New figures show that 61 Ontario hospitals continue to run deficits. (CBC)

For the second year running, more than a third of Ontario hospitals are bleeding red ink, amounting to a $107 million shortfall.

Sixty-one of the province's 159 public hospitals, or 38 per cent, reported a deficit in the last fiscal year that ended March 31, The Canadian Press has learned.

According to figures obtained from Ontario's 14 local health integration units, Ontario hospitals' financial picture remains largely unchanged from the previous year, when 61 hospitals reported shortfalls amounting to $154 million.

Ontario hospitals are forbidden by law from running deficits.

However, many can get a waiver if they come up with a plan to rebalance the books.

The province's hospitals receive about 85 per cent of their funding from the government through the province's local health integration units [LHINs], which were set up by the Liberal government to make local health-care decisions and dispense public cash.

The largest deficits in the 2009-10 year were Peterborough Regional Health Centre with a nearly $14 million shortfall, Sault Area Hospital with a $13.6 million shortfall and North Bay General Hospital with a $10 million shortfall.

Hospitals in North falling behind

Northern hospitals appear to be falling behind more than their southern counterparts. In the four most northern regions of the province, 31 hospitals were in the red, up from 20 in the previous year.

The largest shortfalls among northern hospitals were Sault Area Hospital, North Bay General Hospital and Sudbury Regional Hospital, which reported a $4.8 million deficit. Most hospitals with deficits were located in the northeast.

By contrast, Toronto hospitals fared better this spring with just two hospitals in the red: Bloorview Kids Rehabilitation with a $1.1 million deficit and Toronto Rehabilitation Institute with a $908,162 deficit.

That's down from the previous year, when Sick Kids, Baycrest and Bridgepoint hospitals reported shortfalls totalling nearly $20 million.

Only one region had no hospital deficits. Central West, which covers the regions of Dufferin, the northern part of Peel, part of York Region and a small part of Toronto, has managed the feat for two years running.

Some hospitals showed startling turnarounds. Niagara Health System, which had the largest deficit in Ontario a year ago and had gloomily predicted years of shortfalls, ended up with a $19 million surplus at the end of March.

A spokeswoman for the Hamilton Niagara Haldimand Brant LHIN said $49 million in provincial cash injections helped put the hospital corporation, which has seven sites, back on solid footing after it fell $18.8 million in the red a year ago.

However, the LHIN has been under fire by local residents, who complain it didn't consult properly before approving a controversial plan for Niagara hospitals, which included the closure of the emergency departments in Fort Erie and Port Colborne. Ontario's ombudsman launched an investigation in 2009, but hasn't yet unveiled his findings.

Funding increases less than inflation

There is concern that while the number of cash-strapped hospitals remained steady, it may be a different story in 2011 due to shrinking provincial funds.

Ontario hospitals received a 2.1 per cent increase to their base funding from the government in 2009-10 — less than inflation. This year, it will only be 1.5 per cent.

"If hospitals are already starting the year with deficits and the inflation that they're facing is higher than the amount they received, you can imagine it's quite a challenge for them to balance their budgets," said Tom Closson, president and CEO of the Ontario Hospital Association.

"And even for hospitals that had balanced budgets, they were having to find savings to offset the inflationary pressures."

Government officials point out that hospitals received an overall funding increase of 4.7 per cent last year, and will receive the same this year, due to extra one-time payouts to fund certain programs and services.

But even hospitals without budget shortfalls are cutting beds and laying off staff, said Natalie Mehra, executive director of the Ontario Health Coalition.

Patients released sooner

Niagara Health cut 30 beds last fall and another 39 this spring, even though it's back in the black, she said.

"The reason for all of these deficits is that for the third year in a row, the provincial government has budgeted less than the rate of inflation for hospitals," Mehra said.

"And that means that hospitals either have to force patients out more quickly — and often, there's nowhere to go — and it means cuts to beds and services."

Those financial woes will be compounded by a new plan to move toward a so-called "patient-based" approach to funding hospitals, she said.

Under the model, hospitals would narrow their range of services with the aim of doing surgeries and treatments more cheaply than their rivals. Those who can do it cheaper would get additional cash from the government.

That's setting the stage for rural and northern hospital closures and laying the groundwork for a private hospital system, Mehra said.

"I think that deficits will get worse everywhere," she said.