HI - DESERT MEDICAL CENTER
1. Target Overview & Investment Thesis
HI - DESERT MEDICAL CENTER is a 55-bed suburban community hospital in SAN BERNARDINO, CA with $80.4M in net patient revenue and a 3.7% operating margin. The hospital serves a payer mix of 21.3% Medicare, 5.2% Medicaid, and 73.4% commercial.
Thesis: Turnaround. Our ML models identify $5.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 3.7% to 11.0% (+736bps).
| Net Revenue HCRIS | $80.4M |
| Current EBITDA COMPUTED | $3.0M |
| Operating Margin COMPUTED | 3.7% |
| Occupancy HCRIS | 30.4% |
| Revenue / Bed COMPUTED | $1.5M |
| Net-to-Gross HCRIS | 15.9% |
| Distress Probability ML | 50.6% |
2. Market Context & Competitive Position
CA has 414 Medicare-certified hospitals with a median operating margin of -4.9%. The target's margin of 3.7% places it above the state median. Among 109 size-comparable peers (28-110 beds), the median margin is -5.9%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (28-110), prioritizing same-state peers. 109 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| HI - DESERT MEDICAL CENTER (Target) | CA | 55 | $80.4M | 3.7% |
| RANCHO LOS AMIGOS NATL.REHAB.C | CA | 83 | $512.6M | 41.9% |
| USC NORRIS CANCER HOSPITAL | CA | 60 | $468.7M | 19.1% |
| KFH - FREMONT | CA | 100 | $296.2M | -6.6% |
| MERCY HOSPITAL OF FOLSOM | CA | 106 | $287.8M | 17.0% |
| ADVENTIST HEALTH SONORA | CA | 84 | $274.3M | -7.4% |
| CPMC-R.K. DAVIES MEDICAL CENTE | CA | 105 | $243.7M | 24.6% |
| WOODLAND HEALTHCARE | CA | 74 | $211.5M | -3.2% |
| FRENCH HOSPITAL MEDICAL CENTER | CA | 98 | $208.6M | -2.1% |
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: $5.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.7M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.6M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.6M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $979K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $51K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $3.0M |
| + RCM Uplift | +$5.9M |
| Pro Forma EBITDA | $8.9M |
| Current Margin | 3.7% |
| Pro Forma Margin | 11.0% |
| WC Released (1x) | $3.1M |
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 | $4.5M | $78.7M | 17.32x | 76.9% |
| Base (11x exit) | 10.0x | 11.0x | $4.5M | $88.0M | 19.37x | 80.9% |
| Bull Case | 9.0x | 11.0x | $4.1M | $109.0M | 26.66x | 92.8% |
| Bull (12x exit) | 9.0x | 12.0x | $4.1M | $120.2M | 29.38x | 96.6% |
| Bear Case | 11.0x | 10.0x | $5.0M | $47.6M | 9.52x | 57.0% |
| Bear (11x exit) | 11.0x | 11.0x | $5.0M | $54.0M | 10.80x | 61.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Low occupancy | At 30.4%, 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 50.6% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
| 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
- 109 hospitals with 28-110 beds
- Same-state prioritization (n=110)
- Comp margins: P25=-21.6% / P50=-5.9% / P75=1.8%
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.