COPPER SPRINGS
1. Target Overview & Investment Thesis
COPPER SPRINGS is a 144-bed community hospital in MARICOPA, AZ with $44.1M in net patient revenue and a -15.9% operating margin. The hospital serves a payer mix of 3.7% Medicare, 0.0% Medicaid, and 96.3% commercial.
Thesis: Undervalued. Our ML models identify $3.2M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -15.9% to -8.5% (+736bps).
| Net Revenue HCRIS | $44.1M |
| Current EBITDA COMPUTED | $-7.0M |
| Operating Margin COMPUTED | -15.9% |
| Occupancy HCRIS | 94.3% |
| Revenue / Bed COMPUTED | $306K |
| Net-to-Gross HCRIS | 31.1% |
| 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 -15.9% places it below the state median. Among 45 size-comparable peers (72-288 beds), the median margin is 2.2%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (72-288), prioritizing same-state peers. 45 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| COPPER SPRINGS (Target) | AZ | 144 | $44.1M | -15.9% |
| HONORHEALTH JOHN C. LINCOLN ME | AZ | 258 | $618.4M | -7.9% |
| 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% |
| ABRAZO ARROWHEAD CAMPUS | AZ | 270 | $406.4M | 11.7% |
| 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% |
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: $3.2M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $926K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $882K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $873K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $537K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $28K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-7.0M |
| + RCM Uplift | +$3.2M |
| Pro Forma EBITDA | $-3.8M |
| Current Margin | -15.9% |
| Pro Forma Margin | -8.5% |
| WC Released (1x) | $1.7M |
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 | $-10.8M | $-13.8M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-10.8M | $-18.7M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-9.7M | $-11.5M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-9.7M | $-15.4M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-11.9M | $-26.5M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-11.9M | $-33.0M | 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
- 45 hospitals with 72-288 beds
- Same-state prioritization (n=46)
- Comp margins: P25=-6.1% / P50=2.2% / P75=11.4%
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.