A key provider of non-emergency call service says it wants to pull out of 'financially unsustainable' contracts

The government has insisted the "flaws" in its new NHS 111 helpline will be overcome, as one of the main providers for the service prepared to pull out of all its contracts because it considers them "financially unsustainable".

NHS Direct, which had already withdrawn from operating the non-emergency phone service in north Essex and Cornwall, announced on Monday that it was seeking "a managed transfer", including of frontline and other staff, related to nine other contracts.

It said it would "provide a safe and reliable … service until alternative arrangements can be made by commissioners".

The organisation originally won 11 of the 46 contracts to provide the 24-hour service in England. It had put a value of £43m a year on the contracts, but says its predicted income is £21.2m.

In the west Midlands and north-west England NHS Direct is handling 30%-40% of calls, with other calls referred to GP out-of-hours services or a contingency 0845 service. It has needed far more staff than expected.

The Department of Health said: "We know that NHS Direct has struggled to meet the standards required." But it insisted that most of the country was getting a high-quality service: "It makes obvious sense that, for many patients, accessing the NHS by phone is often the quickest and easiest way to get advice and speak to a doctor or nurse when needed. So of course it's disappointing that there have been problems with its implementation. But these are flaws that can and will be overcome."

The NHS 111 line for urgent but non-emergency care has been riddled with controversy since it began on 1 April. Last month the British Medical Association (BMA) called for an independent inquiry into the "disastrous" rollout of the service.

A Channel 4 Dispatches investigation to be screened on Monday night found staff shortages, long waits for callers to be connected, and in some cases ambulances being called out unnecessarily.

NHS England said it would support commissioners of NHS 111 services to find alternative providers to take over NHS Direct's contracts. It said callers in the areas currently served by NHS Direct would continue to receive a "prompt and safe service".

Local GP-led clinical commissioning groups were "actively discussing with a range of potential providers the best way to continue providing a high-quality 111 service for patients", NHS England said.

Dame Barbara Hakin, deputy chief executive of NHS England, said: "Over 90% of NHS 111 calls are now answered in under a minute and patients are rating the service highly. Our immediate focus is to ensure that this level of service and improvement is delivered consistently.

"We have been in discussions with NHS Direct for some time over this issue and they have assured us they are committed to continue to provide services. We are also having constructive discussions with a number of potential new providers who could take on these contracts, specifically with the local ambulance trusts, who have experience and a strong track record in provision of similar services."

She said a full 111 service would be available throughout the transition: "The public should not feel any detrimental effects of changes in the providers of the service. This decision has been taken by all parties to make sure that 111 delivers a sustainable high level of service to all callers in the years ahead."

She said NHS Direct's contracts would "come to an end in a planned and managed way throughout 2013-14".

NHS Direct says it has nearly 600 NHS staff (465 full-time equivalents – FTEs) operating its 111 services, plus about 415 FTE agency workers on hand to cope with peaks in demand.

Dr Chaand Nagpaul, chair of the BMA's GP committee, said: "The implementation and planning of NHS 111 has been an abject failure. NHS Direct struggled to cope with the volume of calls it was receiving, despite having years to plan for the launch of NHS 111. Other already overstretched services, such as GP out-of-hours providers, have had to step in and undertake the workload that was supposed to be dealt with by NHS 111."

Nagpaul said NHS Direct's plans to withdraw from 111 revealed "worrying flaws" not just in the tendering process but in how contracts were awarded and monitored throughout the NHS.

"The Department of Health gave the BMA written assurances that there would be strict safeguards in place to ensure that NHS 111 providers would have the clinical and financial ability to deliver a safe, effective service to patients." Concerns about the low nature of some of the successful bids were ignored, Nagpaul said.

Peter Carter, chief executive of the Royal College of Nursing, said: "A locally commissioned, fragmented system may simply not be able to provide the high standard of service and advice that patients need. We remain concerned that patient care may suffer if the person who takes calls is unable to quickly and easily access clinical expertise or escalate relevant calls to senior staff who are able to make decisions about the care needed."

Downing Street admitted there had been problems with the start of 111 but said performance and patient satisfaction were now high. A spokesman said David Cameron was "confident that we will continue to push up standards and deliver a high level of service for patients across the country".

The Dispatches programme, NHS Undercover, reveals the findings of two reporters posing as trainee call handlers who secretly filmed at centres run by the private healthcare company Harmoni, which has a third of the 111 contracts in England.

Dispatches said the footage, shot at branches in Dorking, in Surrey, and Bristol, revealed "serious failings in the system". Its reporters found many patients were left waiting for longer than the 10-minute target for a callback from a clinician, and some workers who were not clinicians were filmed giving medical advice to the undercover journalists.

They also uncovered concerns about training and staff shortages and fears that the system was leading to unnecessary callouts for ambulances, putting additional pressure on an already stretched A&E service, Dispatches said.

One Harmoni call centre manager was secretly filmed admitting: "We had a very bad service. Realistically, on the weekends we still are unsafe. We don't have the staff to deal with the calls that are coming in."

Harmoni, which runs 11 contracts on its own and works with South East Coast Ambulance Services on a 12th, made no comment on whether it would bid for any services run by NHS Direct. It said it would investigate any specific concerns raised by Dispatches: "Our staffing levels are extremely robust, with around one clinical adviser to every four health advisers. Staffing levels are agreed and shared with local commissioners and NHS England and are reviewed weekly.

"While it has been acknowledged that NHS 111 services generally did not get off to a good start, we and other providers have successfully delivered substantial improvements, including recruiting 180 more advisers."

The nine NHS Direct contracts affected by the latest crisis cover Somerset, Buckinghamshire, east London and the City, south-east London, Sutton and Merton, West Midlands, Lancashire and Cumbria, Greater Manchester, Merseyside and Cheshire.

The trust running NHS Direct worked on the pilot of the 111 line based on a cost of £13 for each call to cover staff salaries and other costs. But in its annual report for 2012-2013, it said that when the first 111 contract was awarded in the north-east of England, local commissioners said they would not pay more than £7.80 per call.

"This was extremely challenging for the trust as it was far below the cost of the pilot 111 services that the trust had experience of, and was substantially below the level of cost that the trust had modelled as its future 111 service proposals." NHS Direct said it had submitted a bid to provide the service at a higher cost per call, and lost out on the contract.

Its board later bid for contracts on the basis of costs of £7 to £8 per call. It was awarded 11 contracts, covering 34% of the population in England. Harmoni operates the service in 12 regions, and other contracts went to local ambulance trusts and social enterprises.