NHS locum firms 'fixed charges 15% higher than rivals'

The Government is investigating allegations that recruitment companies colluded to charge the NHS 15 per cent above the market rate for temporary medical staff.

The Mail on Sunday has learned that three leading agencies are at the centre of a probe by the Purchasingand Supply Agency (PASA), the NHS body that oversees all private sector contracts.

The inquiry will examine whether there is any substance to allegations in an anonymous letter that the companies formed a cartel to charge hospitals more for staff than the rates set by their competitors.

The letter claims that the companies conspired to increase their charges by 15 per cent above the target rates set by PASA for the supply of temporary doctors, known as locums.

It suggests that one agency alone would be unable to raise its rates so significantly above its rivals.

Only by the firms working together, which it says would represent a significant portion of the UK locum market, are the higher charges viable.

The companies supply the extra staff to cover holiday and sickness absence and general shortages to hospitals across Britain. All are well known in the industry.

The letter alleges that the firms decided to fix the rates for specialist anaesthetists, paediatricians and psychiatrists, forcing hospitals to pay more for their services.

The agencies have vigorously denied the allegations.

The letter was sent to all 55 medical recruitment companies on an approved Government supplier list known as the 2008-2011 National Framework Agreement.

It says: 'It is abundantly clear that the companies would not risk submitting these rates in isolation as NHS Trusts would not use them.

'Every previous Agreement has shown that these three suppliers have erred on the side of caution, aware that it would be impossible to submit significantly higher rates.

'But with an agreement between all three suppliers, the door has been opened for them to control the medical locum market at extraordinary margins.

'More worrying is that the taxpayer will lose out on over £100,000,000 for every year of the Agreement due to this artificial increase.'

Being included on the Agreement is lucrative for agencies because it is the first port of call for NHS personnel managers looking for staff.

It represents peace of mind for hospitals because PASA regulates and audits all agencies on the list to make sure staff comply with criminal-records checks and are fit to work in the UK.

The new Agreement, which lasts until 2011, comes into force on Tuesday and all agencies have had their bids and charges approved by PASA. Most have stayed within the NHS target rates to ensure they appear on the list.

But The Mail on Sunday has seen confidential documents containing all the new figures, which suggest that the three companies being investigated are charging rates significantly higher than the PASA targets.

While many rival agencies are charging an average of £70 an hour for specialists - the basic PASA target - the three companies involved in the probe have prices set around the £85 an hour mark for staff at the same professional levels - slightly above even the 15 per cent hike alleged in the letter.

The documents do not prove that the three companies formed a cartel.

Medical recruitment companies enjoy lucrative contracts with the NHS and can make hundreds of millions of pounds a year from the taxpayer for the supply of temporary staff.

Chief executives enjoy salaries of about £300,000 with pension plans and bonuses worth an extra £80,000.

PASA said it is taking the investigation and the allegations 'very, very seriously' and that 'if any substance to the allegations is found we will pursue this with all our power, including engaging the Serious Fraud Office or the police.'

The probe began ten days ago and is set to conclude this week.

Health Secretary Alan Johnson has refused to comment until the outcome of the investigation is known.

Representatives for the companies said: 'Following an investigation into the matter, we are of the view that there is no basis for the allegations made in the letter, which we note is anonymous and advances no evidence to support its unfounded allegations.'