RH OF NORTHWESTARKANSAS LLC
1. Target Overview & Investment Thesis
RH OF NORTHWESTARKANSAS LLC is a 25-bed community hospital in WASHINGTON, AR with $10.3M in net patient revenue and a 1.4% operating margin. The hospital serves a payer mix of 45.0% Medicare, 0.0% Medicaid, and 55.0% commercial.
Thesis: Turnaround. Our ML models identify $761K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 1.4% to 8.8% (+742bps).
| Net Revenue HCRIS | $10.3M |
| Current EBITDA COMPUTED | $143K |
| Operating Margin COMPUTED | 1.4% |
| Occupancy HCRIS | 59.8% |
| Revenue / Bed COMPUTED | $410K |
| Net-to-Gross HCRIS | 10.2% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
AR has 108 Medicare-certified hospitals with a median operating margin of -7.6%. The target's margin of 1.4% places it above the state median. Among 52 size-comparable peers (12-50 beds), the median margin is -15.1%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (12-50), prioritizing same-state peers. 52 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| RH OF NORTHWESTARKANSAS LLC (Target) | AR | 25 | $10.3M | 1.4% |
| ARKANSAS CHILDRENS NORTHWEST | AR | 24 | $113.6M | 7.2% |
| ARKANSAS SURGICAL HOSPITAL | AR | 47 | $75.1M | 11.7% |
| ENCORE MEDICAL CENTER | AR | 25 | $55.7M | -4.7% |
| OZARKS COMMUNITY HOSPITAL OF G | AR | 25 | $48.6M | -21.0% |
| DREW MEMORIAL HOSPITAL INC | AR | 49 | $35.3M | -27.2% |
| ASHLEY COUNTY MEDICAL CENTER | AR | 25 | $33.7M | -23.0% |
| OZARK HEALTH INC | AR | 25 | $32.3M | -4.7% |
| FORREST CITY MEDICAL CENTER | AR | 48 | $30.3M | -17.3% |
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: $761K (742bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $215K | +210bp | 18mo |
| Denial Rate Reduction | 12.0% | 6.5% | $206K | +201bp | 12mo |
| Cost to Collect | 4.5% | 2.5% | $205K | +200bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $125K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +9bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $143K |
| + RCM Uplift | +$761K |
| Pro Forma EBITDA | $904K |
| Current Margin | 1.4% |
| Pro Forma Margin | 8.8% |
| WC Released (1x) | $393K |
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 | $221K | $8.6M | 38.75x | 107.8% |
| Base (11x exit) | 10.0x | 11.0x | $221K | $9.5M | 42.95x | 112.1% |
| Bull Case | 9.0x | 11.0x | $199K | $12.1M | 60.73x | 127.3% |
| Bull (12x exit) | 9.0x | 12.0x | $199K | $13.2M | 66.54x | 131.5% |
| Bear Case | 11.0x | 10.0x | $243K | $4.7M | 19.27x | 80.7% |
| Bear (11x exit) | 11.0x | 11.0x | $243K | $5.2M | 21.52x | 84.7% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Low | Low net-to-gross ratio | Large contractual allowances suggest pricing discipline issues. Mitigant: payer renegotiation is an additional upside lever |
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
- 52 hospitals with 12-50 beds
- Same-state prioritization (n=53)
- Comp margins: P25=-24.5% / P50=-15.1% / P75=-2.4%
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.