Leicester Royal Infirmary faces losing funding for ambulance handovers which take too long.
A new penalty will see the hospital docked £200 every time it takes the accident and emergency department more than 30 minutes – double the target time of 15 minutes – to take on a patient from an ambulance crew.
If the delay is 60 minutes or more, the penalty will increase to £1,000 per patient.
East Midlands Ambulance Service (Emas) also faces a £20 penalty every time it takes a crew more than 30 minutes to get back on the road after they have handed over their patient.
The financial penalties will be taken from funding provided by the Leicester City Clinical Commissioning Group (CCG), which oversees performance at the city hospitals.
Simon Freeman, Leicester CCG managing director, said: "Too many patients experience unnecessary delays in receiving the care they need when arriving at hospital in an ambulance.
"That cannot be right. It is distressing for patients and lacks essential standards of care.
"We are working with NHS partners to make the necessary improvements to address the issues, so these penalties do not become an issue.
"These potential contractual penalties will hopefully act as a further incentive to make changes now for the benefit of patients."
A working group comprising the county's three CCGs, Leicester's hospitals and Emas has been set up to come up with a plan to meet the target.
Leicester's hospitals have three months to improve performance before the penalties are imposed.
Phil Walmsley, head of operations at Leicester's hospitals, said: "We are no worse than a lot of places and are doing better than a lot.
"We have also changed a lot of our processes."
It is estimated that if the penalties had been imposed in the past year, Leicester's hospitals would have missed out on about £1 million.
Special sensors are due to be fitted on doors to the accident and emergency doors at the infirmary to give an accurate monitoring of waiting times.
Latest figures from Emas show the Infirmary kept 138 patients waiting more than an hour during February – the highest number in the region.
