My Brother's partner used to work for the new Norfolk & Norwich Hospital in Norwich as a Nurse Manager in Oral Oncology. When the hospital was opened it was partially funded by the private sector and the government. It was agreed, contractually to do X number of operations during the year, because they exceeded that number, they were fined something like £1.7 million. To most people that sounds ridiculous, me included.
What I have worked out is, there is a central pot of money from which hospitals and GPs get funded. If there is a fine to pay like the above, that money gets removed from the contractual funding agreement for the following year. I don't think they have to pay out the money there and then, but I could be wrong.
I agree with Brian, the only loosers are the end users, i.e. us. Not sure what we can do about it though. I personally believe there are too many layers of management in the NHS and its about time it was reduced, but unfortunately its always the front line services that cut.