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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 pick in the post-acute market today?

Mr. Ripperger: That would be Apria Healthcare (NYSE:AHG). They are the largest provider of home oxygen equipment and respiratory therapy services in the country today. The overall market is growing volumes in the high single digits per year due to the increased incidence of chronic obstructive pulmonary disease (COPD). The company has been growing earnings in excess of 28% year over year for the last few quarters, generates over $200 million in cash from operations per year, and is only trading at about 15 times earnings.

TWST: Does that reflect the perceptions surrounding the company in the mid-1990s?

Mr. Ripperger: The stock has completely metamorphosized from what it was in the mid-1990s. But there still are some concerns over this one reimbursement issue related to the respiratory drugs that is, I believe, partly responsible for the discount that the stock trades at right now. However, when one considers that Apria only gets roughly 5% of its revenues from Medicare-reimbursed respiratory drugs, and given that the large national companies have significant opportunities to offset any cut through market share gains or reduced drug purchasing, I believe the stock is overly discounted at present. I would also emphasize the strong free cash flow characteristics of the business for both Apria and Lincare, which is their largest national competitor. Each generates over $200 million a year in cash from operations. In addition to using a large portion of its cash flow to acquire smaller mom-and-pop operators at roughly 3-4 times EBITDA, Apria recently bought back about $35 million in stock and paid down over the past few years over $130 million in debt just from their internal cash flow.

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.