BARSTOW COMMUNITY HOSPITAL
1. Target Overview & Investment Thesis
BARSTOW COMMUNITY HOSPITAL is a 30-bed suburban community hospital in SAN BERNARDINO, CA with $69.6M in net patient revenue and a 10.7% operating margin. The hospital serves a payer mix of 18.8% Medicare, 4.0% Medicaid, and 77.2% commercial.
Thesis: Turnaround. Our ML models identify $5.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 10.7% to 18.0% (+736bps).
| Net Revenue HCRIS | $69.6M |
| Current EBITDA COMPUTED | $7.4M |
| Operating Margin COMPUTED | 10.7% |
| Occupancy HCRIS | 63.9% |
| Revenue / Bed COMPUTED | $2.3M |
| Net-to-Gross HCRIS | 12.5% |
| Distress Probability ML | 40.8% |
2. Market Context & Competitive Position
CA has 414 Medicare-certified hospitals with a median operating margin of -4.9%. The target's margin of 10.7% places it above the state median. Among 77 size-comparable peers (15-60 beds), the median margin is -6.1%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (15-60), prioritizing same-state peers. 77 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| BARSTOW COMMUNITY HOSPITAL (Target) | CA | 30 | $69.6M | 10.7% |
| USC NORRIS CANCER HOSPITAL | CA | 60 | $468.7M | 19.1% |
| TAHOE FOREST HOSPITAL | CA | 25 | $264.3M | 13.0% |
| PORTERVILLE DEVELOPMENTAL CENT | CA | 17 | $193.6M | -6.0% |
| ADVENTIST HEALTH REEDLEY | CA | 49 | $187.1M | 1.8% |
| SUTTER DAVIS HOSPITAL | CA | 48 | $176.9M | 12.5% |
| ADVENTIST HEALTH UKIAH VALLEY | CA | 50 | $173.4M | -39.9% |
| ADVENTIST HEALTH CLEARLAKE | CA | 25 | $159.9M | -6.3% |
| ST ELIZABETH COMMUNITY HOSPTI | CA | 49 | $159.2M | 3.5% |
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: $5.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.5M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.4M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.4M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $847K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $45K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $7.4M |
| + RCM Uplift | +$5.1M |
| Pro Forma EBITDA | $12.6M |
| Current Margin | 10.7% |
| Pro Forma Margin | 18.0% |
| WC Released (1x) | $2.7M |
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 | $11.4M | $100.3M | 8.77x | 54.4% |
| Base (11x exit) | 10.0x | 11.0x | $11.4M | $114.0M | 9.97x | 58.4% |
| Bull Case | 9.0x | 11.0x | $10.3M | $134.6M | 13.09x | 67.2% |
| Bull (12x exit) | 9.0x | 12.0x | $10.3M | $149.9M | 14.57x | 70.9% |
| Bear Case | 11.0x | 10.0x | $12.6M | $70.9M | 5.64x | 41.3% |
| Bear (11x exit) | 11.0x | 11.0x | $12.6M | $82.1M | 6.53x | 45.5% |
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
- 77 hospitals with 15-60 beds
- Same-state prioritization (n=78)
- Comp margins: P25=-16.8% / P50=-6.1% / 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.