ABRAZO SCOTTSDALE CAMPUS
1. Target Overview & Investment Thesis
ABRAZO SCOTTSDALE CAMPUS is a 128-bed suburban community hospital in MARICOPA, AZ with $117.4M in net patient revenue and a 2.4% operating margin. The hospital serves a payer mix of 20.5% Medicare, 6.0% Medicaid, and 73.5% commercial.
Thesis: Undervalued. Our ML models identify $8.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 2.4% to 9.8% (+736bps).
| Net Revenue HCRIS | $117.4M |
| Current EBITDA COMPUTED | $2.8M |
| Operating Margin COMPUTED | 2.4% |
| Occupancy HCRIS | 39.4% |
| Revenue / Bed COMPUTED | $917K |
| Net-to-Gross HCRIS | 10.1% |
| Distress Probability ML | 49.0% |
2. Market Context & Competitive Position
AZ has 124 Medicare-certified hospitals with a median operating margin of -0.8%. The target's margin of 2.4% places it above the state median. Among 47 size-comparable peers (64-256 beds), the median margin is 0.5%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (64-256), prioritizing same-state peers. 47 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ABRAZO SCOTTSDALE CAMPUS (Target) | AZ | 128 | $117.4M | 2.4% |
| BANNER GATEWAY MEDICAL CENTER | AZ | 185 | $573.8M | 5.2% |
| FLAGSTAFF MEDICAL CENTER | AZ | 242 | $477.9M | -0.8% |
| YAVAPAI REGIONAL MEDICAL CENTE | AZ | 218 | $456.9M | -2.2% |
| MERCY GILBERT MEDICAL CENTER | AZ | 197 | $381.9M | 6.3% |
| KINGMAN REGIONAL MEDICAL CENTE | AZ | 196 | $373.6M | -6.0% |
| HONORHEALTH DEER VALLEY MED CT | AZ | 204 | $372.1M | 3.3% |
| NORTHWEST MEDICAL CENTER | AZ | 253 | $318.3M | -1.0% |
| ABRAZO WEST CAMPUS | AZ | 207 | $303.3M | 22.2% |
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: $8.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $2.5M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $2.3M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $2.3M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $1.4M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $75K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $2.8M |
| + RCM Uplift | +$8.6M |
| Pro Forma EBITDA | $11.5M |
| Current Margin | 2.4% |
| Pro Forma Margin | 9.8% |
| WC Released (1x) | $4.5M |
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 | $4.4M | $105.2M | 24.02x | 88.8% |
| Base (11x exit) | 10.0x | 11.0x | $4.4M | $117.1M | 26.75x | 93.0% |
| Bull Case | 9.0x | 11.0x | $3.9M | $147.0M | 37.31x | 106.2% |
| Bull (12x exit) | 9.0x | 12.0x | $3.9M | $161.6M | 41.00x | 110.2% |
| Bear Case | 11.0x | 10.0x | $4.8M | $60.5M | 12.57x | 65.9% |
| Bear (11x exit) | 11.0x | 11.0x | $4.8M | $68.2M | 14.15x | 69.9% |
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
- 47 hospitals with 64-256 beds
- Same-state prioritization (n=48)
- Comp margins: P25=-6.4% / P50=0.5% / P75=10.3%
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.