Wirral Care Homes Association is to mount a legal challenge against a council decision to cut its payments.
The move came just one day after the authority's social services chief said he was "hopeful" that a compromise has been reached with owners.
A decision not to pay an annual rise coupled with a 1.3% reduction in fees will be recommended to the council's cabinet next Thursday.
An earlier proposal floated in March aimed to cut fees by 5%.
The plan caused an outcry among home owners who warned it would lead to closures and result in many elderly people facing eviction.
In a report to be presented to the council's ruling cabinet on Thursday, John Webb, director of adult social services, is recommending that fees to care home owners should effectively be capped during 2009/10 at around 98.7% of the 2008/09 rate.
If the cabinet accepts this recommendation, it will mean around 4% more being paid to care owners than had been originally proposed.
But the report also says that owners who do not agree to the new contract will be given three months' notice then have their contracts terminated.
Mr Webb said: "It is hoped that this new level, which still places Wirral above the North West average, will be acceptable to the care home owners."
However, a representative of the care homes association told the Globe this afternoon: "Our solicitor has issued a letter to the authority today threatening legal action.
"It is our belief they have acted unlawfully on two counts; one concerns the delivery of care, the other contends that they have failed to offer written advice to the elderly.
"Many care homes in Wirral are worried about the possibility of closure and were relying on a cost of infaltion rise based on the Retail Price Index for November/December last year, as per our contracts.
"Our view remains unchanged - that the reduction in fees is both unfair and dangerous.
"The local authority cannot continue to pay fees which are significantly below recognised independent figures for minimum fee levels and their proposal to widen that funding gap is unacceptable."
Hundreds of care home owners are expected to lobby the cabinet meeting on Thursday evening.
The cut would save the council £1.3m, some of which, says the report, would be reinvested in alternative care provsions for the elderly.
Cllr Moira McLaughlin, cabinet member for adult social services, said: "The current situation cannot be allowed to continue as it is not an efficient use of tax payers' money.
"Some care homes are currently operating with as little as 70% bed occupancy, which demonstrates an over-provision of care home beds.
"This situation will get worse as more and more elderly people opt to stay in their own home through the use of new technologies, the development of ‘Supported Living’ services, and developments such as the additional 119 extra care units being built in Wirral.
"It is a very reasonable position that we have taken. We have listened to the care home owners’ concerns and have responded."