Fitch Upgrades Summa Health System, Ohio, to 'A-' from 'BBB+'; Outlook Stable

Business Wire, June 22, 2006

TAMPA, Fla. -- Fitch Ratings has upgraded to 'A-' from 'BBB ' the approximately $137.8 million outstanding Akron, Bath and Copley Joint Township Hospital District (Summa Health System) bonds listed below. (Fitch does not rate the $74 million series 2004B variable-rate demand bonds.) The Rating Outlook is Stable.

The rating upgrade to 'A-' reflects Summa's continued strong operating profitability as reflected by operating margins at or better than 2.9% in each of the past three fiscal years, which is in excess of Fitch's 'A' category median of 2.5%. The System is the leading provider of health care in the Akron market and continues to be a leader in the implementation of quality initiatives and measures. Operating margins have been consistently strong over the past three years as Summa has exited certain unprofitable business lines and renegotiated or terminated unfavorable managed care contracts. Fitch believes that System management has done an excellent job directing the corporation's efforts toward profitable core business and has positioned Summa to sustain favorable margins over the near term.

Main credit concerns include a competitive marketplace and future capital expenditures. Summa's days cash on hand is on the low side for an 'A' category credit at 128 days as of March 31, 2006, but it has risen by approximately 50% since Fitch's last review of the credit in January 2004. Cash to debt is sound at 107.3 % compared to Fitch's 'A' rated median of 109.8%. Fitch believes Summa has balanced sound liquidity growth with good capital investment in PP&E over the last several years but cash flow will need to be maintained in order to meet the corporation's capital budget of approximately $247 million over the next three years. Although Summa is the market leader in Akron, significant competition exists both locally and due to the service area's close proximity to Cleveland where Cleveland Clinic and UHHS are located. Significant outmigration continues to occur in the Akron market. Fitch does not view the recent decline in volume at the main hospital negatively due to it being caused by the exiting of an unfavorable managed care contract. Despite the managed care contract being one of the System's largest, profitability was enhanced despite lower volumes.

Located in Akron, OH, Summa is an organized delivery system with Akron City Hospital and St. Thomas Hospital as one hospital on two campuses, Cuyahoga Falls General Hospital, and SummaCare (its health plan) as the main entities. Total revenues in fiscal 2005 were approximately $774.48 million. Disclosure has been good; however, Fitch notes that interim financial disclosure does not include a cash flow statement or a management discussion and analysis.

Fitch upgrades the following:

-- $89.8 million Akron, Bath and Copley Joint Township Hospital District, Ohio fixed-rate hospital facilities revenue bonds, series 2004A (Summa Health System);

-- $48,000,000 Akron, Bath and Copley Joint Township Hospital District, Ohio, hospital facilities revenue bonds, series 1998A (Summa Health System).

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.