NHS England hoped a seven-year, £330m deal with Capita would reduce its costs by 35%, while the outsourcing firm planned to make a loss of £64m in the first two years of the contract but recoup this later, the watchdog found.
The contract, starting in 2015, covered administrative support to 39,000 GPs, dentists, opticians and pharmacists, such as processing payments, ordering supplies and moving medical records.
Problems started to emerge in 2016 as Capita embarked on a programme of office closures, which meant its customer service centre struggled to meet demand.
Some service failures put patients at risk of harm, the NAO found.
For example, 87 women were told incorrectly they were no longer part of the cervical screening programme and processing issues led to delays in an estimated 1,000 GPs, dentists and opticians working with patients.
Payments to some of these practitioners were delayed.
NHS England has made savings in line with expectations, the auditors, found but noted that, to date, NHS England has deducted £5.3m from payments to Capita in penalties for poor performance.
However, the NHS expects to pay up to £3m in compensation to primary care providers, the NAO said.
More than two years into the contract and some basic principles have still not been agreed, which hampers NHS England’s ability to hold Capita to account, the watchdog added.
The auditors called for consideration as to whether elements of the contract should be taken back in-house.
NAO head Amyas Morse said: “Neither NHS England nor Capita fully understood the complexity and variation of the services being outsourced.
“As a result, both parties misjudged the scale and nature of the risk in outsourcing these services.”
He added that value for money was about more than just cost reduction.
“It is deeply unsatisfactory that, two and a half years into the contract, NHS England and Capita have not yet reached the level of partnership working required to make a contract like this work effectively,” Morse said.
Public Accounts Committee chair Meg Hillier said: “Trying to slash costs by more than a third at the same time as implementing a raft of modernisation measures was over-ambitious, disruptive for thousands of doctors, dentists and pharmacists and potentially put patients at risk of serious harm.”
She added that this was another example of “poor contracting” by government and urged it to learn the lessons of past failures.
A Capita spokesperson acknowledged that the complexities of the services being outsourced were not properly understood before the contract was signed.
“This was the first time the NHS in England had ever centrally contracted these services,” they said.
“The report notes that several organisations and legacy issues all contributed to underperformance.”
The spokesperson said the report had noted that the company’s performance had improved.
“Capita will continue to work with all parties to address the small number of remaining service issues,” they added.
NHS England has also been approached for comment.
