The underlying rating on Montgomery County Higher Education and Health Authority, Pa.'s bonds, issued for Holy Redeemer Health System (HRHS), is affirmed and reflects: * Increasing outpatient volume and stable inpatient admissions; * A well-developed continuum of care; and * The potential benefits from an affiliation with University of Pennsylvania Health System (UPHS). These factors are somewhat offset by a decrease in profitability in 1998, a competitive health care market, entrance of managed care in this market, and a moderately high debt level. The bonds are secured by a gross revenue pledge of the obligated group. Historically (1993-1997), operating margins and excess margins averaged 0.43% and 2.5%, respectively. In 1997, operating margins and excess margins were 0.22% and 2.5%, respectively.
