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Eight analysts and top management from sixty-six sector firms examine the Suntrust Robinson Humphrey 31st Annual Institutional Conference in this special 247-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info526.htm

TWST: What fuels the positive attitude with respect to pricing and the labor component?

Mr. Lehrich: We have a solid window into commercial pricing remaining firm for the next two to three years. The managed care health insurance pricing cycle has been on a nice uptrend. We have strong visibility into mid-teens premium yield increases for 2002, and probably another round of healthy increases in 2003. The leverage with the providers for the foreseeable future is a function of bigger market scale, more important market share in key markets and just overall greater leverage, given the round of portfolio rationalization that we saw throughout the late 1990s, particularly among the larger hospital chains. On the volume side, we’re just starting to see the power of the baby boomer demographic actually play into the numbers. That demographic offers a very durable and consistent demand picture for healthcare services and particularly for the hospitals. Hospitals will be an important beneficiary. For example, inpatient utilization jumps 20% when you move from the 45-year-old demographic up to the age 55 demographic. It jumps another 70% when you move into the age 65 demographic. There are more than 50 million Americans moving through these age brackets as we speak. The demand side and capacity utilization are expected to markedly improve during the next five to 10 years. This leads us to another important point and that is that the baby boomer patients are really the most profitable ones. They are well insured and to a large extent, they’re heavy users of service lines that are typically priced with decent margin, such as cardiology and orthopedics, neurology and oncology, among others. That’s a key point in terms of where we are in the spectrum of that demographic and the fact that utilization of the baby boomers is going to be fairly profitable looking out over the next 10 to 15 years. On the cost side, we’ve seen margins really improve nicely during the last couple of years, speaking specifically to the hospital space, although that applies to some of the specialty healthcare companies, as well.

TWST: What are your specific thoughts on the direction for long-term care?

Mr. Lehrich: Long-term care has historically been a very, very tough sector to invest in. The financial returns, on a normalized basis over a long period of time, have never been attractive. There is really one exception to that — Manor Care (NYSE:HCR). Also in the specialty healthcare area is HealthTronics (Nasdaq:HTRN). This is probably the one name that I’m most excited about, although its market cap does limit its appeal. It’s a micro-cap stock — about a $100 million market cap. They are the specialty provider of non-invasive surgical services in the urology and orthopedics space. They’ve got about 100 treatment locations for their kidney stone business, in which they deliver shockwave therapy, or lithotripsy, to treat kidney stones. Right now, this is really the core business for them. Lithotripsy is the standard of care in the kidney stone treatment arena and has been for really the last 20 years. The more exciting and probably bigger growth opportunity for HealthTronics is going to be in the orthopedics business. They have 48 treatment locations and are currently working very hard at extending the FDA label for their OssaTron orthopedic device. We think the market opportunity for the orthopedic business is quite large and that’s going to be a key growth driver for them. We’ve got a pretty aggressive $16 price target on the stock. It’s currently trading at about $10.

This special conference issue includes:

1) Healthcare Services - In an in-depth (3,900 words) Analyst Interview, Darren Lehrich, Vice President and Equity Research Analyst covering healthcare services companies at SunTrust Robinson Humphrey, examines the outlook for the sector and shares specific stock recommendations.

2) Outlook for Cable TV - In an in-depth (1,700 words) Analyst Interview, Gary A. Farber, Senior Vice President of SunTrust Robinson Humphrey, examines the outlook for the sector and shares specific stock recommendations.

3) Hardline Retailing - In an in-depth (x,x00 words) Analyst Interview, David A. Schick, member in Equity Research covering the retail industry at Suntrust Robinson Humphrey, examines the outlook for the sector and shares specific stock recommendations.

4) Wireless Communications - In an in-depth (2,200 words) Analyst Interview, Jason Bell, Vice President at Suntrust Robinson Humphrey, examines the outlook for the sector and shares specific stock recommendations.

5) Outlook for Supply Chain Software - In an in-depth (3,100 words) Analyst Interview, Christopher W. Rowen, Vice President at Suntrust Robinson Humphrey, examines the outlook for the sector and shares specific stock recommendations.

6) Outlook for Regional Banks - In an in-depth (3,600 words) Analyst Interview, Christopher W. Marinac, Managing Director at Suntrust Robinson Humphrey, examines the outlook for the sector and shares specific stock recommendations.

7) Quantitative Research - In an in-depth (3,200 words) Analyst Interview, Gary W. Tapp, Senior Vice President in the Equity Research Department at Suntrust Robinson Humphrey, examines the outlook for the sector and shares specific stock recommendations.

8) CEO interviews (average 2,500 words). Top management of sixty-six sector firms examine the outlook for their firm and the sector.