"I'm afraid they're wrong. Services are not being cut," Matthews told reporters.
"We are shifting where we're spending, so if somebody can go home from hospital _ get the home care they need at home _ then we want to support them."
The Ontario Health Coalition said a zero per cent budget increase has forced hospitals to cut services, with out-patient clinics for everything from physiotherapy and pain management to cardiac rehab and audiology being closed across the province.
"The services being cut in hospitals aren't even provided by home care; you don't replace a pain clinic in home care, you're not replacing five hospitals in Niagara with home care, you don't replace a medical-surgical bed with home care, said coalition director Natalie Mehra.
"The smoke and mirrors is the rhetoric that these are all trade offs, that there are no real cuts happening."
The government has been increasing funding to the home care and community care sectors to get so-called Alternative Level of Care patients who don't need to be in expensive hospital beds back home or into a long term care facility.
"We're seeing our ALC rates in hospitals _ that's how many people are in hospital who don't need to be in hospital _ in many parts of the province those rates are coming down rapidly because we're investing more in home care," said Matthews.
"We're improving the care people are receiving, but we're doing it in a way that gets better value for our health care dollars, so we're supporting more people at home, more people in the community."
The New Democrats said they were concerned about the ability of a "health care system that's falling apart" to keep people healthy once they leave hospital.
"The government's promise that health care would be protected is being broken, and we're seeing it in every community," said NDP Leader Andrea Horwath.
"We're seeing people who are being sent home from hospital, but don't have the supports or home care that they need to recuperate and they recycle right back into the emergency ward again."
The coalition said home care is being more strictly rationed and a recent increase in funding for home care is nowhere near enough to deal with lengthy waiting lists.
"Home care clients are increasingly being wait-listed, or they're being referred to community agencies who provide something less than home-care services, because there's not enough money in home care, or they're just being denied services," said Mehra.
"They're seeing much more complex patients, who cost more to provide for, but home care funding per client is shrinking because there are so many more patients being dumped into home care."
Some patients are forced to pay $50 to $70 for every physiotherapy treatment when hospital clinics close and they are sent to private facilities, added Mehra.
However, Matthews said the government's efforts to redirect its health care spending should not force people to pay out of pocket for services previously covered under the Ontario Health Insurance Plan.
"Not at all," she said.
The health coalition said Ontario ranks eighth out of 10 in provincial health care funding, and dead last when it comes to per capita funding of hospitals.