CPMC-R.K. DAVIES MEDICAL CENTER
1. Target Overview & Investment Thesis
CPMC-R.K. DAVIES MEDICAL CENTER is a 105-bed suburban community hospital in SAN FRANCISCO, CA with $243.7M in net patient revenue and a 24.6% operating margin. The hospital serves a payer mix of 31.3% Medicare, 4.9% Medicaid, and 63.7% commercial.
Thesis: Turnaround. Our ML models identify $17.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 24.6% to 31.9% (+736bps).
| Net Revenue HCRIS | $243.7M |
| Current EBITDA COMPUTED | $59.9M |
| Operating Margin COMPUTED | 24.6% |
| Occupancy HCRIS | 41.1% |
| Revenue / Bed COMPUTED | $2.3M |
| Net-to-Gross HCRIS | 30.5% |
| Distress Probability ML | 49.0% |
2. Market Context & Competitive Position
CA has 414 Medicare-certified hospitals with a median operating margin of -4.9%. The target's margin of 24.6% places it above the state median. Among 171 size-comparable peers (52-210 beds), the median margin is -4.7%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (52-210), prioritizing same-state peers. 171 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CPMC-R.K. DAVIES MEDICAL CENTE (Target) | CA | 105 | $243.7M | 24.6% |
| CHILDRENS HOSP & RES CNTR OAKL | CA | 155 | $687.9M | -7.1% |
| NORTHBAY HOSPITAL GROUP | CA | 204 | $676.6M | -8.2% |
| CONTRA COSTA REGIONAL MEDICAL | CA | 124 | $595.0M | -29.2% |
| KFH - VALLEJO | CA | 184 | $531.7M | 0.3% |
| RANCHO LOS AMIGOS NATL.REHAB.C | CA | 83 | $512.6M | 41.9% |
| DOMINICAN HOSPITAL | CA | 202 | $499.0M | 5.0% |
| CMH OF SAN BUENAVENTURA | CA | 170 | $498.5M | -7.6% |
| USC NORRIS CANCER HOSPITAL | CA | 60 | $468.7M | 19.1% |
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: $17.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $5.1M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $4.9M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $4.8M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.0M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $156K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $59.9M |
| + RCM Uplift | +$17.9M |
| Pro Forma EBITDA | $77.8M |
| Current Margin | 24.6% |
| Pro Forma Margin | 31.9% |
| WC Released (1x) | $9.3M |
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 | $92.1M | $574.2M | 6.23x | 44.2% |
| Base (11x exit) | 10.0x | 11.0x | $92.1M | $661.6M | 7.18x | 48.3% |
| Bull Case | 9.0x | 11.0x | $82.9M | $750.7M | 9.06x | 55.4% |
| Bull (12x exit) | 9.0x | 12.0x | $82.9M | $843.4M | 10.17x | 59.0% |
| Bear Case | 11.0x | 10.0x | $101.3M | $454.7M | 4.49x | 35.0% |
| Bear (11x exit) | 11.0x | 11.0x | $101.3M | $533.0M | 5.26x | 39.4% |
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
- 171 hospitals with 52-210 beds
- Same-state prioritization (n=172)
- Comp margins: P25=-21.0% / P50=-4.7% / P75=3.9%
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.