Fitch Places Community Medical Center, California 'BBB' Rating on Watch Negative.

SAN FRANCISCO -- Fitch Ratings has placed the 'BBB' rating on the approximately $264 million Central California Joint Powers Health Financing Authority certificates of participation (COPs) (Community Hospitals of Central California Project) on Rating Watch Negative.

The Rating Watch Negative is due to the recent resignations of the CEO and COO during what Fitch believes to be a period of significant operational uncertainty, which was highlighted by Community Medical Center's (CMC) large operating loss in fiscal 2004, declining cash position, and sizeable capital needed to equip the new burn and trauma facility on the Community Regional Medical Center (CRMC) campus. CMC lost $8.3 million from operations in fiscal 2004, falling well behind its $3.7 million budgeted operating loss. The loss is attributed primarily to the $10.3 million operating deficit of the new Fresno Heart Hospital (FHH), which opened in October 2003. The negative operating results combined with significant capital investment in the CRMC campus have resulted in additional liquidity constraints. Days cash on hand fell to 62.5 days and cash to debt declined to 36.3% at Feb. 28, 2005 from 78.4 days and 39.9% at Aug. 31, 2003, respectively. Fitch believes CMC's weak liquidity will continue to be pressured by the need to build out shelled space within existing facilities on the CRMC campus to add bed capacity to support the new CRMC burn and trauma facility and allow these services to be transferred from the University Medical Center. However, the timing of such buildout and subsequent transfer of services remains uncertain given CMC's limited financial flexibility.

Fitch notes systemwide operating income improved to negative $408,000 through the six months ended Feb. 28, 2005 compared to negative $2.7 million through the same period in the prior year. In addition, management reports that FHH is operating at near breakeven. Fitch views the improving financial performance positively but notes continued gains could be hampered by the recent turnover in management. A national search is underway to fill the CEO position and Fitch expects to meet with the new management team sometime in July, at which time Fitch will further review the credit.

Headquartered in Fresno, California, CMC operates a full-service health care system with three hospitals (732 staffed beds), three long-term care facilities, and other related entities. CMC's fiscal 2004 total revenues were $589 million. CMC covenants to provide quarterly information to bondholders. Quarterly disclosure to Fitch has been adequate and includes a balance sheet, income statement, and statement of cash flows.

Outstanding Debt:

-- $65,095,000 Central California Joint Powers Health Financing Authority COPs (Community Hospitals of Central California Project), series 2001;

-- $123,780,000 Central California Joint Powers Health Financing Authority COPs (Community Hospitals of Central California Project), series 2000;

-- $75,565,000 Central California Joint Powers Health Financing Authority COPs (Community Hospitals of Central California Project), series 1993.