KPC PROMISE HOSPITAL OF PHOENIX
1. Target Overview & Investment Thesis
KPC PROMISE HOSPITAL OF PHOENIX is a 48-bed suburban community hospital in MARICOPA, AZ with $17.4M in net patient revenue and a 4.5% operating margin. The hospital serves a payer mix of 36.0% Medicare, 18.5% Medicaid, and 45.6% commercial.
Thesis: Turnaround. Our ML models identify $1.3M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 4.5% to 11.9% (+736bps).
| Net Revenue HCRIS | $17.4M |
| Current EBITDA COMPUTED | $792K |
| Operating Margin COMPUTED | 4.5% |
| Occupancy HCRIS | 47.8% |
| Revenue / Bed COMPUTED | $363K |
| Net-to-Gross HCRIS | 35.8% |
| Distress Probability ML | 54.3% |
2. Market Context & Competitive Position
AZ has 124 Medicare-certified hospitals with a median operating margin of -0.8%. The target's margin of 4.5% 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 |
|---|---|---|---|---|
| KPC PROMISE HOSPITAL OF PHOENI (Target) | AZ | 48 | $17.4M | 4.5% |
| 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: $1.3M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $366K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $349K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $345K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $212K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $11K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $792K |
| + RCM Uplift | +$1.3M |
| Pro Forma EBITDA | $2.1M |
| Current Margin | 4.5% |
| Pro Forma Margin | 11.9% |
| WC Released (1x) | $669K |
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 | $1.2M | $18.1M | 14.82x | 71.5% |
| Base (11x exit) | 10.0x | 11.0x | $1.2M | $20.3M | 16.62x | 75.4% |
| Bull Case | 9.0x | 11.0x | $1.1M | $24.9M | 22.69x | 86.7% |
| Bull (12x exit) | 9.0x | 12.0x | $1.1M | $27.5M | 25.05x | 90.4% |
| Bear Case | 11.0x | 10.0x | $1.3M | $11.3M | 8.39x | 53.0% |
| Bear (11x exit) | 11.0x | 11.0x | $1.3M | $12.8M | 9.55x | 57.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| High | Elevated distress probability | Model estimates 54.3% 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
- 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.