THE PURCHASE OF THE READ CODES AND THE
MANAGEMENT OF THE NHS CENTRE FOR CODING AND CLASSIFICATION
THE
ARRANGEMENTS
WHICH
CREATED
A
CONFLICT
OF
INTEREST
FOR
DR
READ
26. The NHS Executive appointed Dr Read as the
first Director of the Centre for Coding and Classification. They
also granted Computer Aided Medical Systems Ltd - a company owned
by Dr Read - exclusive rights to distribute the system to
the NHS and provide support for the Read Codes developed by the
Centre. This meant that Dr Read was employed by the NHS to
develop a system in which he had a direct financial interest.[27]
27. We asked Dr Read how much capital and revenue
income he had received from the NHS in connection with the Read
Codes. Dr Read provided us with a note in which he identified
total income of £1.228 million (Table 2) over the eight year
period from the purchase of the codes by the NHS Executive. This
included earnings of about £70,000 a year from the Central
for Coding and Classification Centre and about £40,000 from
CAMS Limited. But taking into account the earnings he had lost
as a general practitioner, he put his net income at £0.628
million. [28]
Table 2
|
Capital and Income Received by Dr Read since the Purchase of Read Codes
|
|
£m
|
Capital |
0.065 |
Income |
|
Original sale (net)
|
(0.290) |
NHS Salary |
0.613
|
CAMs Ltd Salary |
0.322 |
CAMs Ltd Dividends
|
0.565 |
CAMs Ltd Benefits
|
0.066 |
Net Rental Income
|
(0.049) |
Total |
1.228 |
Less Lost Earnings as a GP
|
0.600 |
Total Net Income
|
0.628 |
28. We asked Dr Read what practical difficulties
his conflict of interest had caused him. He told us that his board
at CAMs had advised him that it would be useful for the company
to develop software systems that used the codes. However, he had
felt that this would be difficult because CAMs could be perceived
to be taking advantage of the situation they were in. [29]
In a note, Dr Read added further examples, for example:
- As inventor of the codes he often did not promote
them as vigorously as he might have done because of the personal
embarrassment he felt;
- He felt sensitive in developing the training,
consultancy and software product work of CAMs Ltd. This was because
he could have been perceived to be profiting from a position of
having an advantage over other suppliers, even though this was
the legitimate result of the original contract.
29. The Committee asked the NHS Executive about this
conflict of interest. The Executive accepted that the dual role
for Dr Read was a fundamental flaw. It had come about in the very
different climate that was prevailing in the NHS at that time,
because the Executive had wanted to pay a fair price while retaining
Dr Read's involvement in the project. They fully accepted the
criticism of the arrangement contained in the C&AG's report.[30]
They pointed out, however, that the C&AG's report did not
identify any actual abuse.[31]
30. In 1994, the Executive appointed consultants
to advise on the appropriateness of continuing the dual role.
While they found nothing to suggest that the arrangements were
intrinsically inappropriate, the consultants identified three
main risks, that the Centre might spend money on projects of primary
benefit to CAMS; benefit CAMS at the expense of competitors; or
promote CAMS.[32] They
concluded that it would be preferable if Dr Read did not
have dual roles in two closely related organisations, although
this needed to be considered alongside the benefits that ensued
to the Executive, in particular from Dr Read's continued involvement
in the Read Codes and their promotion through CAMS.[33]
31. The Accounting Officer admitted that had he known
about this report he would have acted at that time.[34]
However, he only became aware of the situation in 1996 after the
NHS Executive had received the first management letters from the
National Audit Office. He then stopped the arrangement. As a result,
Dr Read was no longer the Director of the Centre, although he
was being paid a salary for fulfilling a non-director role. [35]
And although CAMs had rights to market and distribute the codes
until 1999, the Executive would then put the process of marketing,
licensing and distributing the codes out to tender. The Executive
assured us that there was no direct or indirect conflict of interest
in the arrangements now in place.[36]
Conclusions
32. It is wholly unacceptable that the NHS Executive
put in place an arrangement that created such a conflict of interest
for Dr Read. Even though there is no evidence of actual abuse,
these arrangements placed Dr Read in an ambiguous difficult position.
We consider that the NHS should not employ people to develop or
promote goods or services in which they have a financial interest.
We expect the forthcoming guidance from the Executive to make
that clear.
33. We are disappointed that the Executive did not
begin taking remedial action to deal with the conflict of interest
until 1996, when the National Audit Office first raised their
concerns. We would have expected the Executive to have spotted
the potential for conflict at the outset, and certainly that the
Executive would have alerted the Accounting Officer to the issue
when consultants questioned the arrangements in 1996.
27 C&AG's report (HC 607 of Session 1997-98), paras
4 and 1.35 Back
28
Qs 43, 184-190 and Evidence, Appendix 1, pp 23-25 Back
29
Q223 and Evidence, Appendix 2, pp 25-26 Back
30
Qs 3-8, 39 Back
31
Qs 3, 99, 176-183, 191 Back
32
C&AG's report, (HC 607 of Session 1997-98) para 1.38 Back
33
C&AG's report, (HC 607 of Session 1997-98) para 1.39 Back
34
Q40 Back
35
Qs 40, 105 Back
36
Qs 96-103 Back
| 
