The rating downgrade on California Health Facilities Financing Authority's revenue bonds, issued for Downey Community Hospital, reflects: Poor financial performance over the past two fiscal years (1999 and 1998), generating weak coverage of maximum annual debt service (MADS), largely due to unfavorable capitation contracts; Increasing managed-care and reimbursement pressure; and A competitive service area, dominated by hospitals that are part of larger established systems. The outlook has been revised to negative from stable. A lower rating is precluded by a strong balance sheet, evidenced by 366 days' cash on hand and 190% cash to total debt in fiscal 1999; and increased inpatient and outpatient utilization over the past several years. The bonds are secured by the hospital's gross revenue pledge.
