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Market Leadership and Strong Financials Prompt Upgrade in Moody's Rating

Houston, Texas, November 29, 2002 -- Moody’s Investors Service announced this week that it has upgraded the rating on Memorial Hermann Healthcare System to A2 from A3. The rating outlook continues to be stable.

“This action affirms our solid financial standing and is a direct reflection of our leadership position in the marketplace,” said Dan Wolterman, president and CEO, Memorial Hermann Healthcare System. “The ratings are an independent verification from the financial markets that our overall strategy is serving the community extremely well.”

The rating upgrade to A2 reflects the impressive financial performance which began in fiscal year (FY) 2001 and continued in FY 2002 and interim FY 2003, resulting in favorable debt service coverage.

“Much of the credit for that improvement goes to our employees and physicians,” Wolterman said. “Faced with one of the greatest challenges ever to affect Memorial Hermann - the flooding from Tropical Storm Allison - they battled back and helped us achieve strong financial performance. The ultimate beneficiary of these efforts will be the community and our patients.”

Memorial Hermann’s financial performance reflects the culmination of successful implementation of strategies resulting in what Moody’s believes to be sustainable performance going forward.

“The people we serve throughout the greater Houston area have long benefited from our programs and services. The most important aspect of our improved rating will be our ability to continue to expand health care services to meet the growing demand for our services,” said Wolterman. Currently, five Memorial Hermann hospitals have multi-million dollar expansions under way to address the demand for health care services in those communities and the new rating should result in lower interest and financing costs.

A not-for-profit health care system, Memorial Hermann provides quality, comprehensive programs and services for a person’s whole life. Through its 11 hospitals located in the Texas Medical Center and the greater Houston area, Memorial Hermann offers the convenience of health care in neighborhoods where people live and work as well as easy access to the resources and technology of a university-affiliated teaching hospital. Memorial Hermann takes a holistic approach to health care, offering programs and services that address the physical, social, psychological and spiritual aspects of well-being.

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