The Chesapeake Regional Medical Center this week was upgraded to A2 from A3 by Moody’s Investors Service based on its consistently strong balance sheet. The action affects $39.4 million of fixed-rate debt issued in 2004.

The Chesapeake Hospital Authority is the medical center’s governing board and issuer. The hospital has had double-digit cash flow margins over the last five years and had 275 days cash on hand at the end of fiscal 2009. It has low exposure to Medicaid claims, which accounted for 8.6% of gross revenues in fiscal 2009.

However, Chesapeake’s operating cash-flow margin declined to 9.3% through the first half of fiscal 2010. Chesapeake is also in a “highly competitive” health care market in eastern Virginia, Moody’s noted.

The upgrade is notable given the financial strains on nonprofit hospitals last year. In a report last month, Moody’s said in 2009 it downgraded 54 nonprofit health care providers and upgraded 21 for a ratio of 2.6 to 1. The ratio for the sector in 2008 was 2.0 to 1, though Moody’s said the number of downgrades began to ease in the second half of 2009.

Based on a letter of credit from SunTrust Bank Inc., Standard & Poor’s in February downgraded to BBB-plus from A-minus the rating on $40.9 million of Chesapeake’s Series 2001A variable-rate revenue bonds

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