Jeff,

I am pleased to update you on Texas Children's Hospital's current status in
the aftermath of Tropical Storm Allison.  Should you have any questions,
please do not hesitate to call me.

Texas Children's Hospital has taken several steps to support three Texas
Medical Center hospitals seriously damaged by the floods caused by Tropical
Storm Allison.

Support to The Methodist Hospital

Beginning today and continuing for the foreseeable future, Texas Children's
will make two operating rooms available to surgeons from The Methodist
Hospital for adult cardiovascular and liver transplant procedures.  In
addition, Texas Children's will dedicate a 12-bed unit to the adult
Methodist patients for their follow-up intensive care and post-operative
recovery.

The adult Methodist Hospital surgical procedures to be performed at Texas
Children's will be scheduled between 3:00pm and 3:00am to avoid conflicts
with the normal Texas Children's pediatric surgical schedules.

The Methodist surgeons will receive support in the Texas Children's
operating rooms from Methodist anesthesiolgists, radiologists, nurses, blood
bank and other Methodist allied health professionals.  Texas Children's
Hospital will provide additional support services to the Methodist adult
patients, including diagnostic imaging, laboratory tests, food and pharmacy
services.

Texas Children's will also provide a senior clinical administrator 24 hours
a day, seven days a week to facilitate communications in meeting the needs
of the Methodist physicians and nurses and their adult patients

The number of adult surgeries that will be performed by the Methodist
surgeons at Texas Children's Hospital will be governed by the capacity of
the 12-bed Texas Children's intensive care unit being made available.  This
arrangement will continue until The Methodist Hospital is able to return its
operating rooms and associated support facilities to service.

As it has done since the flood, Texas Children's will continue to accept
adult bone marrow transplant patients from The Methodist Hospital based on
Texas Children's room and staff availabilty.

Support to St. Luke's Episcopal Hospital

Texas Children's Hospital is in the process of working out details of an
agreement by which Texas Children's will make up to 30 beds available to St.
Luke's Episcopal Hospital for general acute care of adult patients.

The adult St. Luke's patients who will occupy these Texas Children's beds
will be under the care of St. Luke's physicians, nurses, allied health and
support services.  Texas Children's will provide experienced clinical
administrators to St. Luke's 24 hours a day, seven days a week to assure
seamless delivery of services to their adult patients.

This arrangement between Texas Children's and St. Luke's is anticipated to
be operational sometime next week.

Support to Memorial Hermann Children's Hospital

Texas Children's Hospital today hosted a meeting with executives from
Memorial Hermann Children's Hospital in which Texas Children's offered
Memorial Hermann up to 26 neonatal level 2 and general acute care beds.
Should Memorial Hermann accept this offer, it would staff these beds with
its own physicians and nurses, while Texas Children's would provide complete
support services.  No decision has been made regarding this proposal.

Texas Children's Hospital Flood Recovery Status

Although Texas Children's Hospital sustained an estimated $20 million in
damages and lost entirely one of its patient care buildings, we were able to
continue full operations with a 100+ percent patient census during the
floods caused by Tropical Storm Allison.

Since then, our inpatient census has remained near 100 percent while our
operating rooms, outpatient specialty clinics and emergency center have
functioned at their normal, high rates of performance.

Meanwhile, work continues to repair our damaged areas on the B2 basement
level and to complete loss assessments to be able to file claims with our
insurance carriers.  The Hospital carries a complete program of property,
equipment and business interruption insurance and expects to be adquately
reimbursed for its losses.

Our Sincere Gratitude to The Texas Children's Family

On behalf of the Texas Children's Hospital Board of Trustees, may I once
again express our deepest gratitude to everyone in the Texas Children's
Hospital Integrated Delivery System for your extraordinarily professional
response to the threats posed by the floods of Tropical Storm Allison and
their aftermath.

Most importantly, our mission of providing the finest possible pediatric
care to our young patients and their families continued uninterrupted during
and after the floods.  In addition, through your dedication and sacrifice,
we have been able to reach out to our neighbors in the Texas Medical Center
to help them care for their patients as they struggle to recover from the
terrible devastation they endured from the flood.

We are so very proud and honored to have you as members of the Texas
Children's family.

Again, thank you very much!

Mark

Mark A. Wallace
President & Chief Executive Officer
Texas Children's Hospital