FRAUD If fraud in large organisations is 5 per cent of revenue, that's £2bn a year for the NHS in England alone. But is the counter-fraud directorate really going to deliver on the detection and recovery of funds? Patrick Butler reports

'I think I have avoided becoming completely cynical. I still get shocked by some of the frauds I discover, and quite frankly if I realised I had started to become cynical I would go and get another job. I don't think you can afford to be cynical, ' says Jim Gee, head of the health service's anti-fraud operation.

The statistics Mr Gee provides do not leave much room for idealism. They show detected NHS frauds over the past nine months to the value of£14m spread over 239 cases, involving the investigation of 253 suspects.

These are mainly NHS staff and include many from the professions of medicine and accountancy.

'A tiny minority', is how Mr Gee, formerly Lambeth council's antifraud boss, puts it. But these national figures for the first nine months of the year, collected together for the first time by the NHS's directorate of counterfraud services (DCFS), are - as Mr Gee readily admits - only the tip of the iceberg.

The figures show a picture of NHS fraud largely uninfluenced by the DCFS, which only went fully operational in January. But the argument goes that when the counter-fraud specialists really get going over the next few months, the detected fraud rate is going to soar.

Mr Gee refuses to panic. 'I don't think we should v iew it as bad news if those figures increase. It's not that there's more fraud out there in the NHS - it is that we are getting better at detecting it.'

The rule-of-thumb figure used by academics to estimate fraud in large organisations is 5 per cent of revenue. For the NHS in England, that equals around£2bn a year, although the DCFS is careful not to speculate on any numbers until it has completed its rolling fraud measurement programme.

This has already measured prescription charge evasion fraud at£95m a year in 1998 (reduced to£59m in 1999 as a result of DCFS action). Figures for primary care fraud are expected by May, w ith just as r igorous baseline estimates for telecommunications, payroll and procurement fraud to follow.

Definitive answers on the level of fraud in the NHS (to a level of accuracy of plus or minus 1 per cent) will emerge as a result, says Mr Gee. 'Then instead of people disagreeing over where fraud is worst, or where it is least prevalent, we can focus people's minds on the solution to the problems, not the nature of the problem.

'It is hardly in the interests of this nascent organisation to be shy of publicising the scale of the fraud. When the DCFS was launched in 1999, some senior NHS finance directors were privately sceptical, and concerned it was an overreaction to an exaggerated problem, a sledgehammer to crack a nut.'

There were also concerns it was a bureaucratic imposition. Each health authority and trust is expected to employ a local counter-fraud specialist by next April, each one trained, accredited, and qualitymonitored by the DCFS.

Mr Gee explains: 'What we are saying is you have to have the skills in place in the health body.

We are not saying that has to be a full-time post. We are leaving it up to finance directors to use their judgement quite properly, to decide how well resourced it needs to be.'

The DCFS has put a lot into winning the hearts and minds of NHS managers over the past few months, enduring a hectic round of presentations and seminars. It has even been sensitive enough to refuse to publish the names of trusts conned by lease fraudsters, partly to save the blushes of the finance directors involved.

'Overwhelmingly, people were positive. . . We are conveying to people that we are professionals, that this is about freeing up money for patient care and they have a role, too; that this is not just a fraud squad sitting in a darkened room staring at computer screens: we all have a responsibility to protect our organisation.'

'We have to go for 100 per cent recovery'

Mr Gee is adamant that the NHS can no longer rely on traditional approaches. Fraudsters come up with new and cleverer scams, and professional specialists are needed to combat them. 'It's simply not good enough to rely on the normal financial controls and audit arrangements, ' he says.

He adds that the DCFS provides a 'very positive' financial benefit for HAs and trusts: free support from the operational service at low cost, obviating the need for them to employ private auditors at extortionate rates, free legal advice, and a financial package to enable them to recover lost money.

The DCFS knows in return that it must come up with the goods - ultimately, to recover lost cash. 'We have to be going for 100 per cent recovery where we can prove it is money that has been defrauded. In every case that may not be possible, but we have to aim for that, ' says Mr Gee.

He wants to ensure effective sanctions, but is aware that civil, criminal and disciplinary sanctions are not applied consistently across the country.

And he wants to iron out the variations in the amounts recovered.

A fraud-reporting hotline for NHS staff goes live in May. The first electronic 'map' of NHS fraud - a constantly updated data profile that provides a template of where fraud is most likely to occur within an organisation - is expected in April. Action plans to tackle fraud in each part of the NHS will be in place by July.

He is pleased with progress so far - from the speed in which the A czar is born: Jim Gee heads the NHS's anti-fraud service.

DCFS was set up to the improved working relations with the police.

'It has been very hard work to persuade the police that this is something they have the resources to tackle, ' he adds.

But Mr Gee also knows things are about to hot up. 'It's ironic. I have worked for a number of different organisations doing this job and you don't get any adverse publicity until you start to tackle the problem; and then of course, because you are tackling it, it comes to light.

'That's got to be good news, not bad news. I worry about the areas where I don't hear anything at all.'

The contractor scam A simple but successful hospital equipment contracts fraud appears to have potentially netted a firm millions of pounds from 51 unsuspecting trusts.

The firm - which cannot yet be named - was raided by police and DCFS staff last December after some trusts questioned the way contract leases were manipulated by the firm.

The firm would send a contract to the trust. The trust would sign it and return it; the firm would then be apparently 'taken over' by a new firm. The new firm would reissue the contract having secretly amended the small print and extended the lease.

In many cases, trusts simply signed the new contract without checking. The total exposure of the NHS is thought to be in the region of£3m. The fraud was uncovered after a number of trusts contacted the DCFS after making a detailed comparison of the new contract with the original contract. The case has been passed to the Serious Fraud Office.

Source: DCFS

The fraudulent optician South London optician Neil McCrea was convicted in February 2000 of cheating the NHS out of£140,000 - although it is estimated that his false claims scam may have raked him in nearer£600,000.

Mr McCrea falsely charged for services to patients from three health authorities - Lambeth Southwark and Lewisham; Merton Sutton and Wandsworth; and Croydon. He even submitted claims for treating 17 people who turned out to be dead.

His fraud was uncovered after the HAs became suspicious of his persistently high volume of claims. The DCFS became involved in 1999 when it advised the HAs on how to present their evidence.

Mr McCrea admitted to 140 charges and was due to be sentenced in late March.

'We will go for the maximum recovery of money. If we can get£600,000, we will go for that, ' said a DCFS spokesman.

Source: DCFS

Tackling NHS fraud - the story so far

June 1997: The efficiency scrutiny on prescription fraud taskforce estimates that the NHS loses£150m annually from fraudulent or counterfeit prescription forms.

December 1998: The government launches its anti-fraud strategy with its strategic document, Countering Fraud in the NHS. It aims to reduce prescription charge evasion by 50 per cent by 2002-03.

April 1999: The counter-fraud operational service is announced, comprising eight regional teams, a national team, and two specialist teams for dental and pharmaceutical fraud.

June 1999: Health minister John Denham launches the pharmacy reward scheme. This allows chemists to claim up to£10,000 where their reporting of illegal prescription form helps prevent fraud or leads to the recovery of money collected through fraud.

October 1999: New checks are introduced to prevent people from fraudulently claiming entitlement to free prescriptions.

November 1999: The Health Act introduces a new civil penalty and criminal offence to punish patients who fraudulently evade payment of NHS charges for prescriptions, dental treatment or optical services.

December 1999: Measures to tackle patient prescription charge evasion fraud lead to a 40 per cent on-year reduction - a saving of£36m.

January 2000: Counter-fraud operational service - the operational arm of DCFS - goes live.

February 2000: First NHS fraudsters convicted under the auspices of the directorate of counter-fraud services.

May 2000: Planned launch of NHS fraud and corruption hotline.