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Fitch Affirms Martha Jefferson Hospital and MJH Foundation's (VA) Rev Bonds at 'A+'; Outlook Stable.

NEW YORK -- Fitch Ratings takes the following rating action on Martha Jefferson Hospital and MJH Foundation (MJH), Virginia as part of its continuous surveillance effort:

--Approximately $74 million Industrial Development Authority of Albemarle County, VA fixed-rate revenue bonds, series 2002 and 2003, affirmed at 'A+'.

--Approximately $161 million Economic Development Authority of Albemarle County, VA variable-rate demand bonds, series 2008A-D underlying rating affirmed at 'A+'.

Additionally, Fitch withdraws the 'A+' rating on $51.5 million Industrial Development Authority of Albemarle County, VA fixed-rate revenue bonds, series 2007 as the bonds were never issued.

The Rating Outlook is Stable.

RATING RATIONALE:

--Strong financial profile characterized by excellent operating profitability, solid debt service coverage, and healthy cash and investment position.

In fiscal year (FY) 2009, MJH posted $21.2 million of operating income resulting in a 9.4% operating margin and 18.9% operating EBIDA margin. FY09's performance resulted in record earnings and its sixth straight year of profitability improvement. Earnings are driven by surging volumes, solid rate increases, and good supplies and nursing staff expense controls.

Coverage of maximum annual debt service (MADS) remains strong at 3.7 times (x) in FY09. This compares favorably to Fitch's 'A' category median of 3.5x MADS coverage.

Despite investment losses and elevated capital spending, unrestricetd cash and investments increased to $208 million in FY09 from $198 million in FY07. This amounts to 432 days cash on hand (DCOH) and 90.5% of long-term debt versus Fitch's 'A' category medians of 171 DCOH and 113.4% of long-term debt.

Strong financial management is also evidenced by low days in accounts receivable balances of 33.6 days, versus the Fitch 'A' category median of 47.8 days.

--Demographically favorable service area of Albemarle County, VA. Located in Charlottseville, MJH enjoys operating in a region with strong economic indicators highlighted by low unemployment, above-average wealth and income levels, and status as a popular retirement destination.

--Growing and solid market position. MJH secures a growing 37% share of the inpatient market, second only to the University of Virginia Medical Center's 41.4% inpatient market share. Market share growth is being driven by medical staff additions, particularly in cardiac and orthopedic service lines.

--Moderately high debt position and aggressive capital structure; 5.3% MADS as a percent of revenue and 52.5% debt to capital are weaker than Fitch's 'A' category medians of 3.1% and 40.3%, respectively. Moreover, MJH has nearly $161 million of variable-rate demand bonds with put features. Regardless, this concern is tempered by relatively flexible repayment terms in the event of a draw on the letters of credit and Martha Jefferson's ample liquidity balances.

KEY RATING DRIVERS:

--Timely and cost-effective completion of its replacement hospital project. The series 2008 bonds partially funded a new 176-bed hospital located about two miles east of its existing facility. Currently, the $275 million project is slightly below budget, about 53% complete, and expected to be finished in late 2011.

--Market position maintenance given the close proximity and presence of a strong competitor in the University of Virginia Medical Center.

SECURITY:

The bonds are secured by a gross receipts pledge.

CREDIT SUMMARY:

The rating reflects MJH's strong financial profile, economically favorable service area, and solid market position. Offsetting factors include a moderately high debt position and aggressive capital structure.

MJH is the largest subsidiary of Martha Jefferson Health Services Corporation, which also includes two foundations and a medical practice management company. MJH and MJH Foundation are the only obligated group members. MJH is a 176-bed acute care facility located in Charlottesville, VA. Total system revenues in FY09 amounted to $226.7 million. Martha Jefferson covenants to disclose quarterly and annual utilization and financial statements to the Municipal Securities Rulemaking Board's EMMA system.

Applicable criteria available on Fitch's web site at 'www.fitchratings.com':

'Revenue-Supported Rating Criteria', dated Dec. 29, 2009.

'Nonprofit Hospitals and Health Systems Rating Criteria', dated Dec. 29, 2008.

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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.
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Comment:Fitch Affirms Martha Jefferson Hospital and MJH Foundation's (VA) Rev Bonds at 'A+'; Outlook Stable.
Publication:Business Wire
Geographic Code:1U2NY
Date:Feb 4, 2010
Words:750
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