Fitch Rates Partners HealthCare System, Massachusetts $172MM 2008H Bonds 'AA/F1+'

Business Wire, March 28, 2008

TAMPA, Fla. -- Fitch Ratings has assigned a long-term rating of 'AA' and a short-term rating of 'F1 ' to Partners HealthCare System (Partners) $172 million series 2008H bonds that will be used to refinance the bonds listed below. Fitch also affirms its 'AA' long-term rating on all of Partners' outstanding debt and affirms its 'F1 ' rating on approximately $184.5 million of Partners HealthCare System's debt that is currently backed by self-liquidity. For certain issues, the ratings are underlying ratings given without consideration of credit enhancement. The Rating Outlook is Stable.

--$75,000,000 Massachusetts Health and Educational Facilities Authority revenue bonds (Partners HealthCare System), series 2007 G1 auction rate bonds.

--$75,000,000 Massachusetts Health and Educational Facilities Authority revenue bonds (Partners HealthCare System), series 2007 G3 auction rate bonds.

--$20,900,000 Massachusetts Health and Educational Facilities Authority revenue bonds (Newton-Wellesley Hospital) MBIA-insured variable rate demand bonds series 1995F.

The 'F1 ' rating is supported by Partners' long-term rating and same-day liquidity at December 2007 of $945.9 million, which would cover the series 2003 D-1, D-2, D-5 and D-6 variable rate demand bonds and the series 2008 H bonds by 2.65 times (x) in the unlikely event of an un-remarketed put. The long-term ratings are supported by Partners' leading market position, its very strong clinical reputation, solid liquidity, improved operating profitability, and good management practices related to revenue cycle, expense control and quality outcomes. At fiscal year-end 2007, Partners had over $4.1 billion in unrestricted cash and investments (inclusive of temporarily restricted net assets, net of pledges) equating to 246 days cash on hand. Partners posted a 1.6% operating margin ($105.9 million) in fiscal 2007, and through the three months ended Dec. 31, 2007 (the interim period) had income from operations of $17.7 million resulting in an operating margin of 1.04%.

Bottom line performance was 8.4% ($583.1 million) and 4.6% ($81.36 million) in fiscal 2007 and through the interim period, respectively. Debt service coverage of maximum annual debt service ($238 million, inclusive of third party debt and research leases) remained solid at 4.1x, which is strong when considering that Partners' debt service declines significantly over time. Partners has successfully completed negotiations to include in its principal managed care contracts pay-for-performance incentives on selected procedures, which Fitch views favorably.

Fitch's prime concerns continue to be Partners' high Medicaid mix and increased charity care at certain facilities, the concentration of three large managed care organizations that control a significant 80% of the managed care payer market, the competitive Boston market, and future capital needs. Partners has incurred significant losses in Medicare and Medicaid and uncompensated care, which has hindered overall profitability.

Based in Boston, Partners comprises two tertiary hospitals, six community acute care hospitals, and four specialty hospitals. Partners generated $6.48 billion in total revenues in fiscal 2007. Disclosure of financial and operating results and material events has been excellent. Partners' practice is to publish and provide quarterly results publicly, including posting to DAC, and directly to requesting bondholders. Quarterly disclosure includes a balance sheet, income statement, cash flow statement, management discussion and analysis, and utilization data.

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.