SCOTTISH Health Secretary Nicola Sturgeon has ordered an investigation into an NHS board's use of a private hospital to hit waiting time targets.

Auditors for NHS Lothian revealed the board's doctors had set up firms to secure NHS work farmed out to the independent sector.

This was creating a "conflict of interest" in which consultants and other NHS staff could benefit financially through transferring cases from the health service to Spire Healthcare's Murrayfield hospital. Patients are still being sent for treatment at Spire.

A spokesman for Sturgeon said she would be looking into the issue "as a matter of urgency".

The use of spare beds in private hospitals was a policy backed by former First Minister Jack McConnell's administration. It was introduced to overcome capacity shortages in the NHS and involved the health service paying the independent sector for operations.

However, the Scottish Government was hostile to the policy, believing it took money out of the NHS. Despite the reservations of Sturgeon, NHS boards have continued to make use of private hospitals in a bid to hit targets.

In 2008, a year after the SNP's first Holyrood election victory, NHS Lothian agreed a three-year contract with Spire to treat patients in its Corstorphine hospital. The budget was set at £3.2 million a year and included a 20% discount on Spire's standard tariffs.

In nearly all the cases, the consultants who dealt with patients at Murrayfield were employees of NHS Lothian.

The Sunday Herald can reveal the board's auditors launched an investigation into the policy after a hospital doctor raised concerns.

According to the report, the consultant was concerned surgeons and anaesthetists in his field "may be obstructing the efficient throughput of patients to promote the transfer of cases" to Murrayfield.

The audit concluded "these suspicions could not be substantiated", but it flagged up concerns about the policy's impact on staff behaviour.

"Conflicts of interest can arise as NHS Lothian staff can benefit through increasing the number of patients being transferred to Murrayfield in response to delays within NHS Lothian."

The report added: "While service and waiting list managers decide which patients are to be referred to Murrayfield, consultants and other clinical staff can still influence the volume of patients referred."

The auditors found consultants and other staff had formed commercial organisations to take on the cases sent to Spire. "Several groups of consultants have set up limited partnerships or companies that are employed by Spire to treat patients sent by NHS Lothian.

"In addition, some anaesthetists and nurses from NHS Lothian have set up their own limited partnerships or companies to contract their services either directly to Spire or to the consultants' limited partnerships or companies."

The report warned this practice could result in public money benefiting non-NHS staff. "Instead of restricting gain to self-employed individuals, the structure of limited partnerships and companies allows the partners or directors to share the benefits."

During 2008-09, the auditors noted NHS Lothian had spent £1.6m more than budgeted against the Spire contract. They claimed the private service also cost "significantly more" than treating patients in-house. This means the NHS has effectively been paying for its own employees to treat patients at a higher cost in a different building.

The report concluded: "The prospect of treating more patients privately could encourage less efficient practices within NHS Lothian."

Although NHS Lothian's three-year contract with Spire ended earlier this year, the board still sends patients to the private hospital. A spokesman for the Health Secretary said: "The NHS is for the benefit of the people, and Nicola Sturgeon will be looking into this issue as a matter of urgency."

NHS Lothian's chief officer Jackie Sansbury said: "This report from January 2010 was requested by the medical director in response to concerns raised by a member of staff. The audit team found no evidence to substantiate these concerns but did identify areas that could be improved and a number of actions were agreed.

"The three-year contract with the private sector expired in March 2011. Much of the activity that previously went to the private sector is now being accommodated within NHS Lothian."

Dr Lewis Morrison, chairman of the BMA's Scottish Consultants Committee, said: "As the report states, the allegations are unsubstantiated. BMA Scotland does not accept that consultants deliberately manipulate waiting times, but we would certainly not condone this practice if it was happening."

Spire declined to comment.