Health chiefs were today asked to reject a funding offer from Midlothian Council after the local authority decided to "withhold" £1.3 million in Scottish Government money.
The cut in expected funding from the council means health and social care is facing a bigger shortfall than expected.
Midlothian Integration Joint Board's (IJB) chief finance officer Claire Flanagan told members the decision not to give the full amount of cash allocated for health to them was "not in line with the parameters set by Scottish Government."
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And she said the decision had been 'last minute' leaving health chiefs struggling to make up the difference as they faced their own deficit of more than £4 million.
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The board, which is responsible for health and social care in Midlothian, receives funding from both the council and NHS Lothian to make up its annual budget.
But they were told the council had decided to apply a cut to their funding, the same as it was imposing on all its services, expecting them to find further efficiencies.
Ms Flanagan told the board, senior officers had been working to mitigate a £4.7 million gap which it already faced in funding for the year ahead when it received news the council was reducing its annual payment by £1.3 million at the last minute.
And Morag Barrow, the IJB's chief officer said: "The IJB had its own budget gap, we were not expecting to have to fill our own gap and take a share of the council's budget gap as well."
Midlothian councillors agreed to pass their budget last month, with the reduced payment to the board included in cuts.
At the time Councillor Pauline Winchester, who is a board member, abstained from voting telling fellow councillors: "As a previous health professional I know what this money will do and it covers the health of Midlothian residents, and without that money I think there will be a big problem."
However fellow board member Councillor Derek Milligan told the council meeting: "Education is our biggest spending by far, followed by the IJB and children's services. If we put a ring fence around them and protected them you would see an armageddon on other services."
At today's meeting council leader Kelly Parry , who also sits on the board, told members that cutting funding to the IJB was "not the only unpalatable decision" they had to make at the budget meeting.
She said: "Midlothian needs more money and if we had that money this year we would not have looked at this cut.
"No councillor gets up on any morning or day and things I want to cut 'x,y,z' budgets. We are committed to working with our communities."
Councillor Milligan urged board members not to reject the council funding offer but to defer the decision until April to give officers the chance to look at alternatives.
He suggested a £1 million plan by health chiefs to replace analogue alarms with digital ones next year could be funded from the council's capital budget, adding other ways of off setting the cut may be available.
His motion for a month's grace to see if the council and health officers could find a solution was seconded by Councillor Parry and passed unanimously by the board.
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