Ontario residents should expect to pay upfront for more health-care services and endure longer lineups if the Liberal government makes good on its threat to freeze funding for hospitals next year, critics said Thursday.

Health Minister Deb Matthews is warning hospitals to brace for a possible budget freeze this spring because the province is grappling with a $24.7-billion deficit -- the largest in its history.

The most hospitals can hope for is an increase below last year's 2.1 per cent boost -- less than inflation -- which critics say is so meagre it has already forced hospitals to close beds and cut services.

No matter how Matthews tries to spin it, a budget freeze amounts to a service cut because hospitals won't be able to meet rising costs, said NDP Leader Andrea Horwath.

The Liberals have already wasted millions of dollars in their bungled attempt to create electronic health records, she said.

"It makes people shake their head with disgust when they hear things like frozen hospital budgets and zero per cent increases on one hand, and on the other hand, they see the eHealth boondoggle -- a billion dollars out the door with very little to show for it," she said.

Tom Closson, president of the Ontario Hospital Association, downplayed the possibility of a funding freeze as "highly speculative."

The OHA is "optimistic" that hospitals will see a funding increase of about two per cent in the next provincial budget, which is expected in May, he said.

"This is a very unusual economic challenge that this government is facing," Closson said.

More than a third of Ontario hospitals -- 61 in total -- couldn't balance their books last year, amounting to a $154-million shortfall.

Hospitals are forbidden from running deficits by law, but many received waivers because they've agreed to balance their books.

The number of hospitals swimming in red ink will only grow if the government starves them of much-needed cash, critics say.

Some hospitals are already on financial life support and borrowing heavily to meet payroll and pay their bills, said Natalie Mehra, executive director of the Ontario Health Coalition.

A funding freeze means patients will be forced to travel further for health care, wait longer for a hospital bed and may even have to fork over cash for services, she said.

"It means that we'll likely see attempts to close more of the small and rural hospitals," she said.

"It means that more services like physiotherapy will be cut and people will have to pay out of pocket for them ... It means longer lineups in the ERs because there's not enough hospital beds."

Premier Dalton McGuinty vowed in October to help cash-strapped hospitals through tough economic times, but there are signs that a freeze on hospital funding is imminent.

A spokesman for Lakeridge Health Network, which runs three hospitals and three specialty sites in east-central Ontario, refused to comment Thursday on how a funding freeze would affect its services.

But in an earlier interview, CEO Kevin Empey suggested that it would be unwise for hospitals to expect a bigger funding increase than last year.

"The signals from the government are: plan for zero per cent next year," he said.

Niagara Health System, which had the biggest deficit last year of $18.8 million, put together a plan to reduce that shortfall to $3 million by 2013. The system has seven hospital sites.

But that plan, which was approved by local health officials, assumes a three per cent increase in funding each year, said hospital spokeswoman Caroline Bourque Wiley. Every one per cent change represents a $3-million impact to its budget.

The hospital's plan for next year assumes a two per cent increase and no service cuts, she said. It "would not be responsible" to speculate about what service reductions would be required if the funding increase falls below that target, she added.

The government usually provides guidance months ahead of its budget on how much funding hospitals can expect to receive, so they can draft operating plans for the upcoming year. That didn't happen this year, Closson said.

Instead, hospitals were instructed to draft plans using three different scenarios -- a funding freeze, a one per cent increase and a two per cent increase -- and submit those plans by Dec. 15, he said.

"I can understand the challenge (the government's) facing: do you really want to get a number out before you have good information on what it's likely to be next year for them in terms of revenue?" Closson said.

"But having said that, the longer they wait, the more difficult it is going to be for hospitals to balance their budgets next year. And the more costly."

The Liberals shouldn't be able to plead poverty after foisting a health tax of up to $900 per person on Ontario taxpayers, said Progressive Conservative health critic Christine Elliott.

"The reality will be that a lot of hospitals are going to have to start cutting services to the public, and that's directly in contrast to what the minister originally said," Elliott said in an interview.

"I think taxpayers have every right to be outraged about this."

Ontario's 159 public hospitals receive about 85 per cent of their funding from the province through 14 Local Health Integration Networks, which were set up by the Liberals three years ago to make local health-care decisions and dispense government cash.