PIH HEALTH HOSPITAL - DOWNEY
1. Target Overview & Investment Thesis
PIH HEALTH HOSPITAL - DOWNEY is a 165-bed suburban community hospital in LOS ANGELES, CA with $189.2M in net patient revenue and a -0.7% operating margin. The hospital serves a payer mix of 18.4% Medicare, 9.8% Medicaid, and 71.8% commercial.
Thesis: Undervalued. Our ML models identify $13.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -0.7% to 6.7% (+736bps).
| Net Revenue HCRIS | $189.2M |
| Current EBITDA COMPUTED | $-1.3M |
| Operating Margin COMPUTED | -0.7% |
| Occupancy HCRIS | 55.7% |
| Revenue / Bed COMPUTED | $1.1M |
| Net-to-Gross HCRIS | 15.5% |
| Distress Probability ML | 46.5% |
2. Market Context & Competitive Position
CA has 414 Medicare-certified hospitals with a median operating margin of -4.9%. The target's margin of -0.7% places it above the state median. Among 207 size-comparable peers (82-330 beds), the median margin is -4.5%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (82-330), prioritizing same-state peers. 207 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| PIH HEALTH HOSPITAL - DOWNEY (Target) | CA | 165 | $189.2M | -0.7% |
| CITY OF HOPE NATIONAL MEDICAL | CA | 217 | $1.83B | -10.7% |
| KECK HOSPITAL OF USC | CA | 301 | $1.11B | -20.8% |
| SUTTER ROSEVILLE MEDICAL CENTE | CA | 318 | $1.07B | 12.1% |
| CALIFORNIA PACIFIC MEDICAL CEN | CA | 274 | $987.8M | -18.5% |
| ZUCKERBERG SAN FRANCISCO GENER | CA | 284 | $889.5M | -41.7% |
| SANTA MONICA UCLA MEDICAL CENT | CA | 281 | $835.9M | 2.8% |
| ENLOE MEDICAL CENTER | CA | 258 | $834.4M | -0.5% |
| KFH - SOUTH SACRAMENTO | CA | 233 | $803.9M | 5.9% |
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: $13.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $4.0M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $3.8M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $3.7M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $2.3M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $121K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-1.3M |
| + RCM Uplift | +$13.9M |
| Pro Forma EBITDA | $12.6M |
| Current Margin | -0.7% |
| Pro Forma Margin | 6.7% |
| WC Released (1x) | $7.3M |
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 | $-2.0M | $130.7M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-2.0M | $143.1M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-1.8M | $188.5M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-1.8M | $205.1M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-2.2M | $61.7M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-2.2M | $67.2M | 0.00x | -100.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| High | Negative operating margin | RCM uplift bridge shows clear path to profitability; working capital release provides near-term cash cushion |
| 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
- 207 hospitals with 82-330 beds
- Same-state prioritization (n=208)
- Comp margins: P25=-16.9% / P50=-4.5% / P75=4.3%
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 27, 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.