Fraud is costing the NHS £5bn a year, with a further £2bn lost to errors, the former head of its anti-fraud section says.
The amount lost to fraud alone could pay for nearly 250,000 new nurses, a report seen by Panorama suggests.
The NHS must “get on with tackling the problem”, said Jim Gee, co-author of the Portsmouth University study and ex-director of NHS Counter Fraud Services.
The Department of Health said it “did not recognise” the figures.
The amount estimated by Mr Gee, who led the NHS anti-fraud section for eight years, is 20 times that recorded in the government’s annual fraud indicator report.
“We need to not be embarrassed, or in denial, about the possibility of fraud taking place in the NHS,” said Mr Gee.
“We need to get on with tackling the problem, minimising its cost, maximising resources available for proper patient care.”
Jim Gee, report co-author, explains how the figures in his report were calculated
The report, by the University of Portsmouth and accountancy firm BDO, is due to be published on Tuesday.
It found that the biggest areas of fraud are in payroll and procurement budgets.
For example a consultant doing private work on NHS time or procurement wise; an optician charging for glasses which the patient never received or needed.
The £2bn cost of errors relate to when the NHS makes overpayments by mistake to suppliers or staff.
Although the NHS has a budget of about £100bn, it is having to make significant savings and should prioritise fighting fraud, said Mr Gee.
“I think fraud is one of the last great unreduced healthcare costs. And to me, putting money into it makes absolute sense,” he said.
“It’s one of the least painful ways of cutting costs. It makes absolute sense to cut the cost of fraud before you cut the quality, or extent of patient services.”
Mr Gee left the NHS’s Counter Fraud Service in 2006 and has spoken out now because of the publication of the report.
He reached the £7bn figure by basing his research upon loss measurement exercises looking at the total cost of fraud.
Mr Gee says it is the most rigorous data that’s available about healthcare fraud in the world.
He believes his figure is so much higher than the government’s because their annual fraud indicator report only relates to pharmaceutical and dental services, and does not include losses taking place in payroll and procurement expenditure, for example.
The Department of Health declined to be interviewed but in a statement said “it did not recognise” the figure or “speculate on levels of losses”.
Panorama also found that NHS Protect, the national body that investigates fraud in England for the Department of Health, has had its budget cut by around 30% since 2006.
The operating budget for NHS Protect in 2013-14 is £11.38m, the equivalent budget in 2006-07 was £16.29 million.
NHS Protect has replaced NHS Counter Fraud Services in England.
A Freedom of Information request by the BBC shows that NHS Protect employs 27 counter-fraud specialists, with a further 294 investigators working at a local level.
By contrast, the Department for Work and Pensions employs six times the number of investigators – but if Mr Gee’s figures are accurate, they face less than half the amount of fraud.
The Department of Health said NHS Protect had a “significant budget” and “protects and safeguards frontline NHS services”.
NHS anti-fraud teams investigate cases ranging from hundreds to millions of pounds.