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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: Are some companies more heavily dependent on government reimbursement, Medicare or Medicaid than others?

Mr. Ripperger: In my coverage universe, the post-acute care providers, specifically long-term care and home respiratory, have the most exposure to government reimbursement. The long-term care companies on average derive over 70% of their revenues from both the Medicare and Medicaid programs.

TWST: Are you recommending the nursing homes at this time?

Mr. Ripperger: I am. Right now I follow all three of the companies — Manor Care (NYSE:HCR), Kindred (Nasdaq:KIND) and Beverly (NYSE:BEV). I am positive on the whole group. Overall, I think the concerns about this Medicare cliff issue, which is related to the potential sunsetting of some of the relief add-backs later this year, is overly discounted in the stocks. It’s unlikely that the cliff will happen because I personally believe that the government is aware of the relative instability of the industry right now, and therefore they don’t want to jeopardize that by arbitrarily going back and cutting the reimbursement level again. So if you take that risk out of the industry, these stocks are very attractively valued, given the type of growth and volumes that they’re reporting year over year, and given the stability of the long-term care industry in a reimbursement-neutral environment. Of those three companies, Manor Care has the highest private pay and quality mix. Therefore, they are relatively more immune to any potential cuts than the other companies. To give you specific numbers, as of the fourth quarter, Manor Care derived about 38% of their revenue from private pay, which compares to 20% for Beverly and 21% for Kindred.

TWST: Should investors buy all three or is there one that stands out as the stock that investors should snap up today?

Mr. Ripperger: It really comes down to valuation. Manor Care has always traded at a slight premium to Kindred and Beverly. I think, given the relative valuations of all three companies, they are all attractive, based upon their fundamentals. We currently have a price target of $32 for Manor Care, for Kindred a price target of $63, and for Beverly a price target of $10. Manor Care pretty much speaks for itself. They have the highest margins in the business, the best cash flows, and the best quality mix, which is justifiably reflected in the premium valuation that they have versus the group.

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.