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Six analysts and top management from seven sector firms examine the Health Care Facilities sector in this special 64-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info386.htm

TWST: Leslie, how well have the health care facilities stocks rewarded investors over the past 12 months compared to other sectors of health care and compared to the overall market?

Ms. Henshaw: The health facilities stocks have actually performed pretty admirably over the last 12 months. Although most of the group has seen some pullback since January, the stocks have still significantly outperformed most other subsectors within health care. In fact, relative to the biotechnology, pharmaceutical and health care IT areas, in particular, not to mention many of the broader market indices, the hospitals’ performance has been nothing less than heroic.

TWST: And compared to the overall market, do you expect the sector to continue to perform well?

Ms. Henshaw: Given that much of the weakness we are seeing in today’s market can be attributed in one way, shape, or form to a weakening economy, from which the hospitals are relatively immune, I believe the group should continue to perform well. In fact, I expect most of the group to deliver fairly solid earnings growth, at least through the end of the year. This strength definitely distinguishes these stocks from most participants in the broader market, where earnings disappointments and negative year-over-year comparisons have become the norm.

TWST: Why was it harder on the non-profits?

Ms. Henshaw: The non-profit segment of the industry has not historically been able to generate the type of margins enjoyed by the for-profit providers. This is due, in part, to the fact that non-profit hospitals frequently absorb a higher research and charitable care burden; operate less sophisticated information systems; experience tighter capital constraints; and face greater resistance to exiting unprofitable businesses or laying off staff. As a result, many non-profits were particularly disadvantaged during the post-BBA era. Because these already low margin operators were barely able to make ends meet, they were unable to invest new capital in physical plant, technology or programmatic improvements.

TWST: Leslie, is there another one that you’d like to highlight?

Ms. Henshaw: A name that we haven’t mentioned, and which falls within the HealthSouth (NYSE:HRC) category, is Select Medical (Nasdaq:SLMC). It completed its IPO earlier in the year, so it’s still in its infancy as a public company. Specifically, Select is a dominant provider in two complimentary lines of business: long-term acute care hospitals and outpatient rehabilitation services. We expect the company to deliver north of 20% growth over the near to intermediate term, thanks to improving financial performance at recently acquired or newly opened facilities and the positive impact of deleveraging. Its single biggest risk, which is one not currently associated with the acute care providers, is that the government intends to redesign the Medicare reimbursement methodology for long-term care hospitals. Because the timing, shape and form of this change remain uncertain, the ultimate impact is extremely difficult to predict. Notwithstanding the uncertainty tied to a portion of the company’s revenue stream, we believe the company’s current operating model, which generates extremely strong returns on invested capital, offers a relatively unique growth vehicle in the current environment. I think the name has already attracted, and will continue to appeal to, a number of non-traditional health care players seeking solid growth with reasonable visibility.

This special issue includes:

1) Health Care Facilities - In an in-depth (12,400 words) Analyst Roundtable, Adam Feinstein, Vice President in Equity Research at Lehman Brothers, Leslie Henshaw, Managing Director at ING Asset Management, Gary Taylor, Vice President of Equity Research at Banc of America Securities LLC, examine the outlook for the sector including, volume trends in hospitals, demographics and share specific stock recommendations.

2) The TWST confidential Off-The-Record survey of management performance at seventeen sector firms asked market insiders about the ability of management teams to create shareholder value.

3) Investing in Health Care Facilities - In an in-depth (4,700 words) Analyst Interview, James Kumpel, Health Care Services Analyst at Raymond James & Associates, examines the outlook for the sector and shares specific stock recommendations .

4) Specialty Healthcare Providers - In an in-depth (3,500 words) Analyst Interview, Peter Emch, Director-Equity Research at Credit Suisse First Boston, examines the outlook for the sector and shares specific stock recommendations.

5) Hospital Management Stocks - In an in-depth (3,300 words) Analyst Interview, Leo Murphy, Vice President-Senior Analyst at Pioneer Investment Management USA, Inc., examines the outlook for the sector and shares specific stock recommendations.

6) CEO interviews (average 2,500 words). Top management of seven sector firms examine the outlook for their firm and the sector.