24 March 2014
Last updated at 11:07
Fraud is costing the NHS £5bn a year, with a further £2bn lost to financial errors, the former head of its anti-fraud section says.
The amount lost to fraud alone could pay for nearly 250,000 new nurses, a report seen by Panorama suggests.
The NHS must "get on with tackling the problem", said Jim Gee, co-author of the Portsmouth University study and ex-director of NHS Counter Fraud Services.
The Department of Health said it "did not recognise" the figures.
The amount estimated by Mr Gee, who led the NHS anti-fraud section for eight years until 2006, is 20 times that recorded in the government's annual fraud indicator report.
It is based on worldwide figures, which suggest average losses to fraud and error of just under 7% of healthcare budgets.
"If the NHS is in line with the rest of the world it is losing £7bn," Mr Gee, who is currently Director of Counter Fraud Services at BDO LLP, told BBC Breakfast.
He said the UK-wide figures had to be extrapolated because "the NHS in recent years has stopped measuring its own losses" - only looking at those for dental and pharmaceutical services.
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Jim Gee, report co-author, explains how the figures in his report were calculated
Key types of fraud include the non-payment of prescription charges by patients, medical professionals claiming for work they have not done and overcharging by contractors, said Mr Gee.
"We need to not be embarrassed, or in denial, about the possibility of fraud taking place in the NHS," he told Panorama.
"We need to get on with tackling the problem, minimising its cost, maximising resources available for proper patient care."
'Absolute sense'
The £2bn cost of errors relate to when the NHS makes overpayments by mistake to suppliers or staff.
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By its very nature, it is difficult to say just how much the NHS loses to fraud. Last year NHS Protect with its local investigators oversaw nearly 150 successful criminal cases. There were also 435 civil or internal disciplinary actions. But this is likely to be the tip of the iceberg.
Just like the Crown Prosecution Service, NHS Protect only proceeds with the cases it has a reasonable chance of winning - and cuts to its budget has made it even more difficult to gather evidence than it used to be.
It does not publish details of the amount of fraud that is brought to its attention nor the amount it suspects is happening. That is why the estimates by its previous director, Jim Gee, are very interesting.
The opportunity for fraud in a service as complex as the NHS where there are one million patient contacts every 36 hours is endless. There have been cases of dentists making claims for non-existent patients, GPs falsifying records to claim extra payments and consultants putting in for bogus overtime. Fraudsters outside the NHS have also targeted the service.
But if the £5bn figure is right, it suggests the problem is greater than anyone probably ever thought.
Although the NHS has a budget of about £100bn, it is having to make significant savings and should prioritise fighting fraud, said Mr Gee.
"I think fraud is one of the last great unreduced healthcare costs. And to me, putting money into it makes absolute sense," he said.
"It's one of the least painful ways of cutting costs. It makes absolute sense to cut the cost of fraud before you cut the quality, or extent of patient services."
The Department of Health declined to be interviewed but in a statement said "it did not recognise" the figure or "speculate on levels of losses".
Panorama also found that NHS Protect, the national body that investigates fraud in England for the Department of Health, has had its budget cut by around 30% since 2006.
The operating budget for NHS Protect in 2013-14 is £11.38m, the equivalent budget in 2006-07 was £16.29 million.
NHS Protect has replaced NHS Counter Fraud Services in England.
A Freedom of Information request by the BBC shows that NHS Protect employs 27 counter-fraud specialists, with a further 294 investigators working at a local level.
By contrast, the Department for Work and Pensions employs six times the number of investigators - but if Mr Gee's figures are accurate, they face less than half the amount of fraud.
The Department of Health said NHS Protect had a "significant budget" and "protects and safeguards frontline NHS services".
NHS anti-fraud teams investigate cases ranging from hundreds to millions of pounds.
Among their cases was that of dentist Joyce Trail, from Birmingham, who was one of the most prolific fraudsters in NHS history.
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- Fiona Walker presents Panorama - The Great NHS Robbery
- BBC One, Monday 24 March at 20:30 GMT
Trail charged the NHS for work she had never actually carried out.
She visited care homes offering to check residents' teeth and then used their personal details to claim payment from the NHS.
Trail even claimed payment for the false teeth for patients who had died.
She was jailed in 2012 for £1.4m worth of fraud.
Other fraudsters investigators have prosecuted include NHS employees selling stolen products on eBay and dentists charging the NHS for gold crowns while fitting patients with cheaper ones.
One investigator, Barry Hards, said the lack of money for investigators means that now is a good time to be a fraudster in the NHS.
"How can you have confidence that there's a likelihood you'll be found out, when there's very few people looking at you?" he said.
"I think it's a genuinely held concern that some people in senior positions have just taken their eye off the ball on this."
