Over the last five weeks, bonds issued by Lenox Hill Hospital have been downgraded to junk status by the two major bond-rating agencies that track the nonprofit Upper East Side facility.

In its most recent financial disclosure, Lenox Hill Hospital management projected a loss of $37.8 million in 2005, nearly double its original projected loss of $20 million. In 2004 the hospital had more than $550 million in total revenue. The rating downgrade, issued by Moody’s Investors Service in October and again last week by Fitch Ratings, was in response to the hospital’s operating losses and its resulting low level of liquidity.

The chairman of the board of trustees of Lenox Hill, William Hiltz, told The New York Sun that the hospital’s current financial situation is part of an industry-wide problem. “It’s pretty self-evident that all of the hospitals in New York have been under some pressure financially,” he said.

Mr. Hiltz blamed the financial woes on a “confluence of events” including problems with reimbursement for services and costs associated with malpractice. He said the hospital’s plan to restore profitability “does not contemplate any major structural changes to hospital operations.”

Mr. Hiltz said the institution is now considering selling off some of its considerable Upper East Side real estate assets.

An analyst for Moody’s, Pamela Federbusch, told the Sun that Lenox Hill only had enough cash on hand to operate for 23 days.

She said the hospital had invested a “totally inappropriate” percentage of its holdings in hedge funds, which offer a low level of liquidity.

Mr. Hiltz, also a senior managing director for Evercore Partners, an advisory and investment firm, denied that any of the hospital’s investments had been inappropriate. “First of all, our investment performance has been quite good,” he said.

The Moody’s report said a “dangerously low” amount of cash would limit the hospital’s flexibility if the need for immediate cash arises. The report said that the hospital is now seeking to cash in some of its alternative investments to have more cash by next year.

“We still have them on the watch list for downgrade. Until we have additional information, we are not willing to say they are stabilized or improving,” Ms. Federbusch said.

As recently as August 2004, Lenox Hill earned a strong A-level rating from both Fitch and Moody’s on more than $140 million of bond debt. Since then, both agencies have downgraded the hospital three times, most recently pushing the hospital’s rating below investment grade.

An analyst for Fitch, Tommy Chan, said, “It’s a very precipitous decline for credit. It will definitely be a challenge for them to return to profitability in the short term.”

A statement issued yesterday by the hospital blamed the downgrade on “pension, malpractice and supply costs that exceeded revenue increases from payers. Additionally, the Hospital is coming out of a consultant driven revenue cycle project that has not achieved the expected benefits.”

The hospital, and analysts from Moody’s and Fitch, also blamed losses on a changing mix of patients from medical and surgical cases to obstetrical cases, which are not typically as profitable.

Ms. Federbusch said the hospital’s finances were weakened further by the defection of some its most prominent heart surgeons to Columbia Presbyterian Hospital and low patient volume in a Lenox Hill subsidiary, the Manhattan Eye, Ear, and Throat Hospital.

The hospital’s statement said that its management had developed a corrective plan that calls for “physician recruitment, right-sizing the labor force, improving revenue cycle processes, aggressively pursing payer increases from managed care companies and a number of supply chain initiatives.”

A report in Crain’s said that the hospital soon will begin another round of layoffs that would decrease its 3,000-person staff by 150.

The president of the Greater New York Hospital Association, Kenneth Raske, said that his interactions with Lenox Hill management convinced him that the finances of the hospital were already rebounding. “I expect them to be within an extremely healthy position as early as next year,” Mr. Raske said. “In my opinion, they are a symptom of the kind of dilemma faced in institution to institution around New York.”

Mr. Raske said city hospitals are facing “crushing pressure” from “today’s very challenging and deleterious operating environment.” He cited “abusive practices from HMOs” and changes, initiated by the government, that relate to Medicare payment policies.

Founded in 1857, Lenox Hill Hospital is a 652-bed, fully-accredited, independent facility and a major teaching affiliate of NYU Medical Center.