You never know what's gonna offend someone...That being said, "hallucinations in people with schizophrenia" does seem the safer option, but "schizophrenics" (not capitalized) is used plenty often. Here's an interesting Google result:
Schizophrenics Anonymous (SA) is a self-help group for persons who have schizophrenia or a schizophrenia-related illness.
I don't see them using "schizophrenics" outside of the title though, which further supports the use of "persons / people with schizophrenia". This follows a general guideline: one should avoid defining people by their afflictions and emphasize their personhood foremost. It might seem trivial with occasional use, but conflating a condition with an object category (person) might affect perception of those people, including their self-perceptions / identities, since these are largely matters of emphasis already.
(This is armchair theorizing without references...or any arms on the chair...Please edit or comment with any support or disagreement.)