The rating on California Health Facilities Finance Authority's bonds, issued for UCSF-Stanford Health Care, is based on: * UCSF-Stanford Health Care's market position, with the combined strength and reputation of Stanford and University of California San Francisco's premier academic medical centers; * Solid demand, with stable inpatient and growing outpatient volumes; and * A strong balance sheet, with excellent pro forma debt service coverage and very low leverage. A higher rating is precluded by: * Price pressures in this highly competitive market, * Relatively weak financial performance, and * Substantial integration challenges the newly merged entity faces in its first year of operations. The merger of Stanford Health Services and UCSF Medical Center (UCSF) was completed in November 1997. UCSF-Stanford
