Mr Hill says there are suggestions that Australian blood could be sent to the United States for processing.
He says this could jeopardize the security of Australia's blood supplies, and potentially expose donated blood to diseases Australia is currently free from - such as Mad Cow disease.
Mr Hill fears Australians could lose confidence in the security of Australian blood if it is sent overseas, and that could deter people from making blood donations.
The federal government is reviewing its blood processing arrangements in line with the Australian- US Free Trade Agreement.
The South Australian government has made a submission to the review, calling for Australian blood to continue to be processed in Melbourne instead of being sent offshore.
The review is expected to report back to the Federal Health Minister Tony Abbott by January next year.