A third of the £1.1bn paid out by the NHS in compensation last year was handed to lawyers, with one firm submitting a £121,700 bill following a £5,000 claim.
The cost to the taxpayer is expected to rise to £1.4bn next year, with the NHS conceding that it faced an “increasingly difficult task” in managing the level of payouts.
In its annual report, the NHS Litigation Authority (NHS LA) added that the behaviour of several law firms was causing concern, with large bills being submitted and a large number of unjustified claims being made.
Ian Dilks, the chair of the NHS LA, said: “The costs of litigation are placing a burden on NHS finances of a magnitude that was never imagined when the NHS LA was established.”
The NHS LA also raised concerns about the coalition government’s overhaul of legal aid, saying it had “influenced the behaviour of some claimant lawyers” and led to rising legal costs in many cases.
The authority highlighted one case where an NHS trust agreed to pay out £5,000 for the failure to diagnose a patient’s tumour on the kidney. However, after the offer of £5,000 was accepted, the patient’s solicitors claimed costs of £121,700.
Further analysis of the bill revealed that the firm was claiming a rate of £400 an hour, although a significant amount of the work was carried out by unqualified staff. The firm then claimed a 100% success fee on top of this, raising the hourly rate to £800.
The NHS eventually had the claim struck out.
In another case, the NHS agreed to pay £2,000 to settle a claim. The claimant’s solicitors then presented a bill for £53,529.60 – although the final amount paid by the NHS was reduced.
The report said that it was “impossible to justify” the increasing number of cases where significantly more money was billed by claimant solicitors for legal costs than was paid in compensation.
Due to law firms’ actions, the legal costs of smaller claims have risen significantly. Where patients receive damages of up to £100,000, the average claimant’s legal costs are now more than 50% of the total payment.
By challenging costs, bills have been reduced by an average of 33%. The Department of Health is currently considering plans to cap the fees charged by lawyers in clinical negligence claims.
After the introduction of the legal aid legislation, the NHS LA expected to see a fall in the number of cases. Instead, it found that solicitors were finding other ways to increase costs.
“We are seeing an increasing number of plainly excessive and disproportionate costs bills, the presentation of which coincides with the banning of success fees and the reduction of the recoverability of the full cost of after-the-event (ATE) insurance against the defendant,” noted the report.
The NHS LA added that it continued to receive a significant number of unjustified claims, making no payments at all for more than 46% of clinical claims.
The NHS LA’s chief executive, Helen Vernon, warned that it was becoming harder to ensure that patients received fair compensation while reducing the inappropriate claims made on the NHS.
“The emergence of non-specialist lawyers coupled with excessive claims for legal costs by some firms has required a change in approach,” she said in the report.
In order to stop unjustified claims, the NHS LA is challenging more claims for costs and contesting more cases in court. The number of cases where no compensation is paid has almost doubled in five years, from 2,533 cases to 4,909.
In 2014-15, the authority said that it had saved more than £1.2bn for the NHS by rejecting claims that had no merit.
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