CRESTWOOD MEDICAL CENTER
1. Target Overview & Investment Thesis
CRESTWOOD MEDICAL CENTER is a 164-bed suburban community hospital in MADISON, AL with $258.9M in net patient revenue and a 14.6% operating margin. The hospital serves a payer mix of 28.9% Medicare, 9.4% Medicaid, and 61.8% commercial.
Thesis: Turnaround. Our ML models identify $19.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 14.6% to 22.0% (+736bps).
| Net Revenue HCRIS | $258.9M |
| Current EBITDA COMPUTED | $37.9M |
| Operating Margin COMPUTED | 14.6% |
| Occupancy HCRIS | 63.9% |
| Revenue / Bed COMPUTED | $1.6M |
| Net-to-Gross HCRIS | 7.4% |
| Distress Probability ML | 43.5% |
2. Market Context & Competitive Position
AL has 115 Medicare-certified hospitals with a median operating margin of -8.5%. The target's margin of 14.6% places it above the state median. Among 34 size-comparable peers (82-328 beds), the median margin is -3.8%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (82-328), prioritizing same-state peers. 34 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CRESTWOOD MEDICAL CENTER (Target) | AL | 164 | $258.9M | 14.6% |
| EAST ALABAMA MEDICAL CENTER | AL | 297 | $399.6M | -6.5% |
| USA HEALTH UNIVERSITY HOSPITAL | AL | 242 | $348.5M | -6.4% |
| JACKSON HOSPITAL AND CLINIC I | AL | 278 | $301.4M | -10.4% |
| NORTH ALABAMA MEDICAL CENTER | AL | 223 | $259.5M | 0.5% |
| ST. VINCENTS EAST | AL | 286 | $249.1M | -20.2% |
| THOMAS HOSPITAL | AL | 164 | $244.7M | 6.2% |
| FLOWERS HOSPITAL | AL | 193 | $235.5M | 14.2% |
| USA CHILDRENS AND WOMENS HOSPI | AL | 249 | $228.8M | -0.3% |
4. Predicted Improvement Opportunities
Improvement targets set at P75 of comparable peers with 60% gap closure assumption. Coefficients calibrated to published research bands. Total EBITDA uplift: $19.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $5.4M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $5.2M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $5.1M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.2M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $166K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $37.9M |
| + RCM Uplift | +$19.1M |
| Pro Forma EBITDA | $56.9M |
| Current Margin | 14.6% |
| Pro Forma Margin | 22.0% |
| WC Released (1x) | $9.9M |
6. Returns Analysis — Scenario Matrix
5-year hold, 5.5x leverage, 3% organic growth, 10%/yr debt paydown. Base case uses 100% of predicted RCM uplift. Bull case: 130% uplift at lower entry. Bear case: 50% uplift at higher entry.
| Scenario | Entry | Exit | Equity In | Equity Out | MOIC | IRR |
|---|---|---|---|---|---|---|
| Base Case | 10.0x | 10.0x | $58.3M | $440.5M | 7.56x | 49.9% |
| Base (11x exit) | 10.0x | 11.0x | $58.3M | $503.5M | 8.64x | 53.9% |
| Bull Case | 9.0x | 11.0x | $52.5M | $585.3M | 11.16x | 62.0% |
| Bull (12x exit) | 9.0x | 12.0x | $52.5M | $654.0M | 12.47x | 65.6% |
| Bear Case | 11.0x | 10.0x | $64.1M | $326.3M | 5.09x | 38.5% |
| Bear (11x exit) | 11.0x | 11.0x | $64.1M | $379.7M | 5.92x | 42.7% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Low | Low net-to-gross ratio | Large contractual allowances suggest pricing discipline issues. Mitigant: payer renegotiation is an additional upside lever |
8. Data Sources & Methodology Appendix
Data Sources
- CMS HCRIS Cost Reports (Medicare-certified hospitals)
- CMS Medicare Utilization (DRG-level volumes)
- CMS Chronic Conditions (county-level disease prevalence)
- HCRIS multi-year trend data (financial time series)
Comparable Selection
- 34 hospitals with 82-328 beds
- Same-state prioritization (n=35)
- Comp margins: P25=-10.4% / P50=-3.8% / P75=2.3%
Bridge Methodology
- Targets: P75 of comparable peers (60% gap closure)
- Denial: avoidable share = 35% of delta × NPR
- AR: bad debt coefficient = $0.65 per day per $1K NPR
- NCR: 60% coefficient on collection rate improvement
- CDI: 0.75% of Medicare revenue per 0.01 CMI point
Returns Assumptions
- Leverage: 5.5x entry (84.6% debt / 15.4% equity)
- Organic growth: 3% annual EBITDA growth
- Debt paydown: 10% of principal per year
- Hold period: 5 years
Generated by SeekingChartis on April 26, 2026. All predictions use public data only. Confidence intervals calibrated via split conformal prediction (90% coverage target). This memo is for informational purposes and does not constitute investment advice.