NHS money is being wasted by hospitals in England wrongly charging the health service for treating short-stay patients, a watchdog says.

The Audit Commission said hospitals could earn more than five times as much by recording them as inpatients rather than outpatients.

Overcharging and the managerial rows it caused took up time and resources.

The Department of Health said the NHS had to accurately record care given and it would work to improve this.

The NHS spends £6.8bn a year on short-stayers – 17% of the hospital budget.

During its review, the Audit Commission took evidence from a small number of hospital trusts and management bodies over how they dealt with patients whose treatment lasted less than 24 hours.

It found plenty of evidence of the same treatment being recorded as an inpatient in one hospital and an outpatient in another.

One trust said the time spent dealing with the disputes caused by the issue was taking up the equivalent of one staff member’s entire workload.

Custom and practice

But the watchdog said it was willing to give hospitals the benefit of the doubt, saying there did not seem to be systematic abuse of the system.

Instead, the commission said it was more likely to be related to historic custom and practice.

As medicine has developed, more and more treatment and recovery is being done during short visits rather than overnight stays.

But hospitals were still classing them as inpatients – that is day patients who are admitted into hospital.

And because they get more for them, they were reluctant to class them as outpatients and charge less.

To illustrate the issue, the report gives an example of an 18-year-old boy who goes to hospital for a simple operation to remove a lesion.

He only spends a short time in theatre and is then discharged.

The hospital that classes him as an inpatient would get £729, whereas if he was treated as an outpatient it would be £116.

However, the report also said there were some examples of where hospitals were undercharging.

It said as well as wasting resources, the problem made it harder for people to judge what the NHS was up to and therefore to measure its effectiveness.

Andy McKeon, who leads on health for the Audit Commission, added: “The arguments are only likely to increase as money gets tighter.”

The Audit Commission said as a rough rule of thumb hospitals should not treat patients as being admitted if they did not take up a hospital bed or trolley during their treatment and recovery.

But it also called for government to provide clear advice and help on the issue.

David Stout, of the NHS Confederation, which represents trusts, agreed it was “really important” that fair payments were made.

A Department of Health spokeswoman added: “The NHS must make sure that they are following the updated guidance to record the care they give to patients accurately and consistently to make sure that it gets good value for every pound it spends.”