The leaked report, which was prepared by Winston Roddick, the Counsel General, said the procedure was "flawed" and that reforms were needed.

Negligence claims are paid from a central pool

It also said the body which handles claims on behalf of the NHS - the Welsh Health Legal Service - was no longer fit for its purpose.

At present, health authorities and trusts in Wales all contribute to a central pool - or "risk pool" which pays out on medical negligence claims.

As the number of succesful claims increases, so does the money needed to pay for them.

This year the authorities and trusts will contribute £47m to the pool - an increase of £29m on the previous year.

The Welsh Health Legal Service - a specialist team of clincial negligence lawyers - deals with claims on behalf of the NHS in Wales.

But according to the Counsel General, this system needs to be overhauled if it is to become "fairer, swifter and less expensive".

Alternatives

The report highlighted weaknesses in the current system as a flawed accountability structure, a lack of senior legal supervision, no system of auditing the quality of work and poor remuneration and career prospects for lawyers and other staff.

Poor communication between the Welsh Health Legal Service and the Welsh Risk Pool was also highlighted.

A second report explored alternatives to the current system and recommended that the NHS in Wales adopted a system called Alternative Dispute Resolution used in other parts of the UK.

It also recommended a fast track scheme to resolve clinical disputes worth between £10- £25,000 should be piloted.

According to an assembly spokesperson, the recommendations of the report are being considered.

Earlier this year, in April, a report by the National Audit Office suggested the NHS is currently facing a £4.4bn legal bill for medical negligence claims - up from £2.8bn two years ago.