The NHS has set aside £787m this year to cover the cost of compensation claims
Escalating fees from no win, no fee solicitors are hitting NHS patient care, the BBC has been told.
Steve Walker, chief of the NHS Litigation Authority, said payouts for compensation claims and lawyer fees could only come from the NHS's budget.
And the BBC has also learned that a law firm acting for parents in the Alder Hey organ retention case tried to claim nearly £4.5m in costs from the NHS.
Lawyers argue costs rise because the NHS takes too long to settle claims.
Mr Walker said the NHS was facing an increasing number of claims from no win, no fee solicitors arguing these were more attractive propositions for claimant and solicitor.
The rising cost of litigation means the NHS has had to put aside a record £787m this year to cover the cost of claims.
Last year, solicitors suing the NHS received more than £91m in costs - nearly three times as much as solicitors acting for the NHS.
Mr Walker told BBC Radio 4's File on 4: "The present system means there is too great a drain on public resources largely for the benefit of... claimant solicitors who are effectively recovering at a rate of perhaps as much as four times what we would pay our solicitors for doing the same quality of work."
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Listen to File on 4, BBC Radio 4 2000 BST, Tuesday 30 June 2009, repeated 1700, Sunday 5 July 2009.
Mr Walker added, "There is only one source of money for the NHS....we have to pay claims from money that would be spent on patient care."
Law firms can earn substantially more in fees than their clients get in damages.
Documents obtained by File on 4 outline the disparities. In just one of many such cases a successful claimant was awarded £5,000, but their solicitor received £56,000. Another claimant received £7,000, their solicitor over £77,000.
File on 4 has been told that no win, no fee solicitors have charged as much as £800 pounds an hour and the programme has seen bills where a law firm charged more than £700 because their train was delayed and another charged £26 to "consider the arrival of a letter".
However medical negligence lawyer Russell Levy claimed that legal costs can rise because the NHS drags cases out.
"They hope the harder they make it and the more they discourage people, they will go away," he said.
He claimed the NHS lawyers often left settling cases until they were on the verge of a court hearing.
"By the time they accept the inevitable, it costs much more than it should."
The NHS is currently facing 6,000 plus medical negligence cases of which half are from no win, no fee solicitors.
If an NHS trust believes a costs claim is excessive it can challenge the costs at a hearing before a costs judge.
Mr Walker told File on 4 in one case the NHS decided to fight a claim for £4,479,957.06 submitted by Liverpool firm E Rex Makin which had been working on behalf of parents in the Alder Hey organ retention scandal.
"We told them we wouldn't be paying and began at considerable expense to prepare for a hearing," he said.
After two months of negotiation the law firm agreed to accept £430,000 settlement.
E Rex Makin said the submitted bill included all items of work for which its solicitor believed he was entitled to recover payment.
The firm said its bill was never assessed by the court and the negotiated settlement that was reached with the Health Authority's solicitors reflected a number of technical arguments that were raised over the costs claimed.