely have this focus. Because of this, fraud is now one of the great unreduced health care costs – although it can be lowered much less painfully than many.
At present we have a fraudulent or corrupt minority who are prepared to divert the funds that are intended to keep us all well. That minority exists in every country. None is immune. None can afford to pretend that they have no health care fraud. It’s not good enough to simply aim to ‘manage’ – or hide – a difficult problem that might result in negative media coverage.
Every penny lost to fraud (and error) drains the lifeblood from our health care systems and undermines their capacity to provide essential treatment. We need to get serious about health care fraud, we need to do this in the UK and globally, and we need to do it urgently.
Jim Gee is the director of counter fraud services at MacIntyre Hudson LLP. The financial cost of healthcare fraud report is published by MacIntyre Hudson LLP, the Centre for Counter Fraud Studies at University of Portsmouth and the European Healthcare Fraud and Corruption Network. It can be found at: www.macintyrehudson.co.uk
