SSH - PHOENIX
1. Target Overview & Investment Thesis
SSH - PHOENIX is a 48-bed community hospital in MARICOPA, AZ with $27.5M in net patient revenue and a 3.8% operating margin. The hospital serves a payer mix of 24.8% Medicare, 0.0% Medicaid, and 75.2% commercial.
Thesis: Turnaround. Our ML models identify $2.0M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 3.8% to 11.1% (+736bps).
| Net Revenue HCRIS | $27.5M |
| Current EBITDA COMPUTED | $1.0M |
| Operating Margin COMPUTED | 3.8% |
| Occupancy HCRIS | 74.2% |
| Revenue / Bed COMPUTED | $573K |
| Net-to-Gross HCRIS | 13.7% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
AZ has 124 Medicare-certified hospitals with a median operating margin of -0.8%. The target's margin of 3.8% places it above the state median. Among 57 size-comparable peers (24-96 beds), the median margin is -1.4%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (24-96), prioritizing same-state peers. 57 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SSH - PHOENIX (Target) | AZ | 48 | $27.5M | 3.8% |
| SUMMIT HEALTHCARE | AZ | 89 | $254.1M | -2.9% |
| VERDE VALLEY MEDICAL CENTER | AZ | 87 | $172.5M | 4.3% |
| NORTHWEST MEDICAL CENTER ORO V | AZ | 96 | $145.8M | 10.6% |
| CANYON VISTA MEDICAL CENTER | AZ | 74 | $132.6M | 1.9% |
| ARIZONA GENERAL HOSPITAL | AZ | 50 | $116.2M | -6.6% |
| BANNER IRONWOOD MEDICAL CENTER | AZ | 89 | $115.5M | -1.7% |
| WESTERN ARIZONA REGIONAL MEDIC | AZ | 93 | $114.3M | 62.0% |
| HONORHEALTH SONORAN CROSSING M | AZ | 70 | $94.4M | -6.6% |
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: $2.0M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $577K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $550K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $544K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $335K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $18K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.0M |
| + RCM Uplift | +$2.0M |
| Pro Forma EBITDA | $3.1M |
| Current Margin | 3.8% |
| Pro Forma Margin | 11.1% |
| WC Released (1x) | $1.1M |
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 | $27.1M | 16.99x | 76.2% |
| Base (11x exit) | 10.0x | 11.0x | $1.6M | $30.3M | 19.02x | 80.2% |
| Bull Case | 9.0x | 11.0x | $1.4M | $37.5M | 26.15x | 92.1% |
| Bull (12x exit) | 9.0x | 12.0x | $1.4M | $41.3M | 28.82x | 95.9% |
| Bear Case | 11.0x | 10.0x | $1.8M | $16.4M | 9.38x | 56.5% |
| Bear (11x exit) | 11.0x | 11.0x | $1.8M | $18.6M | 10.64x | 60.5% |
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
- 57 hospitals with 24-96 beds
- Same-state prioritization (n=58)
- Comp margins: P25=-11.2% / P50=-1.4% / P75=6.5%
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.