SAGE SPECIALTY CARE HOSPITAL
value-creation walk.
7-lever RCM bridge from current EBITDA to pro-forma — denial / underpay / DAR / coding / contract / cost discipline / cash acceleration. Each lever shows current vs benchmark target with data provenance.
Bridge Realization Estimate
ML model predicts what fraction of the bridge is achievable (accuracy: 60%, n=5,839)
Expected realization: 68% of modeled bridge. Strengths: Commercial Payer %, Bed Count. Risks: Revenue per Bed, Occupancy Rate. Risk-adjusted uplift: $0.7M (vs $1.0M modeled).
EBITDA Bridge — 7 RCM Levers
Each bar shows the annual EBITDA impact at full run-rate. Revenue levers increase top-line; cost levers reduce operating expense; cash acceleration releases working capital. Calibrated to published research bands (Denial 12%→5% = $8-15M on $400M NPR).
Lever Detail
Each value shows its data source. SELLER = seller data room, DEFAULT = model default, BENCHMARK = P75 peer benchmark.
| Lever | Current | Target | Revenue | Cost | EBITDA | WC | Ramp |
|---|---|---|---|---|---|---|---|
| Cost to Collect | 4.5% DEFAULT | 2.5% BENCHMARK | $0 | $368K | $368K | $0 | 12mo |
| Denial Rate Reduction | 12.0% DEFAULT | 6.5% BENCHMARK | $354K | $10K | $364K | $0 | 12mo |
| A/R Days Reduction | 52.00 DEFAULT | 38.00 BENCHMARK | $56K | $167K | $224K | $705K | 9mo |
| Clean Claim Rate | 88.0% DEFAULT | 96.0% BENCHMARK | $0 | $12K | $12K | $0 | 6mo |
| Net Collection Rate | 93.5% DEFAULT | 45.9% BENCHMARK | $0 | $0 | $0 | $0 | 18mo |
| CDI / Case Mix Index | 135.0% DEFAULT | 142.0% BENCHMARK | $0 | $0 | $0 | $0 | 18mo |
Implementation Timing Curve
Linear ramp to full run-rate per lever. Month 0 = close date. Partners should expect 60-70% of total uplift realized by month 12.
| Lever | M0 | M3 | M6 | M9 | M12 | M18 | M24 | M36 |
|---|---|---|---|---|---|---|---|---|
| Cost to Collect | $0 | $92K | $184K | $276K | $368K | $368K | $368K | $368K |
| Denial Rate Reduction | $0 | $91K | $182K | $273K | $364K | $364K | $364K | $364K |
| A/R Days Reduction | $0 | $75K | $149K | $224K | $224K | $224K | $224K | $224K |
| Clean Claim Rate | $0 | $6K | $12K | $12K | $12K | $12K | $12K | $12K |
| Cumulative | $0 | $263K | $527K | $784K | $967K | $967K | $967K | $967K |
Returns Sensitivity (IRR / MOIC)
5-year hold, 5.5x leverage, 3% organic growth, 10%/yr debt paydown. Green = exceeds 20% IRR hurdle. Amber = 15-20%. Red = below hurdle or loss. RCM uplift of $967K is added at exit.
| Entry \ Exit | 9.0x | 10.0x | 11.0x | 11.5x | 12.0x |
|---|---|---|---|---|---|
| 8.0x | 79% / 18.4x | 83% / 20.8x | 88% / 23.2x | 89% / 24.4x | 91% / 25.6x |
| 9.0x | 74% / 16.0x | 78% / 18.1x | 83% / 20.2x | 84% / 21.3x | 86% / 22.4x |
| 10.0x | 70% / 14.1x | 74% / 16.0x | 78% / 17.9x | 80% / 18.9x | 82% / 19.8x |
| 11.0x | 66% / 12.5x | 70% / 14.2x | 74% / 16.0x | 76% / 16.9x | 78% / 17.7x |
| 12.0x | 62% / 11.2x | 66% / 12.8x | 70% / 14.4x | 72% / 15.2x | 74% / 16.0x |
Covenant Headroom (at 10x Entry, 6.5x Max Leverage)
Pro forma EBITDA can decline 53% before the 6.5x covenant trips. RCM uplift reduces leverage from 8.5x to 3.0x, adding 5.4 turns of cushion.
5-Year Value Creation Waterfall
EBITDA trajectory: 3% organic growth + RCM uplift ramp (full run-rate at month 18).
| Base EBITDA | RCM Uplift | Total | Margin | |
|---|---|---|---|---|
| Entry | $538K | — | $538K | 2.9% |
| Year 1 | $554K | +$645K | $1.2M | 6.5% |
| Year 2 | $570K | +$967K | $1.5M | 8.4% |
| Year 3 | $587K | +$967K | $1.6M | 8.5% |
| Year 4 | $605K | +$967K | $1.6M | 8.6% |
| Year 5 | $623K | +$967K | $1.6M | 8.7% |
Achievement Sensitivity
What if we only achieve a fraction of each lever? 50% = conservative, 75% = base management case, 100% = plan, 120% = stretch.
| Lever | 50% | 75% | 100% | 120% |
|---|---|---|---|---|
| Cost to Collect | $184K | $276K | $368K | $441K |
| Denial Rate Reductio | $182K | $273K | $364K | $437K |
| A/R Days Reduction | $112K | $168K | $224K | $268K |
| Clean Claim Rate | $6K | $9K | $12K | $14K |
| Total | $484K | $725K | $967K | $1.2M |
Peer Context — Where This Hospital Sits
Key metrics vs 85 size-matched peers. Low percentile on margin/efficiency metrics = more room for improvement = larger bridge opportunity.
| Metric | Hospital | P25 | P50 | P75 | Percentile |
|---|---|---|---|---|---|
| Op Margin | 2.9% | -25.1% | -4.9% | 4.1% | P71 |
| Net-to-Gross | 27.5% | 27.3% | 35.8% | 45.9% | P26 |
| Occupancy | 47.9% | 28.2% | 54.8% | 68.5% | P45 |
| Rev/Bed | $312K | $255K | $416K | $702K | P34 |
| Exp/Bed | $302K | $236K | $430K | $885K | P34 |
Bridge Methodology
Coefficients calibrated to published research bands: denial 12%→5% = $8-15M on $400M NPR. Current metrics estimated from HCRIS public data and ML predictions. Target metrics set at P75 peer benchmarks with 60% gap closure assumption. Revenue levers use NPR × delta × avoidable share. Cost levers use claims volume × cost per reworked claim. Working capital from AR reduction is one-time cash (not included in recurring EBITDA). Returns assume 5.5x leverage, 3% organic growth, 10%/yr debt paydown.