Prepared by Jennifer K. Gorman May 1, 2010 SMF Spring Recommendations

1. Prepared by Jennifer K. Gorman May 1, 2010 SMF Spring Recommendations

2. Universal Health Services (NYSE:UHS) Investment Thesis: Universal Health Services (“UHS") is a company within the facilities subsector of the S&P’s healthcare sector. Facilities are projected to benefit the most from the recent legislative reform by insuring the uninsured and thus reducing facility providers’ bad debt exposure. At the time this stock was selected, healthcare reform had not received legislative approval. UHS was selected because it maintains one of the lowest levels of bad debt exposure; thus, a limited downside risk if the reforms did not take effect. In addition to limited bad debt risk, UHS carries lower debt loads than its competitors and higher liquidity so it can benefit from the less expensive acquisition of distressed facilities currently available. Recommendation: BUY In the behavioral health arena, UHS has been successful at offering treatments in areas of expanding illness such as for children afflicted with Autism and soldiers suffering from PTSD. Its senior leadership at corporate as well as at facility level have a tenure of 9 years or more per person indicating the success that UHS has had in its human resources efforts to recruit and retain only the most dedicated employees to excellence in patient care. • Business Summary: • UHS has been in business of the sound operation of acute care hospital facilities, behavioral health institutions, surgical hospitals, ambulatory surgical centers, and radiology oncology centers in the United States and Puerto Rico for over 30 years. The company is differentiated from the industry through its strategic decisions: • - To maintain prudent levels of debt. (39% of total cap if debt compared with industry average of 72%.), and • - To expand or acquire in communities with historic and projected trends of high population growth as well as elder population concentration. (In 2030, 72 million Americans or 20% of the American population will be over the age of 65.) • UHS currently owns 26 acute care hospitals and 9 surgical centers and radiology oncology centers which account for 75% of total revenues for the last three years. The 101 behavioral health facilities it owns have accounted for 25% of total revenues over the same period. Blue (UHS) and Red (GSPC)) Source: www. yahoofinance.com

3. Universal Health Services (NYSE:UHS) Market Profile: The healthcare sector of the S&P 500 is significantly impacted by the recent government regulation. The facilities sub-sector stands to benefit the most from any health care revision that insures the large number of uninsured who utilize ER’s as their regular treatment sources. All facilities providers carry bad debt on their financial statements as they are not permitted to turn away the uninsured seeking medical attention. Effectively, the government through regulation had made this subsector bear the burden of paying for the expense of the uninsured’s treatment. The new legislation which provides for insuring the uninsured will enable facilities to reduce their exposure to bad debt expense. This reduction will benefit the operating bottom-line of facilities providers by increasing their net income over all. The Demographic Trends: The baby boomers are finally coming of pharmaceutical age. In 2009, only 10% of the population was over the age of 60. By 2050, over 25% of the population will be over age 60. The elderly population has the highest incidence of use of acute care facilities. Increased life expectancy and increased incidence of chronic disease are harbingers of increased demand for acute care facilities. Source: Administration on Aging, Department of Health and Human Services http://www.aoa.gov/AoARoot/Aging_Statistics/future_growth/future_growth.aspx

4. Abbott Laboratories (NYSE:ABT) Corporate Profile: UHS has successfully diversified it acute care offerings through not just acute care facilities, but also 9 surgical centers, radiology/oncology centers, and behavioral health facilities. It has invested more heavily than its competitors in developing strong relationships with its referring physicians to increase in-patient admits - the true money makers in this arena. UHS has exposure in the Las Vegas market (highly depressed) maintaining a number of facilities within the city limits; however, given the recent passage of healthcare reform - UHS stands to realize significant gains from serving more insured patients. UHS has undertaken a strategy of cost containment as well to weather the economic recession. The cost efficiencies realized have cultivated new best operating practices that will provide sustained cost reduction as the economy rebounds. Corporation Information: Location: 367 South Gulph Road, King of Prussia, PA 19406-0958 Website: http://www.uhsinc.com Founded: 1978 Domicile: Delaware Employees: 39,900 Stockholders: 344 Management Team: Chairman & CEO: A.B. Miller President: M.D. Miller SVP, Secretary & Chief Acctg. Officer: S.G. Filton General Counsel: M.D. Klein Treasurer: C.K. Ramagano

5. Universal Health Services (NYSE:UHS) Past Performance: UHS has consistently grown revenue since 2000 to the present year and is expecting to post larger revenue figures in 2010 despite an economic recession. As mentioned earlier, UHS stands to gain from the recently health care legislation adding to both top and bottom line growth through increased sales and decreased bad debt expense. Further UHS has aggressively sought to maintain low debt levels and expenses a policy which will serve them well as distressed facilities become available and UHS will available funds to acquire them at discounted acquisition costs. While UHS does carry a heavier SG&A expense, this load is not attributed to inefficient management, but to the higher compensation packages that UHS offers its affiliated physicians. As physicians make the direct referrals for in-patients admissions maintaining close and financially beneficial relationships with these providers drives fee generating traffic through UHS’s facilities. Source: Value Line for UHS Source: Thomson One Financial Reports for UHS

6. Universal Health Services (NYSE:UHS) Source: Thomson One Financial Reports for UHS The Competition: Community Health Systems (CYH) By facilities owned and operated, Community Health Systems is the largest non-urban U.S. provider of general hospital health care services. CYH focuses on expanding, suburban health care markets where smaller populations result in fewer hospitals and health care service providers. Reimbursement rates from the federal government are higher for non-urban areas to incentivize the provision of needed care in under-served areas. As of 12/31/2008, “CYH owned, leased or operated 118 hospitals in 28 states, with a total of 17,245 licensed beds.” Source: Standard & Poors Net Advantage for CYH. Health Management Associates (HMA) Health Management Associates operates under a similar model as CYH by entering growing, non-urban communities with heavy geographic representation in southeastern and southwestern U.S particularly Florida and Mississippi. “HMA operated 55 hospitals with a total of approximately 8,000 beds as of December 31, 2009.” Source: Standard & Poors Net Advantage for HMA.

7. Universal Health Services (NYSE:UHS) The Competition (continued): Life Point Technologies (“LPNT”) LifePoint operates acute care facilities in non-urban communities in the southeast. LPNT owns, leases or operates 48 hospitals offering 5,686 licensed beds. LPNT’s strategy revolves around acquiring struggling facilities, improving them with capital investment, and driving increased profitability. Tenet Healthcare (THC) Tenet Healthcare (“THC”)is the second largest U.S. for-profit hospital manager. It owns and operates 53 hospitals with 14,352 licensed beds located primarily in California, Florida and Texas. THC has diversified its holdings through ownership of a small number of rehabilitation hospitals, a specialty hospital, skilled nursing facilities, and medical office buildings in proximity to their general hospital properties. THC was the subject of a DOJ investigation for Medicare fraud in 2003 – a market known fact that has plagued the company since.

8. Universal Health Services (NYSE:UHS) The Competition (continued): THE FUTURE VALUATION: UHS is currently trading at $28.83 per share 44% of what it is truly valued at. The above analysis indicates that UHS is undervalued and is a strong candidate to purchase. This conclusion is consistent with the strength of the underlying business model of a wide array of acute care facilities, investment in quality physician relationships, and diversification of services into the mental arena. UHS’s strength is further bolstered by the low bad-debt risk it maintains and high cash holdings enabling the company to capitalize on distressed assets in the current economic recession.