SUTTER TRACY COMMUNITY HOSPITAL
1. Target Overview & Investment Thesis
SUTTER TRACY COMMUNITY HOSPITAL is a 77-bed suburban community hospital in SAN JOAQUIN, CA with $159.6M in net patient revenue and a 8.3% operating margin. The hospital serves a payer mix of 32.4% Medicare, 5.1% Medicaid, and 62.5% commercial.
Thesis: Turnaround. Our ML models identify $11.7M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 8.3% to 15.6% (+736bps).
| Net Revenue HCRIS | $159.6M |
| Current EBITDA COMPUTED | $13.2M |
| Operating Margin COMPUTED | 8.3% |
| Occupancy HCRIS | 38.6% |
| Revenue / Bed COMPUTED | $2.1M |
| Net-to-Gross HCRIS | 28.8% |
| Distress Probability ML | 49.7% |
2. Market Context & Competitive Position
CA has 414 Medicare-certified hospitals with a median operating margin of -4.9%. The target's margin of 8.3% places it above the state median. Among 148 size-comparable peers (38-154 beds), the median margin is -5.4%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (38-154), prioritizing same-state peers. 148 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SUTTER TRACY COMMUNITY HOSPITA (Target) | CA | 77 | $159.6M | 8.3% |
| CONTRA COSTA REGIONAL MEDICAL | CA | 124 | $595.0M | -29.2% |
| RANCHO LOS AMIGOS NATL.REHAB.C | CA | 83 | $512.6M | 41.9% |
| USC NORRIS CANCER HOSPITAL | CA | 60 | $468.7M | 19.1% |
| KFH - ANTIOCH | CA | 144 | $445.4M | 8.1% |
| KFH - VACAVILLE | CA | 144 | $415.3M | 7.1% |
| SCRIPPS GREEN HOSPITAL | CA | 150 | $403.2M | 14.2% |
| EDEN MEDICAL CENTER | CA | 126 | $389.8M | 2.7% |
| KFH - REDWOOD CITY | CA | 140 | $379.7M | -4.5% |
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: $11.7M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $3.4M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $3.2M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $3.2M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $1.9M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $102K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $13.2M |
| + RCM Uplift | +$11.7M |
| Pro Forma EBITDA | $25.0M |
| Current Margin | 8.3% |
| Pro Forma Margin | 15.6% |
| WC Released (1x) | $6.1M |
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 | $20.3M | $204.6M | 10.07x | 58.7% |
| Base (11x exit) | 10.0x | 11.0x | $20.3M | $231.6M | 11.40x | 62.7% |
| Bull Case | 9.0x | 11.0x | $18.3M | $277.0M | 15.15x | 72.2% |
| Bull (12x exit) | 9.0x | 12.0x | $18.3M | $307.6M | 16.82x | 75.9% |
| Bear Case | 11.0x | 10.0x | $22.3M | $139.2M | 6.23x | 44.2% |
| Bear (11x exit) | 11.0x | 11.0x | $22.3M | $160.4M | 7.18x | 48.3% |
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
- 148 hospitals with 38-154 beds
- Same-state prioritization (n=149)
- Comp margins: P25=-22.4% / P50=-5.4% / P75=3.3%
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.