BANNER PAYSON MEDICAL CENTER
1. Target Overview & Investment Thesis
BANNER PAYSON MEDICAL CENTER is a 25-bed suburban community hospital in GILA, AZ with $49.3M in net patient revenue and a 0.0% operating margin. The hospital serves a payer mix of 36.2% Medicare, 11.2% Medicaid, and 52.7% commercial.
Thesis: Turnaround. Our ML models identify $3.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 0.0% to 7.4% (+736bps).
| Net Revenue HCRIS | $49.3M |
| Current EBITDA COMPUTED | $7K |
| Operating Margin COMPUTED | 0.0% |
| Occupancy HCRIS | 47.7% |
| Revenue / Bed COMPUTED | $2.0M |
| Net-to-Gross HCRIS | 50.7% |
| Distress Probability ML | 51.7% |
2. Market Context & Competitive Position
AZ has 124 Medicare-certified hospitals with a median operating margin of -0.8%. The target's margin of 0.0% places it above the state median. Among 41 size-comparable peers (12-50 beds), the median margin is -2.8%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (12-50), prioritizing same-state peers. 41 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| BANNER PAYSON MEDICAL CENTER (Target) | AZ | 25 | $49.3M | 0.0% |
| ARIZONA GENERAL HOSPITAL | AZ | 50 | $116.2M | -6.6% |
| ARIZONA GENERAL HOSPITAL | AZ | 16 | $97.1M | 10.4% |
| THE CORE INSTITUTE SPECIALTY H | AZ | 28 | $91.2M | 9.2% |
| MT. GRAHAM REGIONAL MEDICAL CE | AZ | 25 | $75.2M | -2.8% |
| COBRE VALLEY REG. MEDICAL CENT | AZ | 25 | $74.9M | -10.3% |
| COPPER QUEEN COMM. HOSP. | AZ | 14 | $63.5M | 6.6% |
| MT. GRAHAM REGIONAL MEDICAL CE | AZ | 25 | $49.4M | -6.8% |
| AZ SPINE & JOINT HOSPITAL | AZ | 23 | $45.1M | 19.4% |
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: $3.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.0M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $986K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $976K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $600K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $32K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $7K |
| + RCM Uplift | +$3.6M |
| Pro Forma EBITDA | $3.6M |
| Current Margin | 0.0% |
| Pro Forma Margin | 7.4% |
| WC Released (1x) | $1.9M |
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 | $11K | $36.3M | 3331.86x | 406.4% |
| Base (11x exit) | 10.0x | 11.0x | $11K | $40.0M | 3665.37x | 416.2% |
| Bull Case | 9.0x | 11.0x | $10K | $52.0M | 5293.10x | 455.6% |
| Bull (12x exit) | 9.0x | 12.0x | $10K | $56.7M | 5774.59x | 465.3% |
| Bear Case | 11.0x | 10.0x | $12K | $18.2M | 1516.13x | 332.7% |
| Bear (11x exit) | 11.0x | 11.0x | $12K | $20.0M | 1668.07x | 341.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| High | Elevated distress probability | Model estimates 51.7% 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
- 41 hospitals with 12-50 beds
- Same-state prioritization (n=42)
- Comp margins: P25=-10.1% / P50=-2.8% / P75=8.2%
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.