Its the IT contractors that have the problem
This will have nothing to do with what the NHS thinks and a lot to do with whoever the contractors are (perhaps Americans?).
I have worked in several NHS organisations and if somebody mentioned blurring out 'offensive' bits of the human body they would be laughed out of the job. The NHS employs large numbers of people to deal with sexual health issues most of whom carry around a variety of life sized penis dummies (in a variety of skin colours) and litter the place with condoms like confetti at a wedding so I can't see anybody worrying about a few wobbly bits in a cartoon mockup of the body.