Fitch: For-Profit Hospitals 3rd Quarter 2007 Marked by Weak Volumes and Strong Pricing.

NEW YORK -- In a new special report, Fitch Ratings notes that during the third quarter of 2007, the for-profit hospital industry experienced continued pressure on volumes and margins offset by strong pricing. After turning negative for the first time in a year last quarter, volumes declined even

further during the third quarter, as measured by same store admissions growth. HCA, Inc. (HCA) and Tenet Healthcare Corp. (Tenet) were again among the weakest volume performers; however, this quarter Community Health Services, Inc. (Community) recorded the largest loss in both same store admissions and adjusted admissions. Across the industry, Fitch believes that volumes have been pressured by increased competition from specialty hospitals and a shift in procedures from the inpatient setting into outpatient settings or even the doctor's office. In addition, growing competition from non-profit hospitals has affected providers in certain markets, such as Palm Beach, Florida.

In contrast to volumes, the industry did see some relief on bad debt expense this quarter. However, this trend was somewhat distorted by the presence of special charges recorded during the third quarter of 2006. Furthermore, overall uncompensated care (bad debt plus charity care and discounts to the uninsured) remained high at more than 18% of adjusted revenues, and increased sequentially from the second quarter. Fitch believes elevated levels of bad debt and uncompensated care will continue to challenge the industry and pressure margins for the foreseeable future.

Although providers continue to be challenged by weak volumes and high levels of bad debt, pricing remains an important source of growth for the industry. During the third quarter, same store net inpatient revenue per admission and same store net revenue per adjusted admission both grew over 5%. Fitch believes this growth continues to be driven in part by strong managed care pricing, increased acuity and favorable government reimbursement. Fitch expects managed care pricing to remain favorable through 2008, with average rate increases in the mid- to high- single digits. However, there may be some unfavorable changes in Medicare and Medicaid reimbursement beginning in the fourth quarter of 2007.

More detailed information on the impact of the Medicare changes is available in the special report, 'Fitch's For Profit Hospital Industry Quarterly Diagnosis: Third Quarter, 2007.' In addition, the report provides a discussion of the key trends in volumes and bad debt expense, as well as detailed financial and operating metrics for the industry. The full report is available on the Fitch Ratings web site at www.fitchratings.com.

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.