Correct: Fitch Downgrades Catholic Health Services Of Long Island To 'BBB+'.

Business Editors

(In a press release issued two weeks ago, there were discrepancies in the outstanding debt. The revised press release follows.)

Fitch Ratings-New York-June 14, 2002: Fitch Ratings has downgraded Catholic Health Services of Long Island's (CHSLI) approximately $416 million outstanding bonds (listed below) to 'BBB+' from 'A-'. The Rating Outlook is Stable. Fitch's analysis is based on the consolidated financial performance of CHSLI and includes St. Catherine of Sienna Medical Center (St. Catherine) which is not part of the obligated group and was acquired out of bankruptcy on Feb. 29, 2000.

The downgrade reflects a decline in profitability and debt service coverage which are well below the Fitch 'A' category levels, and the challenge of turning around two financially distressed hospitals in the system. The assignment of a Stable Outlook reflects Fitch's belief that CHSLI's operations should improve in the near term through improved rates from recently renegotiated managed care contracts and expected performance improvement from its two distressed hospitals.

CHSLI's operating trends have declined sharply over the past four years, as the system posted operating losses of $2 million in 1998 (Dec. 31 year-end), $17.5 million in 1999, $35.2 million in 2000, and $43.1 million last year. Through three months of 2002 CHSLI has lost $9.2 million from operations, although about $9 million of this loss is attributable to a four-month nurses strike at St. Catherine, a non-obligated group member but wholly owned subsidiary, that ended on March 17, 2002. The total financial impact of the strike was $13.5 million. CHSLI's maximum annual debt service coverage (MADS) by EBITDA has declined from 2.3 times (x) in 1998 to a very low 1.6x in 2001, and stood at 1.8x through three months of 2002. Because of escalating operating expenses, CHSLI's liquidity levels, as measured by days cash on hand, have fallen from 164 days as of Dec. 31, 1998 to 113 days as of March 31, 2002.

CHSLI is composed of five hospitals located in Long Island, NY and only one, St. Francis Hospital in Roslyn, posted an operating profit in 2001. St. Francis Hospital, the flagship hospital of the system, has a strong market position in open heart surgeries and cardiac services and posted an operating surplus of $23.9 million in 2001. St. Catherine in Smithtown, which lost $16.7 million, and St. Charles Hospital and Rehabilitation Center (St. Charles) in Port Jefferson, which lost $25.7 million, had the largest operating losses in 2001. Mercy Medical Center in Rockville Centre posted an operating loss of $6 million in 2001 and Good Samaritan Hospital in West Islip lost $1 million from operations.

Management has implemented turnaround plans at its underperforming hospitals, including hiring new executives at St. Charles who have turnaround experience. St. Catherine's financial performance was significantly hurt by a nurses strike that lasted from November 2001 through mid March 2002. Management was successful in negotiating contracts with the nurses union through May 14, 2004 and services at St. Catherine were not disrupted during the strike. Without the impact of the nurses strike in the first three months of fiscal 2002, CHSLI's operating performance would have been break-even.

Management has budgeted $30.2 million of financial improvements that would result in a negative 1.3% operating margin and 2.6x MADS coverage by EBITDA in 2002. The majority of the improvements would be derived from improved reimbursement from recently renegotiated managed care contracts with two of the three largest managed care organizations in the market. The rate increases were negotiated through CHSLI's membership in the Long Island Health Network (LIHN), a ten-hospital managed care contracting cooperative. Management has also instituted a system-wide 2% cut in the operating budget and is limiting capital spending.

Ongoing credit strengths include solid market share and increasing volume. CHSLI's market share in its service area has increased slightly to 24% in February 2002 from 23.4% in 2000, comparing favorably with their chief competitor, North Shore-Long Island Jewish Health System, whose market share declined to 32.9% from 33.9% over the same period. Inpatient volume growth remains strong despite the nurses strike at St. Catherine, with 79,214 discharges in fiscal 2001 increasing from 75,004 discharges the previous year. Management has budgeted 80,662 discharges in fiscal 2002.

Fitch expects CHSLI's financial performance to improve primarily through increased revenue from renegotiated managed care contracts and anticipated positive results from the turnaround plans at its distressed hospitals.

CHSLI is a five-hospital system with 1,697 staffed beds. CHSLI is headquartered in Melville, NY with operations in Nassau and Suffolk counties. Total revenue in fiscal 2001 was $1.1 billion.

Outstanding debt:

-- $88,090,000 Dormitory Authority of the State of New York Catholic Health Services of Long Island, revenue bonds, series 2000A (St. Catherine of Siena Medical Center);

-- $19,080,000 Dormitory Authority of the State of New York Catholic Health Services of Long Island, revenue bonds, series 2000B (Siena Village);

-- $34,500,000 St. Catherine of Siena Medical Center taxable periodic auction reset securities (PARS), revenue bonds, series 2000C;

-- $78,330,000 Dormitory Authority of the State of New York (Catholic Health Services of Long Island Obligated Group) St. Charles Hospital and Rehabilitation Center, revenue bonds, series 1999A(1);

-- $62,485,000 Dormitory Authority of the State of New York (Catholic Health Services of Long Island Obligated Group) Good Samaritan Hospital Medical Center, revenue bonds, series 1999A(1);

-- $49,775,000 Dormitory Authority of the State of New York (Catholic Health Services of Long Island Obligated Group) St. Francis Hospital, revenue bonds, series 1999A(1);

-- $24,610,000 Dormitory Authority of the State of New York (Catholic Health Services of Long Island Obligated Group) Mercy Medical Center, revenue bonds, series 1999A(1);

-- $51,950,000 Dormitory Authority of the State of New York taxable periodic auction reset securities (PARS) Mercy Medical Center, revenue bonds, series 1999B.(1)

(1) These bonds are insured by MBIA Insurance Corp., whose insurer financial strength is rated 'AAA' by Fitch.