Fitch Ratings has affirmed the 'BB+' rating on the following bonds issued by the Medical Center Hospital Authority on behalf of Columbus Regional Healthcare System (dba Columbus Regional Health, CRH):

--$102.7 million series 2008;

--$167.5 million series 2010.

The Rating Outlook is Stable.

CRH also has an additional $22.4 million bank loan which is on parity with the outstanding bonds and not rated.

SECURITY

The bonds are secured by a pledge of net revenues, a funded debt service reserve for both the 2010 and 2008 bonds, and a leasehold agreement on certain obligated group property.

KEY RATING DRIVERS

SHARP IMPROVEMENT IN PROFITABILITY: For the nine-months ended March 31st, 2016 CRH has generated sharp improvement in operating profitability with operating and operating EBITDA margins of 2.2% and 11.9%, respectively, compared to a negative 8.9% operating margin and a 2.2% operating EBITDA margin in fiscal 2015. The improvement in performance reflects cost savings from initiatives implemented in the second half of fiscal 2015, which extracted approximately $46.7 million of expenses on an annualized basis.

HIGHLY COMPETITIVE MARKET: CRH operates in a very competitive market place, which is characterized by a modest demographic profile, a dominant managed-care payor, and a large competitor; all factors which Fitch believes constrain CRH's operating flexibility. From 2012 - 2014, CRH experienced erosion in inpatient market share in the primary service area, from 58% to 45%. Moreover, CRH's main competitor, St Francis Hospital was acquired by LifePoint Health, Inc. (Senior Notes rated 'BB/RR4'/Outlook Stable) in January 2016 which may further increase competition for patients in the market.

LIGHT LIQUIDITY METRICS: At March 31, 2016 CRH had unrestricted cash and investments of $150.0 million, which is unchanged from fiscal year end 2015 and equates to 138 days cash on hand, a 5.7x cushion ratio and 50% cash to debt.

ELEVATED DEBT BURDEN: Several of CRH's debt metrics are elevated relative to Fitch's 'BBB' category medians. MADS of 5.9% of annualized FY 2016 revenues and debt to capitalization of 71.6% at March 31st are elevated relative to Fitch's below investment grade medians. However, the improved interim profitability has resulted in improved coverage of maximum annual debt service by EBITDA of 2.2x through the nine month interim period.

RATING SENSITIVITIES

SUSTAINED IMPROVEMENT: Columbus Regional Health is developing a longer-term clinical efficiency improvement plan which has an opportunity target of $23.7 million and is expected to be realized in fiscal 2017 and 2018. Sustainment of CRH's improved operating performance resulting in debt service coverage above 2.0x could lead to a positive rating action.

ON-GOING CAPITAL NEEDS: Capital spending is expected to increase to $25 - $30 million annually with strategic projects at its Northside and Midtown campuses, a portion of which may be funded with debt. Fitch believes CRH's debt capacity is limited unless it can sustain recent improved operating profitability.

SECURED NECESSARY WAIVERS: CRH received waivers from the bond insurer and the bank for covenant violations under the bond and bank documents. Additionally, CRH will need to refinance/ extend its $22.4 million taxable bank note which matures in September 2016. Compliance with operating covenants and successful refinancing/extending the taxable bank note would be required before an upward movement in the rating.

CREDIT PROFILE

CRH is a health care system with a total of 732 licensed beds and $430.9 million of operating revenues (fiscal 2015) located in Columbus, GA. The system includes 632-bed Midtown Medical Center, 100-bed Northside Medical Center, the John B. Amos cancer center, a foundation, a medical group, and other various subsidiaries and services. The obligated group represents 96.9% of total assets and 99.7% of total operating revenues.

IMPROVED INTERIM PROFITABILITY

Through the nine-month interim period, CRH has generated sharply improved operating profitability relative to fiscal 2015 and the 2014 interim period. Through March 31st, CRH generated operating income of $7.1 million on total revenues of $323.8 million, or a 2.2% operating margin which is much improved from the prior year period's $21.7 million loss from operations on total revenues of $328.6 million. Management attributes the improved results to its successful cost containment initiatives which reduced expenses by $46.7 million on an annualized basis. The cost reductions were focused in salaries and benefits ($18.2 million), purchased services, supplies and pharmacy ($8.3 million) and other areas.

Further, CRH has engaged a management consultant focused on clinical process improvement which has identified over $23 million of performance improvement opportunities. Generating and sustaining the identified cost savings and efficiencies would be a key factor in upward movement in the rating.

Fitch notes that CRH receives material supplemental funding revenues. From 2012 - 2014, CRH received annual supplemental funding revenues of between $37.1 million and $39 million. In fiscal 2015, supplemental funding revenues were $41.9 million. Major funding programs are Medicare and Medicaid disproportionate share hospital (DSH) payments ($24.3 million in FY 2015) and the Muscogee County Indigent Care Program which is sourced from a non-repealable tax levy of

3 mills ($13.4 million in FY 2015). While funding levels have increased slightly over the last few years and are not expected to change in the near term, it inherently makes the corporation vulnerable to changes in state and federal programs.

WAIVERS SECURED

In fiscal 2015, CRH violated its debt service coverage and debt to capitalization covenants. CRH secured waivers from both the bond insurer and the bank lender. Fitch expects that CRH will be in compliance with its debt service coverage ratio going forward; however, CRH may continue to miss its debt to capitalization requirement of 65%. CRH's debt to capitalization ratio has been negatively impacted due to increased pension liabilities and the write down of goodwill related to the closure of Doctor's Hospital. CRH expects to obtain waivers from the bank and the bond insurer related to any additional missed covenants. The $22.8 million bank note matures in September 2016. Fitch expects CRH to successfully extend or refinance the debt.

LIGHT LIQUIDITY

Liquidity has declined from FYE 2014 despite the sale of a medical office building in fiscal 2015, which generated $34.5 million in cash. Unrestricted cash and investments at March 31, 2016 was $150 million, which remains unchanged from FYE 2015 and $166 million at FYE 2014.

Growth in unrestricted cash and investments has been constrained in the nine-month interim period due to a $2.7 million swap termination payment, $10 million related to the settlement of a 'qui tam' lawsuit in October 2015 and repayment of a $6.2 million draw under its bank line of credit.

The qui tam settlement totals $29 million, with $10 million paid in fiscal 2016 and an additional $3 million a year to be paid over the next five years. The remaining $4 million is variable depending on certain performance metrics.

HIGHLY COMPETITIVE MARKET

CRH operates in a very competitive market place, which is characterized by a modest demographic profile, a dominant managed-care payor, and a large competitor; all factors which Fitch believes constrain CRH's operating flexibility. Household income and the unemployment rate in Columbus lag both the state and national average. The weak demographic profile of CRH's service area is reflected in a payor mix that is composed of 77% Medicare, Medicaid and self-pay payors.

Furthermore, the market is highly competitive. St Francis Hospital and CRH had near equal inpatient market share positions in 2014. However, from 2012 - 2014, CRH has experienced erosion in inpatient market share in the primary service area from 58% to 45%. While CRH maintains leading market positions in women's and children's and oncology, St Francis has strong market positions in cardiovascular, orthopedics and neurosciences. CRH's main competitor, St Francis Hospital was acquired by LifePoint Health in January 2016 which may further increase competition for patients in the market. Finally, the commercial payor market is dominated by Blue Cross/Blue Shield which has a 70% market share in Georgia and limits both CRH's and St Francis' negotiating leverage.

Over the longer term, CRH is expected to develop its Northside campus, which benefits from a service area with healthy demographic indicators and expands CRH's geographic reach. This should alleviate some of CRH's exposure to Medicaid, which is a high [20.9%] of fiscal 2015 gross revenues.

DEBT PROFILE

As of March 31, 2016, CRH had $307.9 million in total debt, including all notes and capital leases. The $270.2 million in bonded debt is fixed rate, while the $22.8 million in bank notes are variable rate, with a Sept. 1 2016 renewal date. Maximum annual debt service per the indenture and bank calculation is equal to $25 million, which includes approximately $4.5 million in notes payable and capital leases. CRH has a $10 million line of credit for cash flow needs, which had no draws outstanding as of March 31st, compared to $6.6 million outstanding at FYE 2015.