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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: Does Tenet (NYSE:THC) tend to be in urban hospitals, or is it also in rural hospitals?

Ms. Haggar: It is mostly urban. Tenet’s stock was beaten down so badly over the past few years that when we were buying it in early 2000, it was just dirt cheap. Now, despite a huge move, the stock is still not expensive. With market conditions for hospitals improving, Tenet is showing very strong same-store admissions growth. For example, for the first fiscal quarter that ended in August, the company pre-announced that the same-store admissions are going to be up 3.5%, which is higher than its historical growth rate. Moreover, it is benefiting from a favorable managed care pricing environment, which is helping to expand the operating profit margins, despite the fact that hospitals have been dealing with a very tight labor market. Also, the revenue-per-admission growth is accelerating. Tenet is very disciplined about acquisitions. It recently bought two hospitals: one in West Palm Beach and one in Atlanta to strengthen its position in these markets. All of that has enabled the company to post great earnings growth. On a calendarized basis, the company is showing this year an earnings growth rate of almost 30%, and in 2002, we still expect it to grow EPS at a rate of over 20%. Despite a huge upside move for the stock, it is still trading at a slight discount to the market, and it therefore remains one of the least expensive stocks in the hospital group. Moreover, hospitals, just like big pharmas, are probably one of the first sectors that come to mind when you are looking for stocks that are recession-proof.

TWST: Do you have any concerns for hospitals or for Tenet in particular?

Ms. Haggar: For hospitals, one should always monitor the managed care pricing environment. In 2000 and 2001, hospitals have been beneficiaries of a good pricing cycle. Favorable rates have already been locked in for 2002, but that is something that we always worry about on an annual basis.

TWST: In a recessionary environment, employers may be less concerned about retaining their employees. Are they going to be as willing to pay the premium increases?

Ms. Haggar: That’s a very good question. The premium increases for next year have already been negotiated and locked in. However, if the recession were to be deeper and longer than most people think, then that would be a risk to hospitals in 2003 (as it would be of course a risk to managed care companies as well). I think that hospitals are probably a safer place to invest for the long term than managed care stocks, although in the near term managed care stocks may bounce. They are very cheap and they are going to get at least a temporary reprieve from the litigation issues and the regulation that was supposed to take place in Washington, DC, in the second half of this year. Obviously, with the government busy fighting the war on terrorism, all other regulation has been pushed out to perhaps next year.

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.