The NSW health minister says a cap on labour costs at southwest Sydney hospitals will not necessarily translate into job cuts.
The opposition claims to have obtained documents showing more than $7 million will be slashed from South Western Sydney Local Health District staffing budgets this year.
NSW Labor leader John Robertson said the cuts would hit six hospitals in 2012/13, causing patient waiting times to blow out.
"It is impossible to quarantine care in our hospital wards and operating theatres from the O'Farrell government's extraordinary attack on hospital funding in NSW," he said in a statement on Tuesday.
The budget documents showed Liverpool Hospital would lose nearly $3.2 million, Bankstown-Lidcombe Hospital $1.49 million and Campbelltown Hospital would face cuts of just over $1.39 million, he said.
The cuts would also hit hospitals in Fairfield, Bowral and Camden, and could mean 73 job cuts this year alone, according to Labor.
Health Minister Jillian Skinner said hospitals would try to meet labour expense caps by working smarter, not cutting staff.
"South Western Sydney has advised savings will be made by introducing smarter ways of working, for example reducing reliance on staff overtime and the use of agency staff," she said in a statement.
She accused the opposition of "making (health workers) fear for their jobs", adding the health district in question had received an overall funding boost of 5.7 per cent in the last budget.
But Labor health spokesman Andrew McDonald said patient care would be compromised.
"As a practising paediatrician with 40 years experience working in the NSW health system, I know these funding cuts will cause absolute chaos in our hospitals," Dr McDonald said.