A national scheme intended to drive savings in mental health is leading to some patients being “warehoused in inappropriate services”, a senior private sector clinician has warned.

Commissioning fewer medium and low secure inpatient services “out of area”, and using local providers instead, was identified last year as a key area of possible efficiency savings in mental health.

The recommendation was made by the now defunct National Mental Health Development Unit, which closed at the end of March as part of the government’s quango cull.

The unit estimated out of area placements – the majority of which are provided by the private sector – cost the NHS in England £356m a year and were 65 per cent more expensive than “in borough” placements.

But Priory Group chief medical officer Chris Thompson – appointed vice chair of the NHS Confederation’s Mental Health Network in July – warned that some primary care trusts were going too far in their efforts to reduce out of area bills.

Speaking to HSJ, he said that, while some out of area placements were unnecessary, some were “in the clinical interests of the patient”.

Professor Thompson said some PCTs had stopped patients from “going out of area” to services which would be more suited for them, potentially slowing the service user’s progress and delaying their return to the community.

He warned that patients could be “warehoused in inappropriate services” that were local to the commissioner but “without due regard for the care pathway or the specialist needs of the patient”.

Centre for Mental Health deputy chief executive Andy Bell agreed that local placements could be inappropriate in some specialist cases.

He said there could be a “perverse” situation where patients ended up being treated in an inappropriate setting “in area”. He said: “It is not just a case of cutting by x per cent.”

But Mental Health Providers Forum chief executive Ian McPherson argued that the opposite of this was sometimes true.

He said: “There are times they are put out of area, just because there is not a local secondary care service. That is nothing to do with the needs of the individual.”

He said commissioners should ask “why are people going out of area”, a decision which he said should “not be based on numbers” but “on need”.