New York, December 06, 2012 -- Moody's Investors Service has affirmed the Baa1 underlying and long-term ratings assigned to Conemaugh Health System's Inc. (CHS) bonds issued through the South Fork Municipal Authority. The rating outlook remains stable. Simultaneously, we have affirmed the Baa1 underlying ratings on the bonds outstanding for Memorial Medical Center (MMC), Windber Medical Center (WMC) and Good Samaritan Medical Center of Johnstown (GSMC) - all of which are parity to CHS. The rating action applies to $199.2 million of rated debt listed at the conclusion of this report.

SUMMARY RATING RATIONALE

The rating affirmation reflects CHS' dominant market position, stable volume trends and revenue growth, that have translated into solid operating performance, growth in cash and lower leverage measures in FY 2012. The rating remains tempered by a high dependence on government payers (52.0% Medicare and 14.4% Medicaid) characteristic of operating in a service area with weaker demographics. The stable rating outlook reflects our belief that management's focus on physician recruitment will allow CHS to maintain its volumes and solid financial trajectory in the future.

STRENGTHS

*Commanding, stable market position in primary service area of 63% with limited local competition

*Multiple year trend of favorable operating performance translating into improved debt cushion; cash to debt grew to 92% in FY 2012 from 80% in FY 2011

*Improved liquidity to over $215 million or 167 days reflecting solid performance and investment market gains; moderate direct debt burden (92% cash to debt as compared with median of 91.6%)

CHALLENGES

*Service area exhibits relatively weak demographics, with overall declining population and above-average segment of ages 65 and older, evidenced by reliance on Medicare and Medicaid that is growing and higher than industry and Baa1 medians

*Growing pension liability; comprehensive debt raises debt burden, bringing cash to comprehensive debt to 67%. (compared to 92% cash to direct debt)

*Rising average age of plant (13.9 years at FY 2012) following multiple years when capital spending remained under 1.0 times depreciation (capital spending was 1.0 times depreciation in FY 2012)

OUTLOOK

The stable rating outlook reflects our belief that management's focus on physician recruitment will allow CHS to maintain its volumes and solid financial trajectory in the future.

WHAT COULD MAKE THE RATING GO UP

*Continued growth in volumes resulting in solid revenue growth; sustained improvement of operating profitability and cash flow generation; improved debt coverage level and liquidity ratios

WHAT COULD MAKE THE RATING GO DOWN

*Decline in liquidity and related measures; prolonged volume reductions; weakening of operating performance

PRINCIPAL METHODOLOGY USED

The principal methodology used in this rating was Not-For-Profit Healthcare Rating Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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Carrie Sheffield Associate Analyst Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Beth I. Wexler VP - Senior Credit Officer Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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