Fitch Ratings has assigned an 'A+' rating to the approximately $408.9 million series 2015A and $91.7 million series 2015B bonds issued by the Illinois Finance Authority on behalf of Rush University Medical Center Obligated Group (Rush). In addition, Fitch affirms the 'A+' rating on the following outstanding bonds issued on behalf of Rush:

--$92,800,000 revenue bonds series 2006B;

--$50,000,000 variable rate demand revenue bonds series 2008A;

--$408,625,000 revenue bonds series 2009A-D.

The Rating Outlook has been revised to Positive from Stable.

Bond proceeds will be used to refinance series 2006B bonds and series 2009A-D bonds for savings, to remove restrictive covenants and security associated with the debt, and pay for certain costs of issuance. Proforma MADS is estimated to be $47.4 million, down from the current MADS of $56.6 million. The bonds are expected to price the week of January 12 via negotiation.

SECURITY

Bond payments are secured by a pledge of the gross revenues of the obligated group.

KEY RATING DRIVERS

ROBUST PROFORMA COVERAGE: The Positive Outlook is driven by Rush's strong financial profile, highlighted by solid operating profitability and a strengthened balance sheet through moderated capital spending and a reduction in debt service. Pro forma maximum annual debt service (MADS) of $47.4 equals 5.5x and 6.6x coverage of pro forma MADS by EBITDA in fiscal 2014 and Sept. 30, 2014 (three month interim), respectively, well exceeding Fitch's 'A' category median of 3.8x.

CONSISTENTLY STRONG PROFITABILITY: Operating profitability has been consistently robust, meeting or exceeding Fitch's 'A' category medians for the last five years. Operating EBITDA in fiscal 2014 and through the three month interim ending September 30, 2014 was 12.4% and 14.2%, respectively, compared to Fitch's 'A' category median of 9.5%.

IMPROVING LIQUIDITY: The balance sheet has continued to grow as Rush has completed its $1.1 billion transformation project and capital spending levels have moderated over the last few years. Unrestricted cash and investments equaled $1.03 billion at Sept. 30, 2014 (three-month interim), equaling 203.2 days cash on hand and 159% cash to debt. All key liquidity metrics meet or exceed Fitch's 'A' category medians.

SOLID PHYSICIAN ALIGNMENT: Rush employs about half of its medical staff and has engaged in various strategic relationships with physician practices including Midwest Orthopaedics at Rush and DuPage Medical Group, a multi-specialty group with over 425 physicians.

RATING SENSITIVITIES

CONTINUED LIQUIDITY IMPROVEMENT: Further improvement to the balance sheet combined with sustained strong operating profitability and solid debt service coverage levels will likely lead to positive rating pressure over the near term.

CREDIT PROFILE

Rush operates an academic medical center and two community hospitals located in Chicago and the surrounding suburbs with a total of 1,237 licensed beds. Additional operations include a medical group with 603 employed physicians as of September 30, 2014, a rehabilitation and skilled nursing facility, research facilities and a university with over 2,000 students. Total operating revenues equaled $1.97 billion in fiscal 2014.

Despite operating in the highly competitive Chicago market, Rush benefits from an excellent clinical reputation with strong market shares in key specialties, a highly aligned medical staff and its university with schools of medicine, nursing, allied health and biomedical research. Further, Rush's competitive position was enhanced with the opening of its new patient tower at its flagship academic medical center in January 2012.

GROWING LIQUIDITY

Rush's liquidity position has rebounded after significant spending on its master facilities plan and metrics now meet or exceed Fitch's 'A' category medians. Unrestricted cash and investments at September 30, 2014 was $1.03 billion and translated to 203.2 days cash on hand, 24.9x pro forma cushion ratio and 159% cash to debt, all favorable against Fitch's respective 'A' category medians of 199.2 days, 17x and 131.2%. Continued improvement to its liquidity position would likely result in positive rating pressure. Capital spending is budgeted at about $104 million in fiscal 2015 and $141 million in fiscal 2016, which believes is manageable. There are no significant debt plans in the near term.

CONSISTENTLY STRONG PROFITABILITY

Operating cash flow has been consistently strong over the last few years due to solid revenue growth from increased volumes, especially in key service lines, favorable contracting and continued focus on expense management and supply chain savings. Operating margin was a solid 4.2% ($82.5 million) in fiscal 2014, 4.2% in fiscal 2013 and 3.9% in fiscal 2012. Operating EBITDA margin was a strong 12.4% ($243.9 million) in fiscal 2014, 13.6% in fiscal 2013 and 11.8% in fiscal 2012, compared to the 'A' category median of 9.5%. There was a significant increase in depreciation and interest expense in fiscal 2013, reflecting the first full year with the new flagship hospital open. Strong profitability is also driven by Rush's strong physician alignment and expanding partnerships and affiliations, including its TeleStroke, Cancer and Perinatal Networks.

DEBT PROFILE

Total proforma outstanding debt will be $622.4 million and is conservative with 84% fixed, 15% swapped to fixed and 6% variable rate with a letter of credit from Northern Trust that expires in February 2017. Rush has two fixed payor swaps that have a total notional amount of $92.7 million. No collateral is being posted at this time.

ROBUST DEBT SERVICE COVERAGE

Rush's moderate debt burden and strong profitability have resulted in robust debt service coverage, which will improve further with the refinancing of existing debt for savings. Pro forma MADS of $47.4 million equals a light 2.4% of fiscal 2014 revenue relative to Fitch's 'A' category median of 3.1%. Pro forma MADS coverage by EBITDA in fiscal 2014 was a healthy 5.5x and improved further to 6.6x at Sept. 30, 2014 (three-month interim).

DISCLOSURE

Rush covenants to disclose audited financial statements within six months of the end of the fiscal year and quarterly reports no later than sixty days after the end of each fiscal quarter. Rush's disclosure practices are among the best in Fitch's health care portfolio with quarterly and annual disclosure consisting of balance sheet, income statements and cash flow statements, utilization statistics and a management discussion and analysis.

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

Applicable Criteria and Related Research:

--'Nonprofit Hospitals and Health Systems Rating Criteria' (May 30, 2014).

Applicable Criteria and Related Research:

U.S. Nonprofit Hospitals and Health Systems Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=746860

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=964876

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