West Herts Hospitals Trust is set to be fined around £500,000 a month - because waiting times are too high.
According to NHS targets 92 per cent of patients should receive treatment within 18 weeks of referral.
But at West Herts Trust - which runs Watford General, St Albans City and Hemel Hempstead hospitals - the latest figures show just 85 per cent of patients have been seen within that time.
And around 92 patients have been waiting for more than 52 weeks.
Now Herts Valleys Clinical Commissioning Group (CCG), which oversees healthcare across the area, is set to impose financial ‘sanctions’, of around £500,000 a month.
The first of those fines - relating to performance in April and May this year - has been set at £888,000.
Further fine will follow once data has been verified between the trust and the CCG.
And they are expected to continue until the Trust reaches the 92 per cent target level.
Don Richards, chief financial officer said: “We have received notification from Herts Valleys CCG of their intention to apply fines for April and May of this year for our underperformance against national treatment targets.
“We also anticipate notification of further fines for this year.
“We are in discussion with the CCG about how this money could be used to good effect to alleviate elective and emergency pressures at the trust.
“However, once levied, these fines will worsen our financial position.”
According to a report for the meeting of the HVCCG board on Thursday (November 8), the current waiting lists partly reflect the suspension of elective and routine surgery - between January and March - to cope with winter pressures.
Since then the Trust has built up a “considerable backlog” - including 92 patients who have been waiting more than 52 weeks.
Most of the patients who have been waiting 52 weeks or more are said to have complex needs and are likely to need ITU following surgery.
They are concentrated in orthopaedic, ophthalmology, ENT and general surgery. And so far six have been judged to have suffered “minimal harm” as a result of the delay.
No patient has been judged to have suffered ‘moderate’ or ‘severe’ harm due to waiting.
According to the HVCCG board papers, as part of a drive to cut the waiting lists, additional beds at Watford General have been ring-fenced for elective surgery - including seven for orthopaedics.
St Albans City Hospital is being used to treat more complex patients. And some patients are being treated by other providers outside the NHS, including One Hatfield, the Spire Group and The Wellington Hospital.
Meanwhile a number of patients - who have been waiting for more than 18 weeks but not yet had an out-patients appointment - are likely to be listed with other providers.
To support the Trust, the board papers say the HVCCG is funding a programme manager and administrators to support the outsourcing, by contacting patients and dealing with the clinical handover.
The CCG is also auditing waiting lists to see if patients meet the so-called ‘low priority low threshold procedures (LPTP) criteria’.
At the meeting of the board CCG chief executive Kathryn Magson said the position at WHHT was “quite serious”.