The hospital industry had opposed the plan, which was expected to bring in roughly $300 million. Earl Rogers of the Georgia Hospitals Association says the agreement, reached late Monday, helps the state's finances and also protects hospitals and patients.

Gov. Sonny Perdue had proposed a 10.25 percent cut in the amount the state gives to hospitals and health care providers for serving Medicaid patients and eliminating the state sales tax exemption for nonprofit hospitals - which would force them to pay sales taxes for purchases.

Under the compromise, 1.4 percent of hospital revenue would be taxed and the sales tax exemption would not apply.