The new money — which brings the hospitals' total to $12.27 billion — came as a pleasant surprise to the Ontario Hospital Association, which had warned the $12 billion earmarked in the government's May budget could force up to 4,000 job cuts.

Those concerns "have certainly been softened by today's news," association president Hilary Short said after Smitherman made the announcement at North York General Hospital.

She predicted "less of an impact on patient services," but said the association and its members must now sit down and see how each hospital will cope with its funding from the ministry.

Short suggested the money is a "change of heart" from a government that's tried to limit hospital budget increases while putting more cash into less expensive community-based care to slow Ontario's fast-growing health spending.

"What I see is a recognition ... you can't change the system as quickly as formerly indicated," Short said.

However, she said, "it's going to be a tough year even with the improvement in the funding announcement."

Yesterday, Smitherman said the money is a 5.1 per cent increase over last year.

So far, 89 of Ontario's 154 public hospitals have come up with plans to balance their budgets, as required by law.

The group that represents the 10 acute care hospitals in and around Toronto said it's disappointed, because they are getting increases of 4.6 per cent, instead of the 5.1 per cent across-the-province increase.

"The GTA/905 residents still aren't getting their fair share of funding," Tariq Asmi, executive director of the GTA/905 Healthcare Alliance, told the Star's Tanya Talaga.

Smitherman had more good news for hospitals, promising "at least" $12.6 billion next year and $13.1 billion the following year, fulfilling an election promise of stable, multi-year funding long sought by hospitals.

"It will allow them to plan for the future, instead of being surprised by it," he said.

Asked if he had caved in to hospital demands for more funding, he said the provincial budget isn't always the last word on how much money is handed out.