Catholic Healthcare West Earns Bond Rating Upgrade from Moody's; Bond Outlook Upgrade from Standard and Poors.

Business Editors/Health/Medical Writers

SAN FRANCISCO--(BUSINESS WIRE)--Oct. 16, 2003

Not-for-Profit Hospital System Posts Dramatic Financial Improvement

while Increasing Patient and Employee Satisfaction Scores

Catholic Healthcare West (CHW), the largest Catholic hospital system in the western United States and the largest not-for-profit system in California, announced today that Moody's Investors Service has upgraded the organization's bond rating to Baa1 from Baa2.

CHW also announced today that Standard & Poors has revised its outlook on CHW's bond from stable to positive.

The rating upgrade and outlook revision apply to approximately $2.2 billion of outstanding debt.

"The actions taken by Moody's and S&P are recognition of the tremendous progress CHW has made in implementing our strategy. This has resulted in our financial performance and building financial momentum," said Lloyd H. Dean, president/chief executive officer, CHW. "This success is truly remarkable and is a reflection of the focused dedication and commitment to excellence demonstrated by our hospital presidents, our care givers and our support personnel."

Earlier this month, CHW announced fiscal year (FY) 03 results showing margin of $51 million based on operating income of $64 million. That compares to an FY02 loss of $54 million based on an operating loss of $39. CHW's fiscal year ended June 30, 2003.

In its report, Moody's, a leading global credit rating firm, cites the following rationale for upgrading CHW's bond rating:

1. Improved operating performance in fiscal year 2003,

representing the third consecutive year of improvement and the

first year of operating income following six years of sizable

losses;

2. Healthy revenue growth resulting from favorable managed care

contracts and adequate volume increases;

3. Growth in unrestricted cash; and

4. A continued focus on restructuring the organization including

identifying strategies for underperforming assets.

Moody's report notes, "we believe the 2003 results are sustainable and that the 2004 budget, which reflects similar levels of performance, is achievable, although further improvement may be slower given several operating challenges."

Among the operating challenges confronting CHW, and most health care providers operating in California are: uncertainty regarding state Medicare funding; unfunded mandates including nurse-staffing ratios and seismic upgrade requirements; and rising labor and employee benefit costs.

"Despite our dramatic turnaround, we recognize there is still much work to be done," said Dean. "Fortunately, as in the past, our Mission and Values guide us in everything we do. We intend to deliver the highest quality health care in a supportive, caring and nurturing environment, working hand-in-hand with our employees and the communities in which we operate. The record shows we're on the right track."

Across the system, CHW has posted three consecutive quarters of rising inpatient satisfaction scores. In addition, more than 70 percent of CHW employees and physicians now agree that their hospital is an effective organization, up from 56 percent just two years ago.

As a not-for-profit hospital system, the top line FY 03 net operating margin will be reinvested into CHW's 41 acute care facilities.

About Catholic Healthcare West

Catholic Healthcare West (CHW), headquartered in San Francisco, Calif., is a system of 41 hospitals and medical centers in California, Arizona and Nevada. Founded in 1986, it is one of the nation's largest not-for-profit health care systems and the largest Catholic health care system based in the Western United States. CHW is committed to delivering compassionate, high-quality, affordable health care services with special attention to the poor and underserved. The CHW network of nearly 6,000 physicians and approximately 36,000 employees provides health care services to more than four million people annually. In 2002, CHW provided more than $422 million in charity care and unsponsored community benefit. For more information, please visit our website at www.CHWhealth.org.