SSH - TUCSON
1. Target Overview & Investment Thesis
SSH - TUCSON is a 58-bed community hospital in PIMA, AZ with $15.7M in net patient revenue and a -18.2% operating margin. The hospital serves a payer mix of 39.3% Medicare, 0.0% Medicaid, and 60.7% commercial.
Thesis: Turnaround. Our ML models identify $1.2M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -18.2% to -10.8% (+736bps).
| Net Revenue HCRIS | $15.7M |
| Current EBITDA COMPUTED | $-2.9M |
| Operating Margin COMPUTED | -18.2% |
| Occupancy HCRIS | 41.0% |
| Revenue / Bed COMPUTED | $270K |
| Net-to-Gross HCRIS | 20.2% |
| 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 -18.2% places it below the state median. Among 46 size-comparable peers (29-116 beds), the median margin is 3.3%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (29-116), prioritizing same-state peers. 46 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SSH - TUCSON (Target) | AZ | 58 | $15.7M | -18.2% |
| SUMMIT HEALTHCARE | AZ | 89 | $254.1M | -2.9% |
| VERDE VALLEY MEDICAL CENTER | AZ | 87 | $172.5M | 4.3% |
| BANNER HEART HOSPITAL | AZ | 108 | $162.2M | 17.4% |
| 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% |
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% | $329K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $313K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $310K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $191K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-2.9M |
| + RCM Uplift | +$1.2M |
| Pro Forma EBITDA | $-1.7M |
| Current Margin | -18.2% |
| Pro Forma Margin | -10.8% |
| WC Released (1x) | $601K |
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 | $-7.3M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-4.4M | $-9.4M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-3.9M | $-7.0M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-3.9M | $-8.9M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-4.8M | $-11.6M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-4.8M | $-14.3M | 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 |
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
- 46 hospitals with 29-116 beds
- Same-state prioritization (n=47)
- Comp margins: P25=-8.2% / P50=3.3% / P75=10.2%
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.