Cash-strapped hospitals face fines for treating too many patients, under new Government plans designed to tackle the NHS financial crisis.
The Department of Health has introduced the tough regime to stop hospitals spending too much money.
It comes after Ministers admitted hospitals and health trusts in the West Midlands were set to run up a combined deficit of #74 million.
It will be the second consecutive financial year that Midland health services have accumulated massive debts, after they went into the red by #116 million in 2005/06.
Hospitals are commissioned by local Primary Care Trusts to carry out treatment, but the most efficient are able to treat more patients than agreed by cutting waiting times.
This helps the Government meet targets, but also means that PCTs are forced to pay more – fuelling overspending and deficits.
Hospitals will be expected to meet a target of treating patients within 18 weeks of GP referral by the end of 2008, and may be fined if they fail.
But it has emerged that they could also be fined if they treat patients too quickly.
Local health managers have been given the authority to decide if a financial penalty should be imposed. Health Minister Andy Burnham said: "It is a tool we have made available to PCTs. We are not saying they would have to use it."
Last month the Department of Health warned that a number of West Midland PCTs were set to end the financial year over budget.
East and North Birmingham PCT has a predicted overspend of #3 million while South Birmingham PCT has a predicted overspend of #1.9 million.
Worcestershire PCT is set to overspend by #16.2 million while Coventry Teaching PCT has a predicted overspend of #10.5 million.
South Western Staffordshire has a predicted overspend of #4.9 million and Shropshire PCT #4 million.
City Hospital in Birmingham overspent by #5.7 million last year, but will break even this year after axing 566 posts.