WASHINGTON COUNTY HOSPITAL
1. Target Overview & Investment Thesis
WASHINGTON COUNTY HOSPITAL is a 15-bed rural/critical access in WASHINGTON, AL with $16.2M in net patient revenue and a -6.6% operating margin. The hospital serves a payer mix of 49.5% Medicare, 15.8% Medicaid, and 34.6% commercial.
Thesis: Turnaround. Our ML models identify $1.2M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -6.6% to 0.8% (+736bps).
| Net Revenue HCRIS | $16.2M |
| Current EBITDA COMPUTED | $-1.1M |
| Operating Margin COMPUTED | -6.6% |
| Occupancy HCRIS | 34.7% |
| Revenue / Bed COMPUTED | $1.1M |
| Net-to-Gross HCRIS | 76.8% |
| Distress Probability ML | 60.5% |
2. Market Context & Competitive Position
AL has 115 Medicare-certified hospitals with a median operating margin of -8.5%. The target's margin of -6.6% places it above the state median. Among 17 size-comparable peers (8-30 beds), the median margin is -24.8%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (8-30), prioritizing same-state peers. 17 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| WASHINGTON COUNTY HOSPITAL (Target) | AL | 15 | $16.2M | -6.6% |
| ST. VINCENTS CHILTON | AL | 26 | $29.1M | 9.2% |
| ST. VINCENTS BLOUNT | AL | 25 | $25.2M | -33.1% |
| NORTHWEST MEDICAL CENTER | AL | 28 | $23.8M | -12.1% |
| BIBB MEDICAL CENTER | AL | 25 | $19.8M | -20.1% |
| CHOCTAW GENERAL HOSPITAL | AL | 25 | $17.7M | -2.8% |
| MEDICAL CENTER BARBOUR | AL | 30 | $17.6M | -34.1% |
| TANNER MEDICAL CENTER ALABAMA | AL | 15 | $15.0M | -12.0% |
| BULLOCK COUNTY HOSPITAL | AL | 29 | $13.9M | -24.4% |
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: $1.2M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $340K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $324K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $321K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $197K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-1.1M |
| + RCM Uplift | +$1.2M |
| Pro Forma EBITDA | $130K |
| Current Margin | -6.6% |
| Pro Forma Margin | 0.8% |
| WC Released (1x) | $622K |
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 | $-1.6M | $4.9M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-1.6M | $4.9M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-1.5M | $8.3M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-1.5M | $8.6M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-1.8M | $-515K | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-1.8M | $-1.2M | 0.00x | -100.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| High | Negative operating margin | RCM uplift bridge shows clear path to profitability; working capital release provides near-term cash cushion |
| Medium | Low occupancy | At 34.7%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
| High | Elevated distress probability | Model estimates 60.5% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
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
- 17 hospitals with 8-30 beds
- Same-state prioritization (n=18)
- Comp margins: P25=-50.0% / P50=-24.8% / P75=-12.1%
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.