NEW YORK – Standard & Poor's Ratings Services lowered its long term and underlying ratings to 'A' from 'A+' on Maryland Health & Higher Educational Facilities Authority's series 1993 and 2001 bonds, issued for Greater Baltimore Medical Center (GBMC), reflecting financial performance in fiscal 2011 that failed to meet Standard & Poor's expectations and an overall credit profile more commensurate with an 'A' rating than an 'A+' rating.

Standard & Poor's also assigned its 'A' long-term rating and stable outlook to the authority's $69.1 million revenue refunding bonds series 2011, issued for GBMC.

"When we affirmed GBMC's 'A+' ratings in 2010, we noted that the key credit characteristics, while stable, left little flexibility at the 'A+' rating level for an unexpected decline in any key financial metric. We also noted very strong first quarter operating performance, which we expected to continue. Since then, operating income has softened, and while still positive, we no longer believe that GBMC's earnings performance will significantly exceed historical levels, which was necessary, in our opinion, to maintain the rating. Our current view is that GBMC's overall credit characteristics, including its business position and financial profile, are more commensurate with an 'A' rating than an 'A+' rating," said Standard & Poor's credit analyst Liz Sweeney. "On a positive note, we view GBMC's current plan of finance favorably, due to its elimination of direct purchase debt that had a mandatory tender in 2012, and the reduction in maximum annual debt service. Additionally, we believe that there is greater flexibility at the lower rating level for modest but unexpected negative credit events. Accordingly, we do not foresee a lowering the rating over the stable outlook's one- to two-year time frame. We could consider a higher rating if operating performance measurably and consistently improves, while capital needs remain modest," Sweeney added.

The ratings reflect Standard & Poor's view of GBMC's good liquidity, adequate business position in a suburban market with a large employed-physician base, consistently positive operating margins, strong philanthropic history, consistently strong debt service coverage, and low debt burden.

Standard & Poor's believes that soft volume and an increasingly competitive environment, as exemplified by the capital improvement programs of competitor hospitals and the slight decline in GBMC's inpatient market share over the past couple of years, are negative credit considerations.

GBMC, a wholly-owned subsidiary of GBMC HealthCare Inc., is a 298-licensed-bed acute-care regional medical center located in Towson, Md., the capital of Baltimore County. Other subsidiaries of GBMC HealthCare include a hospice, an employed-physician division, a fundraising foundation, a malpractice-insurance captive, medical office buildings, and various investments in health care-related businesses and joint ventures.