KFH - FRESNO
1. Target Overview & Investment Thesis
KFH - FRESNO is a 169-bed suburban community hospital in FRESNO, CA with $456.9M in net patient revenue and a 13.0% operating margin. The hospital serves a payer mix of 3.1% Medicare, 0.8% Medicaid, and 96.0% commercial.
Thesis: Turnaround. Our ML models identify $33.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 13.0% to 20.3% (+736bps).
| Net Revenue HCRIS | $456.9M |
| Current EBITDA COMPUTED | $59.2M |
| Operating Margin COMPUTED | 13.0% |
| Occupancy HCRIS | 55.3% |
| Revenue / Bed COMPUTED | $2.7M |
| Net-to-Gross HCRIS | 26.9% |
| Distress Probability ML | 42.7% |
2. Market Context & Competitive Position
CA has 414 Medicare-certified hospitals with a median operating margin of -4.9%. The target's margin of 13.0% places it above the state median. Among 207 size-comparable peers (84-338 beds), the median margin is -4.6%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (84-338), prioritizing same-state peers. 207 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| KFH - FRESNO (Target) | CA | 169 | $456.9M | 13.0% |
| CITY OF HOPE NATIONAL MEDICAL | CA | 217 | $1.83B | -10.7% |
| CHILDRENS HOSPITAL OF ORANGE C | CA | 334 | $1.31B | 0.7% |
| 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% |
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: $33.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $9.6M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $9.1M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $9.0M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $5.6M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $292K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $59.2M |
| + RCM Uplift | +$33.6M |
| Pro Forma EBITDA | $92.8M |
| Current Margin | 13.0% |
| Pro Forma Margin | 20.3% |
| WC Released (1x) | $17.5M |
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 | $91.1M | $726.8M | 7.98x | 51.5% |
| Base (11x exit) | 10.0x | 11.0x | $91.1M | $829.0M | 9.10x | 55.5% |
| Bull Case | 9.0x | 11.0x | $82.0M | $969.6M | 11.83x | 63.9% |
| Bull (12x exit) | 9.0x | 12.0x | $82.0M | $1.08B | 13.20x | 67.5% |
| Bear Case | 11.0x | 10.0x | $100.2M | $529.0M | 5.28x | 39.5% |
| Bear (11x exit) | 11.0x | 11.0x | $100.2M | $614.4M | 6.13x | 43.7% |
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
- 207 hospitals with 84-338 beds
- Same-state prioritization (n=208)
- Comp margins: P25=-17.6% / P50=-4.6% / P75=3.7%
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.