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Two analysts and top management from eleven sector firms examine the Healthcare sector in this special 51-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info438.htm

TWST: Michael, what primary areas of coverage are you responsible for at Raymond James & Associates?

Mr. Baker: I am a healthcare services analyst at Raymond James. I’m responsible for covering benefits management/processing companies; the area currently consists of the pharmacy benefit managers and the payroll processors. My coverage list includes the payroll companies because a key opportunity they face is benefits automation. Health care is a significant component of the benefit packages offered by corporations. Down the line, I will add managed care organizations to round out my coverage.

TWST: That’s a very interesting way of looking at it. I assume that a number of companies are perhaps going to the cafeteria approach where they will give their employees an amount of money that they can use on health care as they see fit.

Mr. Baker: That is certainly what Corporate America would like to achieve. One of the key challenges, though, is addressing the risk issue (adverse selection) from the standpoint of the health insurer. Insurance companies have been able to diversify their risk by covering the whole employee pool. Allowing employee choice upsets the balance by potentially driving the sick workers to one insurer and the healthy to another.

TWST: Because some people have thought that the defined contribution --

Mr. Baker: Yes. It’s called defined contribution, and one of the companies I cover is actually working in that area. eBenX (Nasdaq:EBNX) is developing a risk-adjusted payment system that is designed to provide insurance companies premium dollars based upon the health profile of the employees that enroll in their plan.

TWST: How important will that be as an area of business for your companies going forward?

Mr. Baker: For eBenX, it would certainly accelerate their business if that were to work out. For the payroll companies, it really doesn’t matter to them because the benefits function needs to be administered either way, whether it’s defined contribution or not. The administrative functions need to be automated. The pharmacy benefit managers would not be impacted.

TWST: Will you tell us something about the history of the benefits management processing sector and how it’s evolved as an area for investment?

Mr. Baker: I’ll break it down into the components. Pharmacy benefit managers have been around awhile. They originally entered the business to process claims for health insurance companies. Pharmacy claims are different from medical claims. Drug prescriptions are higher volume with low dollar amounts, whereas hospital and physician claims are lower volume with high dollar amounts.

TWST: Is there a reason to buy eBenX today?

Mr. Baker: I would wait for more confirmation here. The company is currently losing money. They have approximately 70 million in cash and a quarterly burn rate of 3.5 million. While there is no immediate need for additional funds, I think the market will want to see more validation of the business model before there is meaningful and sustainable stock appreciation. They have an interesting pilot underway in Ohio that is designed to encourage competition among healthcare plans and provide consumers more choice. If the company is successful, the new system will provide more leverage to the business model.

This special issue includes:

1) Investing in Healthcare Funds - In an in-depth (3,800 words) Analyst Interview, Mariola B. Haggar, President, General Partner and Portfolio Manager at Haggar Concord Partners, LP, examines the outlook for the sector and shares specific stock recommendations.

2) Healthcare Benefits Management/Outsourcing - In an in-depth (3,800 words) Analyst Interview, Michael J. Baker, Health Care Services Analyst focusing on benefits management/outsourcing at Raymond James & Associates, examines the outlook for the sector and shares specific stock recommendations.

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