The rating on New Jersey Health Care Facilities Financing Authority's bonds, issued for Newcomb Medical Center, reflects Newcomb's unexpected $14 million loss in 1996, which eliminates all financial flexibility. The hospital violated its rate covenant and auditors expressed doubt that Newcomb could continue as a going concern. Half of 1996's loss was due to booking reserves for a potential liability associated with three drug and alcohol clinics (now closed) operated by Newcomb through a third party contractor. An ongoing Medicaid investigation may ultimately prove that all or part of Newcomb's billing for these services as hospital-based units was illegal. Newcomb has conservatively booked a $13 million reserve equal to the entire amount of revenue billed from these three clinics since
