A review of NHS spending has discovered a damning catalogue of waste, including a hospital spending £10,000 a month by giving staff too many holidays, and managers routinely spending £1.50 a time on soluble tablets for liver failure when non-soluble versions could be bought for 2p each.

Lord Carter, who chairs the NHS Co-operation and Competition Panel, was commissioned by the Department of Health last year to examine the practices of 22 leading hospitals. The report, due to be published this week, finds that the NHS spends billions on inefficient processes and that better management of staff, rotas and shifts could save £400m a year.

Some hospitals could also save hundreds of thousands of pounds by reviewing their spending on latex gloves, aprons and medicine. Latex gloves costing £5.44 a box in one hospital are bought for £2.39 in another. Aprons cost one hospital £2.51 each, but another pays £4.20. Blankets can cost £17 or £25, he will report.

Carter also found that hip operations cost some parts of the NHS more than double the amount they should. This involved expensive prostheses that don’t last as long as cheaper ones, leading to patients needing earlier replacements and more follow-up care. The difference costs the NHS £17m extra a year. Meanwhile, a hospital was buying the soluble version of a liver failure tablet at £1.50 each, compared with 2p a time for the solid version. By using the soluble version only for children and patients who have trouble swallowing, it can save £40,000 a year.

Carter will say that by making better use of staff, using medicines more effectively and getting better value from the huge number of products the NHS buys, billions a year could be saved by 2020. He will also suggest that by cutting the number of product lines from more than 500,000 to fewer than 10,000 and being better at procurement, it could save up to £1bn by 2020.

Carter said: “I’ve been surprised by the variation in performance in getting the very best care for patients and delivering value for money within the NHS. It’s clearly the case that some of our hospitals are the envy of the world in terms of both quality and performance – so what we must do now is resolve to bring all providers up to the standard of the best.”

The peer, who was elevated to the Lords by Labour, will publish an interim report this week, and shortly afterwards will publish a template for an efficient “model hospital”. For the first time, he will publish a measure of efficiency in every hospital – which will be called the Adjusted Treatment Index. By September, he and the Department of Health will set out what each hospital is expected to save by putting in place the report’s recommendations.

Health secretary Jeremy Hunt said: “Hospitals should focus their resources on patient care by ensuring that they aren’t paying over the odds for basic items. The NHS has huge purchasing power as the world’s single biggest buyer of healthcare products, so we should be driving for the best-value deals every time.”