The company that runs Medical College of Georgia Hospital and Clinics is looking to end its fiscal year strong on June 30. The fiscal year that begins the next day is another story, officials said.

The board of MCG Health Inc. met Wednesday and reviewed strong performances from April and May that have the health system's year-to-date margin at $13.7 million before its allocation to the school, more than $7 million ahead of budget and $5.5 million more than its prior year performance.

The health system credits increasing patient revenues $3.7 million more than budget, decreasing expenses $2.2 million less than budget, and receiving better-than-expected supplemental payments from Medicaid for seeing more Medicaid and indigent patients.

"I think we're going to have one of the better years we've had," CEO Don Snell said. But then immediately, the next fiscal year "could be the most difficult year we've faced," he said.

State revenue collections were down 10 percent from the previous year as of May and there is beginning to be talk of the Georgia Legislature being called back into special session to address the budget, Mr. Snell said.

Augusta delegation chairman Rep. Quincy Murphy, D-Augusta, said he's hearing the talk as well and this month's state tax revenue could be the deciding factor.

"There is a lot of anxiety coming forward waiting on the June revenue report," he said. "That's going to say a lot."

MCG Health and the school could be especially vulnerable during a special session because the school receives an appropriation of about $34 million for graduate medical education, an appropriation that often gets targeted for cuts when times are tight.

"We had to defend it pretty vigorously this year," Mr. Snell said.

Medicaid cuts were also part of Georgia Gov. Sonny Perdue's strategy to address a deficit in the fiscal year 2010 budget before they were restored by the Legislature, and the health system is the state's third largest Medicaid provider.

There should be concern if the legislators have to return to Atlanta this year, said state Sen. Ed Tarver, D-Augusta.

"I think if we are called back into special session that everything is back on the table," he said.

On top of that, President Obama recently proposed paying for health care reform by reducing certain Medicare payments to hospitals that would cost MCG Health about $12 million a year, Mr. Snell said.

"The state budget problems are always at issue," he said. "Health reform is something additive this year."

The annual squabble between the school and the health system over paying for residency programs also arose this year.

MCG President Daniel W. Rahn said the school has already received $22 million in cuts and the health system is refusing to pay $1.3 million more that the school wants for residency programs next fiscal year.

"I really have to advocate that we have full coverage" of those programs in next fiscal year's budget, Dr. Rahn said.

Board Chairman Donald Leebern Jr. pointed out that it always comes up and always gets resolved through negotiations.

"It's nothing new," Mr. Leebern said.