Arriva has payment withheld because Leicester patient transport service misses targets
Health bosses have withheld payment of £4,434 from the company responsible for ferrying patients to and from hospital.
Officials said they had kept back the cash because of the poor performance of Arriva, which failed to meet all its performance targets in October.
The company, which took over the service from East Midlands Ambulance Service in July, winning a £31.3 million, five-year contract in Leicestershire and Rutland, has been told it will get the money if it meets its targets for at least three months.
Simon Freeman, managing director of Leicester City clinical commissioning group, which manages the contract, said: "Improvements in performance are being seen.
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"However, performance is still not at the levels set in the contract and in October contract penalties were triggered for under-performance."
Arriva failed to get enough patients to hospitals within an hour of the appointment time or to collect them from outpatient appointments within an hour of the requested time.
It failed to collect enough patients being discharged from hospital within two hours of the requested time.
Journeys for patients living more than 35 miles from hospital took too long and there was concern about the number of people who tried to ring the service but then abandoned the call.
Mr Freeman said: "Arriva's remedial action plan is on track and performance is forecast to be recovered by the end of December."
Arriva has faced a barrage of criticism since taking over the service – and was told to improve by the health watchdog, Care Quality Commission.
Its inspectors found patients were often picked up late, there was no proper plan for cleaning ambulances and that new staff were allowed to start work before Criminal Records Bureau checks were completed.
Agnes Greensmith, of Rowlatts Hill, Leicester, waited nearly four hours for transport home from Leicester Royal Infirmary in October.
The 93-year-old, who suffers from chronic conditions including diabetes and angina, said: "I hope this will give the company the incentive to improve.
"I am supposed to be going back to the hospital but I am putting it off because of the risk I will have to sit there waiting for hours to get home."
Ron Jenkins, of Wymeswold, who missed an appointment at Loughborough Hospital because his lift from Arriva failed to turn up on time in October, said he was pleased action had been taken.
The 75-year-old said: "The contract should be taken away from Arriva altogether.
"The company should concentrate on buses and leave ambulance services to others.
"I wrote and complained and have still not even received an acknowledgement."
Zuffar Haq, of Leicester Mercury Patients' Panel, said: "I have been asking for some time what sanctions might be imposed on Arriva.
"I am glad these have now been applied and I hope it will focus the minds of Arriva on providing a better service."
Arriva declined to comment.