Trusts ended the last financial year in dispute over internal debts of millions of pounds - around 1 per cent of their turnover - analysis by HSJ has revealed.

The disputes relate to disagreements between primary care trusts and hospitals over sums owed for treatment or hosting services. The Audit Commission raised the issue in its Review of the NHS Financial Year 2006-07. It described a 'growing problem with disputed balances' but could not quantify them. The Department of Health was also unable to give a figure but claimed it was 'certainly not significant'.

However, HSJ has examined the audits at seven NHS organisations chosen at random from across England. In those seven, external auditors identified a total of£26m in contested bills - just over 1 per cent of the total£2.6bn turnover. If replicated across the entire NHS, the total disputed debt would be£869m.

One of the biggest disputes was at Central Manchester and Manchester Children's University Hospitals trust, which has had ongoing problems with PCTs querying bills.

Finance director Adrian Roberts said it had ended 2006-07 with a£6m dispute with its local PCT (Manchester) and a further£3m with other PCTs.

The disputed amount was equivalent to 1.7 per cent of trust income but had peaked at around 5 per cent mid-year, Mr Roberts said. However, much of the locally disputed sum for 2006-07 had now been settled.

'Instead of exchanging blows we need to understand that although payment by results is a rules-based system, in reality there has to be local flexibility or else we'll end up in a court of law.'

At 31 March, Brent Teaching PCT was disputing a£3.1m bill from North West London Hospitals trust and a£2.8m bill from Harrow PCT. It also claimed to be owed£0.3m by Harrow. This is in addition to a dispute with its local authority over continuing care costs of£3.2m.

Brent finance director Anna Anderson said the PCT had 'erred on the side of caution' in putting debts in the accounts and most of the disputes had now been settled.

NHS disputed balances

Trust, Dispute (£m), % of turnover

Nottingham University Hospitals trust, 4.5, 0.8%

Southport and Ormskirk Hospital trust, 0.9, 0.7%

Central Manchester/Manchester Children's University Hospitals trust, 9.0, 1.7%

Brent Teaching PCT, 6.2, 1.6%

Surrey and Sussex Healthcare trust, 4.2, *2.6%

Newcastle PCT, 0.6, 0.2%

Wandsworth PCT, 0.9, 0.2%

*provision made for bad debt