Fitch Affirms National Jewish Health (Colorado) Revenue Bonds at 'BBB'; Outlook Stable.

SAN FRANCISCO -- Fitch Ratings has affirmed its 'BBB' rating on the Colorado Health Facilities Authority's approximately $43.3 million revenue bonds, series 1998, 1998B, and 2005, issued on behalf of National Jewish Health (NJH). The Rating Outlook is Stable.

The rating rationale reflects National Jewish Health's improving financial and operating profile, which is buoyed by NJH's recent expansion of outpatient service lines and investments in clinical and research faculty. At fiscal year-end (FY) 2009, NJH posted an operating loss of $1.9 million, exceeding budget and comparing favorably to the $5.3 million loss in the prior year. In addition, NJH's balance sheet metrics show improvements to liquidity as unrestricted cash and investments rose in FY 2009 and through the three-month interim period. At Sept. 30, 2009, NJH had $46 million in unrestricted cash and investments, equating to 108 days cash on hand and a cash-to-debt position of 93%, up from 84 days and 64% at June 30, 2008. The rebounding profitability and liquidity stem from NJH's 2007 strategic plan in which management made significant investments in personnel and capital infrastructure as it expanded NJH's outpatient service lines and enhanced its research capabilities.

Other credit strengths include NJH's stability in research funding, world-renowned reputation, manageable debt burden, and favorable growth in outpatient volumes. Federal grant revenue, which accounts for 30% of operating revenues and consists mainly of National Institute of Health (NIH) funding, totaled $48.7 million in FY 2009, up from $40.1 million in the prior year. Fitch believes the stability of federal grant revenue is attributable to NJH's reputation as the top-ranked respiratory medicine research institution as ranked by US News and World Report. NJH's debt burden is manageable as demonstrated by maximum annual debt service (MADS) as a percentage of revenue of 1.9% in FY 2009, and compares favorably with Fitch's 'BBB' category median of 3.5%. As reported in Fitch's previous rating action commentary, NJH is reaping the benefits of shifting its resources to outpatient activity as evident by the large jump in clinic visits to 67,210 in FY 2009, up from 39,980 in FY 2007.

The Stable Rating Outlook reflects Fitch's belief that NJH will continue to benefit from its strategic plan, will strive to achieve near break-even operating profitability in FY 2010, and continue to strengthen its balance sheet.

National Jewish Health is a nationally recognized academic medical center located in Denver, CO, specializing in pulmonary, allergic, cardiac, and immunologic disease. Total revenue in FY 2009 was approximately $177.3 million. NJH covenants to provide only annual disclosure to fixed-rate bondholders and does not covenant to provide any disclosure to the series 2005 bondholders, which Fitch views negatively.

Additional information is available at 'www.fitchratings.com'.

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