SALINE MEMORIAL HOSPITAL
1. Target Overview & Investment Thesis
SALINE MEMORIAL HOSPITAL is a 130-bed under-performing / distressed in SALINE, AR with $91.4M in net patient revenue and a -8.0% operating margin. The hospital serves a payer mix of 35.7% Medicare, 22.1% Medicaid, and 42.2% commercial.
Thesis: Undervalued. Our ML models identify $6.7M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -8.0% to -0.6% (+736bps).
| Net Revenue HCRIS | $91.4M |
| Current EBITDA COMPUTED | $-7.3M |
| Operating Margin COMPUTED | -8.0% |
| Occupancy HCRIS | 24.6% |
| Revenue / Bed COMPUTED | $703K |
| Net-to-Gross HCRIS | 23.8% |
| Distress Probability ML | 58.9% |
2. Market Context & Competitive Position
AR has 108 Medicare-certified hospitals with a median operating margin of -7.6%. The target's margin of -8.0% places it below the state median. Among 33 size-comparable peers (65-260 beds), the median margin is 2.6%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (65-260), prioritizing same-state peers. 33 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SALINE MEMORIAL HOSPITAL (Target) | AR | 130 | $91.4M | -8.0% |
| MERCY HOSPITAL FORT SMITH | AR | 256 | $447.1M | 13.8% |
| MERCY MEDICAL CENTER | AR | 236 | $366.7M | 7.7% |
| BAXTER REGIONAL MEDICAL CENTER | AR | 169 | $282.2M | -2.8% |
| BAPTIST HEALTH MEDICAL CENTER- | AR | 200 | $278.0M | 0.2% |
| ST. VINCENT HOT SPRINGS | AR | 220 | $258.6M | 6.6% |
| WHITE COUNTY MEDICAL CENTER | AR | 179 | $251.3M | 3.4% |
| WHITE RIVER MEDICAL CENTER | AR | 170 | $247.7M | -11.9% |
| NEA BAPTIST MEMORIAL HOSPITAL | AR | 180 | $246.7M | 1.0% |
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: $6.7M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.9M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.8M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.8M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $1.1M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $58K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-7.3M |
| + RCM Uplift | +$6.7M |
| Pro Forma EBITDA | $-556K |
| Current Margin | -8.0% |
| Pro Forma Margin | -0.6% |
| WC Released (1x) | $3.5M |
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 | $-11.2M | $19.2M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-11.2M | $17.5M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-10.1M | $36.1M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-10.1M | $36.4M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-12.3M | $-10.8M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-12.3M | $-15.8M | 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 |
| Medium | Elevated Medicaid exposure (22.1%) | Medicaid reimburses below cost in most states. Mitigant: denial reduction lever has highest impact on Medicaid claims |
| Medium | Low occupancy | At 24.6%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
| High | Elevated distress probability | Model estimates 58.9% 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
- 33 hospitals with 65-260 beds
- Same-state prioritization (n=34)
- Comp margins: P25=-11.8% / P50=2.6% / P75=7.7%
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.