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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: Peter, may we start with a profile of the type of healthcare facilities that you include in your coverage?

Mr. Emch: My coverage is of specialty healthcare providers, basically defined as non-hospital, non-nursing home. It’s a wide variety that would include, but is not limited to, dialysis, home care, surgery center, rehabilitation and clinical labs.

TWST: For the most part, are these companies dependent on reimbursement by government or by private insurance, or is reimbursement a mixture of both?

Mr. Emch: It’s a mixture of both. While it varies, it’s probably not that dissimilar from hospitals that are going to be reimbursed by both the government and private insurance. They’re probably, on balance, a little less dependent on government than hospitals.

TWST: We’ve heard a lot about how the hospitals and particularly the nursing homes and the rehabilitation companies were hurt by the Balanced Budget Act. And now, there have been some givebacks. Have these companies felt a meaningful benefit?

Mr. Emch: In general, they’ve benefited slightly, although it varies from company to company. I think that most of the benefit on the givebacks is really centered in the hospital space. Regarding specialty providers, I don’t think that either the lab companies or the home respiratory companies benefited much. The dialysis companies benefited slightly. But it’s been a minor positive.

TWST: How have the stocks in the group that you follow performed over the past six to 12 months?

Mr. Emch: They were the best performing group in the S&P 500 in the fourth quarter of last year, and were again among the stronger groups in the S&P in the second quarter of 2001. If you remember, many of the healthcare stocks closed at peaks at the end of December, so compared with the end of the year, there are more of these stocks that are up than are down, but they’re not up tremendously. Year to date the median stock in my coverage area is up 9% and the group is outperforming the S&P 500.

TWST: For the most part, what kind of guidance are companies giving for third and fourth quarter earnings?

Mr. Emch: The earnings reports have been generally strong. I virtually can’t think of any company — with a stock price of more than a couple of bucks — that has missed the numbers. And we’re not looking for that trend to change in the second quarter. I think, in general, the pricing environment for non-government has been strengthening, although not as much as for the hospitals. The volumes have been generally in line or better than what we’ve been looking for.

TWST: Peter, what’s the outlook for the lab companies?

Mr. Emch: Good. The lab business is very strong. LabCorp (NYSE:LH), which I don’t follow, has reported a very strong first quarter. They recently successfully priced a follow-on offering, which would indicate that investors found the story to be compelling. There is a lab company that went public in the second quarter in a very well received offering, Unilab (Nasdaq:ULAB), and Quest Diagnostics (NYSE:DGX) stock has performed quite well in the second quarter, after the company substantially beat earnings estimates in the first quarter. The outlook for the lab companies right now is very, very good. It’s as good as it’s been in that industry for a decade.

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.