TORONTO - Ontario's cash-strapped government reversed some earlier fee cuts that were supposed to save $340 million a year to reach a new agreement with the province's doctors, Health Minister Deb Matthews announced Tuesday.

The tentative fee agreement with the Ontario Medical Association, worth $11.1 billion a year, adds $100 million to the total compensation package for doctors but includes savings in other areas to completely offset the increase, added Matthews.

"I’m very, very pleased that we were able to sit down with the OMA and really work with them in a very serious, deliberate fashion to meet our fiscal mandate," she told reporters.

"Yes, there is a little bit more in the physician services envelope, but every penny of that is offset by system savings that doctors control."

The $100 million won't even cover the fees for the 600 new doctors who set up shop in Ontario each year, added the minister.

The two-year deal provides increased payments for lumbar spine X-rays, CT scans and doctors' home visits to seniors, as well as reversing six of the 34 fee cuts the government made in May for such things as an after-hours premium, a flat fee for anaesthesia and self-referral fees.

"We were prepared to listen to doctors, and if they had a better way of achieving the same objective we’re prepared to work with them," said Matthews.

"I didn’t want to get stuck in a position where I was so entrenched in my perspective that I wouldn’t listen to doctors."

The OMA had launched a court challenge of the fee cuts announced last spring, but said Tuesday it was pleased the government agreed to reverse some of those cuts.

"I think through creative thinking we have achieved a number of new ideas in terms of finding savings that are evidence based that will make the health care system more sustainable, and at the same time will allow the physician services budget to increase," said OMA president Dr. Doug Weir in an interview.

"So in that way it’s respectful of doctors and will be good for patients."

The Progressive Conservatives lashed out at the Liberals for not sticking to the fee cuts announced in May, and complained they can't ask questions about the OMA deal in the legislature because Premier Dalton McGuinty prorogued it until sometime next year.

"This is what a flailing, failed government looks like," said Opposition Leader Tim Hudak.

"They make one announcement and then months later backpedal. I wish the house were in session right now so I could ask questions of the premier to find out exactly how much more this is going to cost taxpayers."

The NDP said the Liberals were sending the wrong message to other public sector workers, including teachers and members of the Ontario Public Service Employees Union, who started negotiations Tuesday with the government on a wage freeze.

"They’ve negotiated what appears to be an increase for doctors," said New Democrat house leader Gilles Bisson.

"What does that mean for other negotiations, if you’re a teacher or somebody with OPSEU or anybody else, what does that mean for expectations? I think what this government is doing is essentially creating a mass amount of confusion."

Bargaining teams for 36,000 OPSEU members sat down Tuesday with government negotiators for the first time. OPSEU has joined CUPE and two teachers' unions in launching a court challenge of the Liberals' bill that would freeze the salary of most teachers, saying it infringes on collective bargaining rights.

The agreement with the OMA is scheduled to be voted on by 25,000 doctors next month.

Matthews said it does meet the province's objective of freezing the wages of all public sector workers for two years to trim a $14.4-billion deficit.

"We can characterize this as a real wage freeze," she said.

"This was a true partnership, Ontario’s doctors sitting down with the government and figuring out how to provide better care given our difficult fiscal circumstances."

Talks between the province and the OMA resumed in September after breaking off when the government made regulatory changes to cut Ontario Health Insurance Plan fees and premiums.

"You will know we had some difficulty at the outset when it came to negotiating an agreement with our doctors, but I'm proud to report that we have found ways to come back to the table to demonstrate some flexibility on the part of each party to this agreement," said McGuinty.

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