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Eight analysts and top management from eight sector firms examine the healthcare facilities sector in this special 73-page Healthcare Facilities issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info547.htm

TWST: Matthew, what kinds of companies do you include in your coverage of healthcare services?

Mr. Ripperger: I’m following two sectors in the small and mid-cap areas of healthcare services: post-acute care providers and companies that provide outsourced services to providers and payors. Included in the post-acute care area are the nursing homes, home respiratory companies and ambulatory surgery center companies. Included in the outsourcing area are companies that contract with hospitals to provide specialized services in areas such as diagnostic imaging, program management and nurse staffing. Also included under outsourcing are companies in the disease management space, which is an evolving market of specialized third party medical managers.

TWST: What’s your favorite in the group today?

Mr. Ripperger: My favorite in the group today is a company called United Surgical Partners, where I have a buy rating and a 35 target price. United Surgical Partners (Nasdaq:USPI) was founded by Don Steen, who is the Chairman and CEO. He is one of the founding fathers of the for-profit surgery center business dating back to the early 1980s. He has developed a model by which USPI goes into a market and joint ventures with a large, not-for-profit hospital system and with physicians in the market to operate a freestanding surgery center. There are a number of very important benefits to this structure. First, by partnering with a large, established, not-for-profit system, such as Baylor in Dallas and Memorial Hermann in Houston, USPI is able to “piggy-back” on the established commercial pricing power that that system has already established with commercial payors. This has contributed to higher average rates per surgery case for USPI versus the overall industry, roughly 25%-35% higher. Secondly, USPI automatically captures a significant amount of referral volume at their facilities that they wouldn’t get if they were competing with a hospital, so they are much more of a partner than a competitor. This is evidenced in superior same-store volume growth in excess of 20% at the facilities where they partner with hospitals. Thirdly, USPI is providing a needed growth vehicle for these large NFP systems to expand into the outpatient surgery market, which has been a market that they have historically avoided. Given the synergies on all sides (USPI, the NFP system and physician groups), I believe that USPI is well positioned to continue to replicate its model in new markets and with new partners as well as further penetrate its current market with established partners. As mentioned above, the company is already off to a fast start by signing on many of the largest systems in the country, and based upon their 0.05 earnings upside surprise in the first quarter (0.19 versus our estimate of 0.14), I believe that the model is working better than expected. Also, given the continued migration of surgery center procedures to the outpatient setting, I believe that USPI is ideally positioned to continue to benefit.

TWST: What part should these healthcare services companies play in a healthcare fund in 2002, 2003?

Mr. Ripperger: The ultimate challenge with healthcare services is that you don’t have the same market cap that you do in other areas of health care, so you are never going to be able to allocate a significant percentage of your overall fund to healthcare services. However, if one can disregard market cap considerations, I believe that the strong underlying fundamentals for these companies and the earnings visibility of these companies, especially given the broader market environment currently, warrants an overweighting of the group in a healthcare fund today.

This special issue includes:

1) Healthcare Facilities - In an in-depth (13,700 words) Analyst Roundtable, B. Kemp Dolliver, Managing Director at SG Cowen Securities Corp., Adam Feinstein, Vice President in Equity Research at Lehman Brothers, John Hindelong, Managing Director of Credit Suisse First Boston, Frank G. Morgan, Managing Director at Jefferies & Company, Inc. and Michael Yellen, Senior Portfolio Manager at AIM Capital Management Group, examine the outlook for the sector including earnings guidance, stock performance and share specific stock recommendations.

2) Hospitals & Healthcare Facilities - In an in-depth (3,500 words) Analyst Interview, Gary Taylor, Vice President, Equity Research at Banc of America Securities LLC, examines the outlook for the sector and shares specific stock recommendations.

3) Assisted Living & Healthcare REITs - In an in-depth (5,200 words) Analyst Interview, Jerry L. Doctrow, Managing Director, Equity Research at Legg Mason Wood Walker, Inc., examines the outlook for the sector and shares specific stock recommendations.

4) Long-Term Care & Specialized Service Providers - In an in-depth (6,700 words) Analyst Interview, Matthew Ripperger, Vice President and Equity Research Analyst at JP Morgan, examines the outlook for the sector and shares specific stock recommendations.

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