Fitch Update: Hurricane Katrina's Effect on Gulf Area Hospitals.

NEW YORK -- Three of Fitch's rated hospitals have been directly affected by Hurricane Katrina: Ochsner Clinic Foundation (revenue bonds rated 'A-' by Fitch) in New Orleans, LA; Memorial Hospital at Gulfport (revenue bonds rated 'A' by Fitch) in Gulfport, MS; and Forrest County General Hospital (revenue bonds rated 'A-' by Fitch) in Hattiesburg, MS, 130 miles northeast of New Orleans. Fitch has placed the ratings of Ochsner Clinic Foundation and Memorial Hospital at Gulfport on Rating Watch Negative due to the unprecedented infrastructure damage and evacuation efforts within each hospital's service area, as well as the uncertainties involved in the receipt of insurance and Federal Emergency Management Agency (FEMA) monies. This indicates the possibility, but not certainty, of a rating downgrade over the short term. Details related to the damage sustained, operations, bond security provisions, and insurance for each of these entities are outlined below.

-- Ochsner Clinic Foundation: Fitch was unable to contact management at Ochsner Clinic Foundation (Ochsner) but has learned from the hospital's website ('www.oschner.org'), other public sources, the media, and the hospital's financial advisors that the hospital is operating. The main hospital incurred no structural damage but did have water damage. An unknown number of Ochsner's 24 service-area clinics will need to be rebuilt. Security provisions for the bonds include a gross revenue pledge and mortgage pledge. In addition, there is a debt service reserve fund. According to the Series 2002 bond documents, the hospital covenants to maintain flood, windstorm and business interruption insurance. Fitch cannot verify at this time whether Ochsner has been in compliance with these covenants. Approximately 46% of Ochsner's debt is insured by MBIA Insurance Corp. (MBIA). Unaudited results for the facility as of June 30, 2005 show a strong liquidity position of 176 days, with cash to debt around 110%. Operations remain unprofitable with a negative operating margin of .9%. Coverage of debt service through six months of fiscal 2005 stands at 2.5 times (x).

-- Memorial Hospital at Gulfport: Fitch was unable to reach management regarding the status of the facilities. Memorial Hospital at Gulfport's (Memorial) financial advisors have informed Fitch that the hospital sustained modest damage, and the hospital is operating and treating patients. While the hospital sustained some window, wall and roof damage, there was no rising water damage and minimal interior damage. The bonds are secured by a pledge of gross revenues and there is a debt service reserve fund. While much of Memorial's insurance coverage does not extend to named storms, Memorial maintains insurance for wind damage. With a deductible of approximately $1 million, the policy is expected to cover replacement costs related to much of the damage incurred by the hospital. Recoveries from business interruption insurance are expected to be modest and mostly limited to the hospital's urgicare clinics. Approximately 39% of Memorial's debt is insured by MBIA. As of fiscal year-end 2004, Memorial's key financial indicators are in line with or exceed Fitch's 'A' medians.

-- Forrest County General Hospital: Fitch contacted management, who indicated that the hospital sustained little damage and that the surrounding areas were not severely affected by the hurricane. All of Forrest County's debt is insured by Financial Security Assurance Inc. Fitch believes that the effects of the hurricane will have no adverse impact on Forrest County's rating.

In addition, Fitch contacted Lafayette General Medical Center (revenue bonds rated 'A-') in Lafayette, LA and East Alabama Medical Center (revenue bonds rated 'A') in Opelika, AL. Both of these hospitals reported that no damage was sustained as a result of the hurricane.

Fitch is continuing to monitor the impact of the hurricane and will provide additional commentary when more information is available. (Outstanding debt for Ochsner Clinic Foundation and Memorial Hospital at Gulfport is listed below.)

Outstanding Debt:

Ochsner Clinic Foundation (underlying and long-term rating of 'A-'):

-- $159,940,000 Louisiana Public Facilities Authority (LA) (Ochsner Clinic Foundation Project) revenue bonds series 2002A (insured: MBIA Insurance Corp., insurer financial strength rated 'AAA' by Fitch.)

-- $189,060,000 Louisiana Public Facilities Authority (LA) (Ochsner Clinic Foundation Project) revenue bonds series 2002B

Memorial Hospital at Gulfport (underlying and long-term rating of 'A'):

-- $59,306,000 Gulfport (MS) (Memorial Hospital at Gulfport Project) hospital revenue bonds series 2001A;

-- $33,832,000 Gulfport (MS) (Memorial Hospital at Gulfport Project) hospital revenue refunding & improvement bonds series 1994A (insured: MBIA Insurance Corp.);

-- $3,766,000 Gulfport (MS) (Memorial Hospital at Gulfport Project) hospital revenue refunding bonds series 1994B (insured: MBIA Insurance Corp.).

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.