The money will be returned to Worcestershire Acute Hospitals NHS Trust once it starts hitting the target again, but if the poor performance continues, it could end up costing the trust about £5 million a year.

A national target set by Government stipulates that at least 95 per cent of patients must be seen within four hours of arriving at A&E.

Simon Hairsnape, managing director of NHS Worcestershire, the organisation that holds the purse strings for county healthcare, said Worcestershire Royal Hospital had not hit that target since April.

“NHS Worcestershire was obliged to issue a contract performance notice earlier this year,” he said. “Performance has still not improved and the contract now entitles NHS Worcestershire to withhold two per cent of the monthly contract income, circa £400,000, until such time as the target improves.

“To put this in context, the total income from NHS Worcestershire is about £250 million.

“NHS Worcestershire regrets that this action is necessary but has an absolute responsibility to ensure that local people receive the highest quality services possible.

“Arrangements have been made to ensure that this action does not in any way impact on the care provided by the trust.”

It has already reported that A&E performance has nosedived, even though the target was relaxed from 98 per cent to 95 per cent by the coalition Government.

Just 87.9 per cent of patients at Worcester’s hospital were seen within four hours in September.

So far this financial year, only 93.3 per cent of patients (68,953 out of 73,893 people) have been seen within four hours across the trust, with poor performance at the Royal dragging down the figure.

The Alexandra Hospital in Redditch hit the target in August and September.

Chris Tidman, the trust’s director of finance, declined before the to say where the money would come from to provide for patient care if NHS Worcestershire withheld the cash.

He said: “The trust is working hard to achieve the four-hour A&E waiting time target and has put in place a number of changes in recent weeks in terms of how it manages its beds and staffing that should soon begin to take effect.

“Furthermore, given that the demand going through the A&E at the Worcestershire Royal Hospital was up by 10 per cent on the previous October, it is also important to recognise that primary care and community services have the right capacity in place to ensure that A&E services are only used when absolutely necessary.

“Therefore, a joint action plan has been agreed to ensure a whole health system response over the winter period, which it is hoped will avoid the need for any contractual penalties.”