University Hospital will be among the facilities fighting a fee proposal by Georgia Gov. Sonny Perdue to plug a shortfall in Medicaid.
But the state has to do something and the resulting rate cut would have hit hospitals harder, a Perdue spokesman said.
At the monthly meeting Thursday of one of its operating boards, University Health Care System CEO J. Larry Read said the 1.6 percent fee on its net revenue would cost it $5 million.
Eventually, that loss would have to be borne by the hospital's patients, he said.
"And that's not a fair thing to do," Mr. Read said.
Because the federal government matches state Medicaid contributions at roughly a 3 to 1 rate, the fee would help the state plug what could be a $600 million hole in Medicaid in the next fiscal year, said Perdue spokesman Bert Brantley.
The deficit is in part caused by a loss of $212 million in one-time tobacco money and an increase in enrollment because of the economy.
The fee would also come back to the hospitals in increased revenue, so it would result in an increase of $277 million in state revenue with a total loss of $77 million to the hospitals, according to Perdue's office.
Some facilities, such as Grady Memorial Hospital in Atlanta, would come out ahead. Grady would gain $12 million because of its high volume of Medicaid patients.
Trinity Hospital of Augusta would come out more than $178,000 ahead.
Medical College of Georgia Hospital and Clinics would break even, according to the governor's figures.
If a cut is needed, it would be 16.5 percent across the board, which would raise about the same amount of revenue but cost hospitals $365 million, according to the governor's office.
"The choice is we've got to fill this hole," Brantley said. "Either there is going to be a provider rate cut or there is going to be a 1.6 (percent) provider fee. The vast majority of hospitals end up much better in the provider fee than they do in the rate cut."
University Hospital would lose $6 million under the rate cut scenario.
But Read and the Georgia Hospital Association both said they fear this is just the beginning for hospitals.
"It's a slippery slope," he said. "It's 1.6 (percent) this year. What is next?"