The sales to operating capital ratio is computed from the recent financial statements and is computed as sales (for the period ending December 31, 2007) divided by the total beginning of the period operating capital (long term and short term operating capital). The sales to operating capital ratios, for each of the firms, for the year 2006 is presented in Exhibit 3. Exhibit 3 also presents the four-year average sales to operating capital ratio for each of the firms. Again, a firm that is attempting to position itself for high future growth may exhibit a low sales to operating capital ratio. This ratio is in the range of 1.13 to 2.13 with a weighted average (according to firm size) of 1.33, for the six comparable firms. From examination of these ratios, it is again apparent that HCA, Inc., Health Management, Province Healthcare, Tenet Healthcare, and especially Community Health, all, appear to be positioning themselves for high future growth with average sales to operating capital ratios of 1.47, 1.40, 1.50, 1.13, and 0.78, respectively.

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Reinvestment rates for each of the firms are also presented in Exhibit 3. The reinvestment rate is computed as the change in operating capital for the period divided by the after tax operating profit of the firm. The reinvestment rate measures how much a firm is plowing back to generate future growth. The reinvestment rate is measured by looking at the most recent financial statements for the firm. Observation of the reinvestment rates for the six firms reveals that the two large companies (HCA, Inc. and Tenet Healthcare) have the lowest reinvestment rates of 85% and 17%, respectively. This is to be expected as the smallest firms will be expected to experience the most growth and require higher rates of reinvestment. The average reinvestment rate for three of the small firms (Apria Healthcare, Health Management, and Renal Care Group) is 148%. Province Healthcare's reinvestment rate of 505% appears exceptionally high and is excluded from this computation. Community Health System's reinvestment rate of 245% is moderately high.

Exhibit 4 illustrates the financial statement analysis by year for Community Health Systems, Inc. Community Health Systems, Inc. is still in a high growth phase, having experienced 25.6% average three year historical growth and projecting 85%ro growth for 2007 and 25% for the next five years. However, the increasing sales to capital ratios, the decreasing reinvestment rates, and the decreasing debt ratios, over the past three years suggest that Community Health Systems, Inc. may be attempting to stabilize its earnings and growth. If this is the case, then we should expect a further increase in their sales to capital ratios and a further decrease in their reinvestment rates.

Exhibit 5 illustrates the historical (past three years) and projected (next three years) capital expenditures and increase in operating working capital for Community Health Systems, Inc. In Panel B of Exhibit 5, 2007 sales and 2007 after-tax operating income are projected to be 85% more than the 2006 amounts. A further 25% increase is projected for 2003 and 2004 for both sales and after-tax operating income. The beginning operating working capital for 2007 is $253.7 million, 8.1% of the projected 2007 sales. The industry average for beginning operating working capital as a percent of sales is 11.4%. However, the average for Community Health Systems Inc. over the past three years has been 6.7%. Thus, the 2007 beginning operating working capital as a percent of 2007 sales, of 8.1% is used to project the working capital requirements for 2003 and 2004.

A reinvestment rate of 180% is applied to the after-tax operating income to project total investment in operating capital for the next three years. The three-year historical average reinvestment rate for Community Health Systems is 243%, however the company has exhibited some decline in this rate. The industry average for the small firms, excluding Province Healthcare is 148%. Therefore 180% was considered to be a prudent projected reinvestment rate for Community Health Systems for the next three years. Capital expenditures is computed as the difference between total increase in operating capital and increase in operating working capital for each of the three years 2007 through 2009.