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NEW ENGLAND MEDICAL CENTER HOSPITALS REVENUE BONDS RATED 'A+' BY FITCH -- FITCH FINANCIAL WIRE --

NEW ENGLAND MEDICAL CENTER HOSPITALS REVENUE BONDS RATED 'A+' BY FITCH
 -- FITCH FINANCIAL WIRE --
 NEW YORK, Feb. 7 /PRNewswire/ -- The Massachusetts Health and Educational Facilities Authority's new issue of $110 million revenue bonds, Series F, issued for New England Medical Center Hospitals, Inc. (NEMCH), is rated 'A+' by Fitch. Outstanding parity issues of $81.3 million 1986 Series D and $25.4 million 1988 Series E revenue bonds are also rated 'A+.' The credit trend is stable.
 The Series F bonds will help finance a major construction project that will add approximately 486,000 gross square feet of patient service area.
 The rating reflects the excellent management team at NEMCH. Despite a restrictive reimbursement environment, NEMCH has generated good cash- flow; in fiscal 1991, coverage of pro forma maximum annual debt service totaled a very strong 2.1 times (x). Balance sheet strength includes $100 million in unrestricted investments, or 129 days cash on hand, at the end of fiscal 1991. NEMCH has assets of another $80 million in restricted investments. A substantial equity contribution of approximately $41 million will lower this cash position somewhat but rapid replenishment should occur once the project comes on line. Steady growth in demand for inpatient and outpatient services has occurred. The reasonable financial forecast assumes a continuation of this growth in demand. Capacity constraints help drive the need for this major project. Projections call for somewhat weakened operating margins as the major capital additions come on line and interest costs become expensed instead of capitalized.
 NEMCH enjoys a regional reputation for tertiary medical diagnostic and treatment services. In 1990, NEMCH received the sixth largest share of hospital-based research funds awarded by the National Institutes of Health. NEMCH acts as the primary clinical affiliate of Tufts University School of Medicine. The chief of each clinical service at NEMCH also serves as chairman of the corresponding academic department at the medical school. Impressive medical staff growth has occurred.
 Concerns center on the number of high caliber competitors. While the Boston-area teaching hospitals, NEMCH included, have for the most part enjoyed strong and increasing demand for their services, a predatory market share climate exists. This market climate creates new challenges for management. NEMCH undertakes this project while several competitors conduct their own extensive building projects in a effort to ultimately garner more patients.
 NEMCH's revenue raising flexibility, from both a competitive and regulatory viewpoint, mitigates this concern. Finally, a less state- regulated environment for negotiating managed care contracts creates near term uncertainty, although on a small degree for NEMCH because of its established contracting history.
 -0- 2/7/92
 /CONTACT: Edward C. Merrigan of Fitch, 212-908-0513/ CO: New England Medical Center ST: Massachusetts IN: HEA SU: RTG


CK -- NY071 -- 7931 02/07/92 16:37 EST
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Publication:PR Newswire
Date:Feb 7, 1992
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