Under the so-called patient-based funding model, the province will reduce its lump-sum payments to 91 of its 152 public hospitals and reimburse them instead for the care they provide, she said.
About 55 smaller hospitals won't be part of the new funding model, which takes effect in April. Four specialty psychiatric hospitals, Toronto's Holland Bloorview children's rehabilitation hospital and Weeneebayko Area Health Authority in northern Ontario are also excluded.
Of the 91 hospitals switching to "patient-based" funding, about 60 per cent will receive more money, while 40 per cent will see a "very small decrease," said Matthews.
She wouldn't identify the hospitals, however, saying ministry officials need to speak to them first about how it will affect them.
Yet Matthews insists the new model — first announced by the Liberals in 2010 — won't reduce overall funding to the province's hospitals. Rather, the intention is to make the system more efficient and encourage hospitals to improve patient care, she said.
"This is not about cuts, this is not about saving money," Matthews said. "This is, though, about shifting resources. So this is, in effect, a zero-sum game."
Under the new rules, a large chunk of the provincial money going to those 91 hospitals will be based on criteria such as how many patients they have, the services they deliver and the specific needs of the population, she said.
It takes into consideration the population — like age, growth projections and socio-economic status — as well as how many complex patients are receiving care and what kind of care is being provided to the community.
That means hospitals that serve growing communities will see their funding increase over time, Matthews said.
The province will also set a price for four procedures — hip replacement, knee replacement, cataract surgery and dialysis and other treatments for kidney disease — and hospitals will get funding for the number of patients they treat for those procedures. Other services may be added over time, officials said.
For example, the average cost to hospitals for each hip replacement case was $8,039 last year. The province wants to bring it down to $6,966, which was the maximum amount it cost in 40 per cent of cases in Ontario hospitals.
The patient-based funding will comprise 46 per cent of their budgets this year, ramping up to 70 per cent in 2014. The rest will be lump-sum payments.
As Ontario's population ages, the province needs to be smarter with its health-care cash, which accounts for nearly half of every dollar it spends, Matthews said.
The Liberals, who are facing a $16-billion deficit this year, have vowed to rein in program spending to eliminate the red ink by 2017-18.
But the Liberals should have prepared for those pressures on the system years ago, instead of wasting health-care dollars on eHealth and Ornge, said NDP Leader Andrea Horwath.
The government spent over a billion dollars on creating electronic health records with little to show for it and Ornge, the province's troubled air ambulance service, is currently under a criminal probe for "financial irregularities."
"The track record of this government on transforming our health-care system into something that actually works for people has been dismal," Horwath said.
Progressive Conservative Leader Tim Hudak supports the move to patient-based funding, saying it's "sensible" to encourage better treatment and provide more funding to growing communities.
"Here's the problem I have: for nine years now, this government has talked about major reforms when it comes to health care, but they've never delivered," he said.
"I'm worried this is just talk before the budget, but they actually won't reform health care."
The Ontario Hospital Association said it also welcomes the patient-based payment plan.
Finance Minister Dwight Duncan wouldn't say how much money he's allocated for health care in his March 27 budget, which has already been sent to the printers.
But economist Don Drummond recommended in his Feb. 15 austerity report that the increase in health spending should be reduced to 2.5 per cent a year, from roughly 6.5 per cent annually in each of the past eight years.