In the first of a series on NHS outsourcing, Felicity Lawrence and Ian Griffiths report on fears that cost cutting at a private out of hours GP service is putting patients' health at severe risk

When Dr Fred Kavalier, the former clinical lead at Harmoni, resigned in January 2011, he forwarded to the senior management concerns raised by a Harmoni GP who warned that cuts in the service had led to "dangerous" pressure on appointments. The GP feared this "could lead to mistakes being made … the current system is putting patients' health at severe risk".

The GP drew attention to other cases: "Five-year-old boy whose mother rings at 11pm, no appointments left at any of the bases [which] now finish at 11pm instead of midnight and are generally booked all night …

"Mother requesting a home visit but none available as there were 12 visits already tagged on the system …

"One newborn with diarrhoea and vomiting and almost zero oral intake for three days waiting 90 minutes to be seen as 'urgent' at St Pancras …

"A patient from Uxbridge bringing her child to be seen overnight at St Pancras as the only base open as pool is shared across Harmoni's London network, despite taking 90 minutes to drive there …

"A 13-year-old with shortness of breath and wheeze wrongly classified as 'routine', mother rang at 11.47, was rung back at 15.23, next appointment available at 18.00 at Whittington, child then waiting over an hour to be seen by which time he was taken straight into A&E due to extreme difficulty breathing."

Nonetheless, Harmoni won the latest tender for the out of hours GP service in north central London. Documents seen by the Guardian show that other shortlisted bidders outscored it on quality, but Harmoni was cheaper.

Medics critical of the company allege it has cut costs to the point of making the service unsafe. Local doctors' representatives have also raised concerns that the NHS commissioning body responsible for the private contracts does not have the capacity to award or monitor them effectively.

The North Central London primary care trust was formed in April 2011, when five local PCTs covering the London boroughs of Barnet, Camden, Enfield, Haringey and Islington were required to merge as part of the government's health reforms.

The number of health managers for the area has been cut by more than half, with many staff – including those with financial and contract expertise – leaving the service.

Dr Paddy Glackin, who was until this summer secretary of the Local Medical Committee of GPs in the area, said the re-awarding of the out of hours GP contract to Harmoni was met "with almost universal dismay among local GPs".

His comments are supported by interviews conducted by the Guardian with several other local GPs, who also claimed records of patient contact received from Harmoni were inadequate; that decisions about treatment appeared to them to be made on the grounds of cost and payment rather than clinical need; that their patients were regularly told inappropriately to go to A&E or to clinics; and that home visits that should have been made were not.

Harmoni absolutely rejects this. In a statement it said its "safety record, incidents, complaints, response times to patients and rota fills all indicate a safely run service. We categorically deny that Harmoni would ever refer patients to another service for financial gain; all referrals are made on clinical need."

The PCT and Harmoni said the company had met all the quality requirements in its bid for the new contract.

Harmoni says it is able to deliver high quality services for a lower cost than other providers because it specialises in out of hours care: "Because of this we are more operationally efficient than smaller providers … We refute entirely any suggestion that we have cut costs in a way that compromises the quality of the service."

The PCT told the Guardian the joint working of the five former PCTs had been a success and had reduced duplication and streamlined working.

Harmoni was formed as a joint venture between the ECI private equity group and a GP co-operative in 2005; its then £3m-a-year turnover grew to £100m in 2011. It began as a company through which GPs in Harrow could provide out of hours services to their patients, grew to provide a deputising service for several other London boroughs, and then attracted private equity investors.

Its spectacular growth has been won by bidding for the sort of NHS and government contracts that have typically been seen by the private sector as bridgeheads into the market for outsourced public services. It has provided healthcare for prisoners and victims of sexual assault, IT services, some walk-in health centres, and a referral management service of the sort increasingly used by PCTs to double-check, and in some cases weed out, GPs' referrals to hospital specialists before they go ahead, as well as out of hours GP services under contract to swaths of London and southern England, including Buckinghamshire, Essex, Hampshire, North Somerset, Suffolk, Surrey, Warwickshire, West Sussex and Worcestershire.

It has recently won 12 NHS contracts – a quarter of the total available – for the national 111 service for patients, due to be introduced next spring. The 111 system aims to cut NHS costs by reducing the number of patients ending up at overstretched A&E departments.

The public will be able to dial the single number to get through to call handlers who will assess their case and redirect them to the most appropriate care, whether that be expert telephone advice, a GP out of hours or community service, an appointment at an urgent care clinic or an ambulance. Harmoni will provide the service for the NHS in several London areas and across counties in East Anglia and the south-west.

The Harmoni accounts for the year ending March 2012 reported that the operating company, HWH Group, was "ahead of plan". It required £2.7m of new cash from investors to keep it going, but had cut its losses from £1.6m the previous year to £1.4m, and reported implementing "cost-saving measures".

One step up the corporate structure, with its complex shareholdings designed to make sure the private equity partners had first call on any repayments of debts, things were not looking so good.

A loss of £9m, in part due to the interest payments on its debt to the ECI partners, had sent its net assets tumbling to just £2m. The company could only be treated as a going concern because the private investors agreed to waive and roll up the interest payments owing to them. They made clear, however, that they were doing so for a further 12 months only on the assumption that a sale would repay their debt in full.

A sale of the operating company duly followed. Although the company was not making money, the NHS contracts it had won, with their guaranteed income and cashflow from taxpayers, had considerable value. It was announced that Care UK – another private health company, owned by private equity partners Bridgepoint – had acquired Harmoni for £48m on 6 November, just three days after the death of a baby at the Harmoni-run clinic at the Whittington hospital in north London.

ECI took £20m, or 40% of the sale price, and GPs who had owned the rest of the shares since its co-operative days became millionaires. ECI said in a press release that it was pleased with its successful exit from the investment.

The Guardian asked where any profits, due to a series of separate partnership companies, would fall for tax purposes. It said that ECI was UK resident.

The firm acquiring Harmoni and its NHS contracts, Care UK, was acquired by the Bridgepoint private equity fund in 2010 for £423m. It runs more than 50 primary care health services, mental health services and about 90 care homes across the country. More than 90% of its revenues in 2012 came from the UK taxpayer.

The company attracted controversy in 2010 when it emerged that its then chairman, John Nash, had funded Andrew Lansley's private office in the runup to the general election.

Lansley, the shadow health secretary, was at the time drawing up his plans for reform of the NHS, including measures that would open the health service further to the market and private contractors such as Care UK.