THCC SIERRA VISTA REGIONAL HOSPITAL
1. Target Overview & Investment Thesis
THCC SIERRA VISTA REGIONAL HOSPITAL is a 162-bed suburban community hospital in SAN LUIS OBISPO, CA with $175.4M in net patient revenue and a 6.4% operating margin. The hospital serves a payer mix of 30.4% Medicare, 10.8% Medicaid, and 58.9% commercial.
Thesis: Turnaround. Our ML models identify $12.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 6.4% to 13.8% (+736bps).
| Net Revenue HCRIS | $175.4M |
| Current EBITDA COMPUTED | $11.2M |
| Operating Margin COMPUTED | 6.4% |
| Occupancy HCRIS | 46.2% |
| Revenue / Bed COMPUTED | $1.1M |
| Net-to-Gross HCRIS | 13.1% |
| Distress Probability ML | 49.3% |
2. Market Context & Competitive Position
CA has 414 Medicare-certified hospitals with a median operating margin of -4.9%. The target's margin of 6.4% places it above the state median. Among 210 size-comparable peers (81-324 beds), the median margin is -4.3%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (81-324), prioritizing same-state peers. 210 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| THCC SIERRA VISTA REGIONAL HOS (Target) | CA | 162 | $175.4M | 6.4% |
| 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: $12.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $3.7M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $3.5M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $3.5M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $2.1M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $112K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $11.2M |
| + RCM Uplift | +$12.9M |
| Pro Forma EBITDA | $24.1M |
| Current Margin | 6.4% |
| Pro Forma Margin | 13.8% |
| WC Released (1x) | $6.7M |
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 | $17.3M | $203.1M | 11.77x | 63.7% |
| Base (11x exit) | 10.0x | 11.0x | $17.3M | $229.0M | 13.27x | 67.7% |
| Bull Case | 9.0x | 11.0x | $15.5M | $277.2M | 17.85x | 78.0% |
| Bull (12x exit) | 9.0x | 12.0x | $15.5M | $307.0M | 19.77x | 81.6% |
| Bear Case | 11.0x | 10.0x | $19.0M | $132.9M | 7.00x | 47.6% |
| Bear (11x exit) | 11.0x | 11.0x | $19.0M | $152.4M | 8.03x | 51.7% |
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
- 210 hospitals with 81-324 beds
- Same-state prioritization (n=211)
- Comp margins: P25=-16.9% / P50=-4.3% / P75=4.4%
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.