THE HEART HOSPITAL BAYLOR DENTON
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: 72% of modeled bridge. Strengths: Revenue per Bed, Bed Count. Risk-adjusted uplift: $3.0M (vs $4.2M 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 | $1.6M | $1.6M | $0 | 12mo |
| Denial Rate Reduction | 12.0% DEFAULT | 6.5% BENCHMARK | $1.5M | $44K | $1.6M | $0 | 12mo |
| A/R Days Reduction | 52.00 DEFAULT | 38.00 BENCHMARK | $244K | $723K | $967K | $3.0M | 9mo |
| Clean Claim Rate | 88.0% DEFAULT | 96.0% BENCHMARK | $0 | $51K | $51K | $0 | 6mo |
| Net Collection Rate | 93.5% DEFAULT | 54.1% 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 | $397K | $795K | $1.2M | $1.6M | $1.6M | $1.6M | $1.6M |
| Denial Rate Reduction | $0 | $393K | $787K | $1.2M | $1.6M | $1.6M | $1.6M | $1.6M |
| A/R Days Reduction | $0 | $322K | $645K | $967K | $967K | $967K | $967K | $967K |
| Clean Claim Rate | $0 | $25K | $51K | $51K | $51K | $51K | $51K | $51K |
| Cumulative | $0 | $1.1M | $2.3M | $3.4M | $4.2M | $4.2M | $4.2M | $4.2M |
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 $4.2M is added at exit.
| Entry \ Exit | 9.0x | 10.0x | 11.0x | 11.5x | 12.0x |
|---|---|---|---|---|---|
| 8.0x | 46% / 6.6x | 50% / 7.7x | 54% / 8.8x | 56% / 9.3x | 58% / 9.9x |
| 9.0x | 41% / 5.5x | 45% / 6.5x | 49% / 7.4x | 51% / 7.9x | 53% / 8.4x |
| 10.0x | 36% / 4.6x | 41% / 5.5x | 45% / 6.4x | 47% / 6.8x | 49% / 7.2x |
| 11.0x | 31% / 3.9x | 36% / 4.7x | 41% / 5.5x | 43% / 5.9x | 44% / 6.3x |
| 12.0x | 27% / 3.3x | 32% / 4.0x | 37% / 4.8x | 39% / 5.1x | 41% / 5.5x |
Covenant Headroom (at 10x Entry, 6.5x Max Leverage)
Pro forma EBITDA can decline -10% before the 6.5x covenant trips. RCM uplift reduces leverage from 8.5x to 7.1x, adding 1.3 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 | $22.4M | — | $22.4M | 28.2% |
| Year 1 | $23.1M | +$2.8M | $25.9M | 32.6% |
| Year 2 | $23.8M | +$4.2M | $28.0M | 35.2% |
| Year 3 | $24.5M | +$4.2M | $28.7M | 36.1% |
| Year 4 | $25.2M | +$4.2M | $29.4M | 37.0% |
| Year 5 | $26.0M | +$4.2M | $30.2M | 38.0% |
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 | $795K | $1.2M | $1.6M | $1.9M |
| Denial Rate Reductio | $787K | $1.2M | $1.6M | $1.9M |
| A/R Days Reduction | $483K | $725K | $967K | $1.2M |
| Clean Claim Rate | $25K | $38K | $51K | $61K |
| Total | $2.1M | $3.1M | $4.2M | $5.0M |
Peer Context — Where This Hospital Sits
Key metrics vs 235 size-matched peers. Low percentile on margin/efficiency metrics = more room for improvement = larger bridge opportunity.
| Metric | Hospital | P25 | P50 | P75 | Percentile |
|---|---|---|---|---|---|
| Op Margin | 28.2% | -38.2% | -8.9% | 9.0% | P95 |
| Net-to-Gross | 29.3% | 25.8% | 37.5% | 54.1% | P33 |
| Occupancy | 53.6% | 12.6% | 27.7% | 53.4% | P75 |
| Rev/Bed | $3.6M | $438K | $654K | $1.2M | P91 |
| Exp/Bed | $2.6M | $463K | $875K | $1.4M | P89 |
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.