The NHS could free up £480 million a year to reinvest in services if trusts filled temporary vacancies with workers from a "staff bank" instead of using expensive staffing agencies, a report has said.
Temporary employees supplied by agencies, including doctors and nurses, cost on average 20% more than those from the NHS's staff banks, despite doing the same job.
NHS Improvement called on all trusts to take a "bank-first" approach to recruiting temporary staff, and only use agencies as a last resort.
It said bank staff tend to come from internal pools of workers who are already employees of the NHS trust and have agreed to work flexible shifts.
As bank staff generally work within the trust, their use increases the likelihood of a patient being treated by the same healthcare professional throughout their care.
The five most expensive locum doctors cost the NHS more than £2 million a year.
One agency has been charging up to £480 an hour for one consultant and £200 for a further five, compared with £76.10 which is what the NHS would expect to pay if they came from the trusts' own banks.
More than 150 locum doctors have been working at the same trust for more than two years, with 14 at the same trust for over five years. Almost 340 nurses have been reported as having worked over two years at trusts, it said.
The NHS has cut spending on agency workers by £1.2 billion, or a third, since NHS Improvement introduced a cap in 2015.
Improvements to rostering and new options of flexible working hours have meant fewer staff feel the need to join agencies.
Last year spending on bank staff was higher than for agencies for the first time in several years, leading to a £528 million reduction in agency spending for the NHS.
But the improvement agency said the NHS is still missing out on significant savings which could be used to improve care for patients.
It has set all trusts in England a target of reducing agency costs by 17% for 2018/19.
NHS Improvement chief executive Ian Dalton said: "Trusts have made fantastic progress in reducing spending on expensive private agency staff over the last three years.
"These savings mean more money for other vital NHS services and ensure every penny the NHS spends counts.
"But there is further progress to be made. Bank staff cost the NHS less than agency staff and could improve a patient's continuity of care.
"That is why we want trusts to take a bank-first approach, and only use agency staff as a last resort.
"Temporary agency workers play an important role in ensuring staffing numbers remain at a level that provides the best possible care for patients and gives them the opportunity to work flexibly.
"But an over-reliance on high-cost private agencies when there are other options available is not good for patients or for the NHS's finances."
The price cap introduced by NHS Improvement means providers should not spend more than 55% above the basic rate for a staff member.
Any agency shift which costs more than £100 an hour must be signed off by the trust's chief executive and reported to NHS Improvement.
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