ARKANSAS HEART HOSPITAL
1. Target Overview & Investment Thesis
ARKANSAS HEART HOSPITAL is a 112-bed suburban community hospital in PULASKI, AR with $205.9M in net patient revenue and a 1.2% operating margin. The hospital serves a payer mix of 47.9% Medicare, 3.1% Medicaid, and 49.0% commercial.
Thesis: Undervalued. Our ML models identify $15.2M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 1.2% to 8.6% (+736bps).
| Net Revenue HCRIS | $205.9M |
| Current EBITDA COMPUTED | $2.5M |
| Operating Margin COMPUTED | 1.2% |
| Occupancy HCRIS | 49.5% |
| Revenue / Bed COMPUTED | $1.8M |
| Net-to-Gross HCRIS | 30.1% |
| Distress Probability ML | 48.0% |
2. Market Context & Competitive Position
AR has 108 Medicare-certified hospitals with a median operating margin of -7.6%. The target's margin of 1.2% places it above the state median. Among 32 size-comparable peers (56-224 beds), the median margin is 0.6%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (56-224), prioritizing same-state peers. 32 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ARKANSAS HEART HOSPITAL (Target) | AR | 112 | $205.9M | 1.2% |
| 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% |
| CONWAY REGIONAL MEDICAL CENTER | AR | 169 | $232.9M | -14.5% |
| NATIONAL PARK MEDICAL CENTER | AR | 126 | $118.8M | 2.6% |
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: $15.2M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $4.3M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $4.1M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $4.1M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $2.5M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $132K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $2.5M |
| + RCM Uplift | +$15.2M |
| Pro Forma EBITDA | $17.6M |
| Current Margin | 1.2% |
| Pro Forma Margin | 8.6% |
| WC Released (1x) | $7.9M |
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 | $3.8M | $167.9M | 44.07x | 113.2% |
| Base (11x exit) | 10.0x | 11.0x | $3.8M | $185.9M | 48.80x | 117.6% |
| Bull Case | 9.0x | 11.0x | $3.4M | $237.2M | 69.17x | 133.3% |
| Bull (12x exit) | 9.0x | 12.0x | $3.4M | $259.8M | 75.75x | 137.6% |
| Bear Case | 11.0x | 10.0x | $4.2M | $90.9M | 21.68x | 85.0% |
| Bear (11x exit) | 11.0x | 11.0x | $4.2M | $101.3M | 24.18x | 89.1% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Standard execution risk | RCM improvement requires management buy-in and 12-18 month implementation timeline |
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
- 32 hospitals with 56-224 beds
- Same-state prioritization (n=33)
- Comp margins: P25=-12.4% / P50=0.6% / P75=6.8%
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.