Washington Hlth Care Fac Auth/Virginia Mason Med Ctr Rtg Lowered to 'BBB+' from 'A-'

Primary Credit Analysts: Stephen Infranco, New York, (1) 212-438-2025; stephen.infranco@spglobal.com Ken W Rodgers, New York, (1) 212-438-2087 NEW YORK – (Standard&Poor's CreditWire) Feb. 23, 2000—Standard&Poor's today lowered its underlying rating (SPUR) to triple-'B'-plus from single-'A'-minus on Washington Health Care Facilities Authority's $90.51 million health care revenue bonds and $33.40 million variable-rate demand bonds series 1997B dated Aug. 20, 1997, issued for Virginia Mason Medical Center (VMMC). Standard&Poor's also revised its rating to negative from stable. The downgrade reflects: -- Poor financial performance, with fiscal 1999 results expected to generate negative margins after onetime adjustments, in addition to the preceding years loss of $12.0 million; -- A limited balance sheet, with current liquidity at 61

...-- A competitive market in downtown Seattle; and -- Thin coverage of maximum annual debt service. The rating is supported by: -- VMMC's unique market position, with a physician-led clinic providing over 1 million annual outpatient visits, and a premier tertiary hospital and referral center providing over 16,000 admissions; -- A wide geographic draw, with over 30% of VMMC's patients coming from outside the Seattle metropolitan area; and -- A manageable debt burden of 3% of total revenues. The bonds are secured by VMMC's gross revenue pledge. VMMC continues to experience weaker financial performance. While nine-month interim statements ending Sept. 30, 1999 indicate some improvement, with an operating margin under 1.0% and a profit margin of 2.0%, VMMC is expected to take onetime adjustment for year-end 1999, which is likely to result in a second year of negative margins. Management does not yet know the extent of the onetime adjustment but expects it to eliminate any gains to date. Fiscal...

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