The Department of Health has agreed the terms of a deal that could save it hundreds of millions of pounds on the long-delayed installation of care record systems through primary and secondary care.

Following months of negotiation, representatives from US software provider CSC signed a letter of intent with officials from the DH, Treasury and Cabinet Office. The letter set out broad principles for resolving the long-running contract dispute over the installation of care records systems.

HSJ understands there have been DH discussions about clawing back £300m–£400m from the contract’s value.

CSC was contracted to install a care records system at 171 NHS trusts and 4,400 GP practices in the North and Midlands and East regions of the national programme project by 2013-14.

However, according to National Audit Office figures, by March 2011 less than a third of organisations had a care records system installed that met the contracted requirements. CSC’s Lorenzo product had experienced the biggest problems.

The DH this week refused to confirm how much it anticipated saving before a legally binding agreement had been reached. However, it described the approach set out in the letter as “hugely improved”.

In December, CSC announced it was writing off $1.5bn, just over £950m, in relation to the contract. However, a document laid with the US stock exchange regulator on Monday, and seen by HSJ, reveals CSC believes there is a “reasonable possibility” that the company can recover a “portion” of the write-off. The stock exchange document also reveals the final deal, scheduled to be agreed by the end of the month, would rely on the NHS committing to a “certain number of trusts” getting a version of Lorenzo.

The notice indicated additional central funds would be available to help trusts implement the system.

Robert McGough, a lawyer specialising in commercial contracts with the NHS, told HSJ that could be “quite attractive” to some trusts. However, he added: “If they don’t find these trusts the deal could still fall through.”

David Owens, a partner in the commercial department of law firm Bevan Brittan, told HSJ it was unclear whether the deal was based on trusts that had already agreed to take Lorenzo or the “assumption” they could put pressure on people to volunteer. However, he said it was unlikely that either side would want to walk away from the deal at this point.