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Cost of healthcare fraud

Total losses to fraud in the National Health Service run at between £3.7 and £5.7 billion a year, it is claimed. The accountancy firm PKF Littlejohn has published a 12-page report The Financial Cost of Healthcare Fraud Report 2015 – with the Centre for Counter Fraud Studies at University of Portsmouth.

The report, written by Jim Gee, Head of Forensic and Counter Fraud Services at PKF Littlejohn and Prof Mark Button, Director of the Centre for Counter Fraud Studies at Portsmouth, covers losses of healthcare fraud (and error). The authors point to the NHS’s own figures on the cost of fraud to be in each main area of expenditure – payroll, procurement, GP, dental, optical, and pharmaceutical services, as well as losses to income from patient charges (mostly from prescription charge fraud). There are also examples of types of fraud.

The report says: “The NHS’s own loss measurement exercises (now sadly almost completely curtailed) do not show significantly different loss rates from those found globally in other healthcare organisations (and highlighted in previous reports of this type); the level of loss is significant and is likely to undermine the NHS’s capacity to provide patient care of the quality
which it wishes to; these losses can be reduced substantially. This is not just shown globally but from the NHS’s own history between 1998 and 2006, where, losses were substantially reduced and fell significantly below the healthcare global average loss rate.”

They call for three things: the NHS needs to focus on reducing the cost of fraud not just investigating and prosecuting individual examples, although this is important too. The NHS needs to re-commence loss measurement exercises across key expenditure streams. It is only with accurate knowledge about the nature and extent of fraud that proportionate, effective action can be taken to reduce its extent. And the NHS needs to re-create a powerful, well-resourced organisation to lead this work with a remit and authority across all parts of the NHS. “Because of the direct, negative impact on human life caused by healthcare losses, it is never easy to admit they take place. However, the first step to reducing losses is to stop being in denial about them.”

They describe fraud as a serious and growing problem for all sectors, besides healthcare. The research shows losses to average 5.6pc across all sectors, but to be even higher in healthcare at 6.1pc. Losses have risen by almost 30pc since 2007.

Fraud has negative consequences in all sectors, but in healthcare the impact of fraud is even more pernicious; it has a direct, negative impact on human life as the quality, quantity and speed of patient care is diminished. In the UK the NHS is under financial pressure as the cost of treatment rises faster than inflation and the resources that can be devoted to it. The good news from the report is that there are several examples cited where the cost of fraud (and healthcare fraud) has been reduced – by up to 40pc within 12 months. Indeed the NHS itself achieved such reductions between 1998 and 2006, but the situation has now worsened again, the report argues.

On the basis of international evidence, the authors say, it’s clear that fraud (and error) losses in any organisation should be expected to be at least 3pc, probably more than 5pc and possibly more than 10pc.

About Jim Gee

Jim Gee is Partner and Head of Forensic and Counter Fraud Services. He is also Visiting Professor at the University of Portsmouth and Chair of the Centre for Counter Fraud Studies. Between 1998 and 2006 he was Director of Counter Fraud Services for the Department of Health and CEO of the NHS Counter Fraud Service, which has since become part of NHS Protect.

About Mark Button

He is the author of several books on private security. With Jim Gee he wrote (published by Wiley), ‘Countering Fraud for Competitive Advantage’ and the ‘Accredited Counter Fraud Specialists Handbook’.

You can request a copy of the report, and others, free from PKF Littlejohn.


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