KFH - ROSEVILLE
1. Target Overview & Investment Thesis
KFH - ROSEVILLE is a 352-bed suburban community hospital in PLACER, CA with $1.18B in net patient revenue and a 14.2% operating margin. The hospital serves a payer mix of 2.9% Medicare, 12.5% Medicaid, and 84.6% commercial.
Thesis: Platform Growth. Our ML models identify $87.0M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 14.2% to 21.5% (+736bps).
| Net Revenue HCRIS | $1.18B |
| Current EBITDA COMPUTED | $167.2M |
| Operating Margin COMPUTED | 14.2% |
| Occupancy HCRIS | 84.3% |
| Revenue / Bed COMPUTED | $3.4M |
| Net-to-Gross HCRIS | 30.7% |
| Distress Probability ML | 39.1% |
2. Market Context & Competitive Position
CA has 414 Medicare-certified hospitals with a median operating margin of -4.9%. The target's margin of 14.2% places it above the state median. Among 155 size-comparable peers (176-704 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 (176-704), prioritizing same-state peers. 155 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| KFH - ROSEVILLE (Target) | CA | 352 | $1.18B | 14.2% |
| STANFORD HEALTH CARE | CA | 657 | $6.76B | 3.7% |
| UC DAVIS MEDICAL CENTER | CA | 666 | $3.28B | -11.5% |
| RONALD REAGAN UCLA | CA | 446 | $2.62B | -6.8% |
| LUCILE PACKARD CHILDRENS HOSPI | CA | 394 | $2.39B | -0.8% |
| LOS ANGELES GENERAL MEDICAL CE | CA | 596 | $1.96B | 10.2% |
| UCI MEDICAL CENTER | CA | 397 | $1.90B | -2.5% |
| CITY OF HOPE NATIONAL MEDICAL | CA | 217 | $1.83B | -10.7% |
| RADY CHILDRENS HOSPITAL - SAN | CA | 401 | $1.82B | 14.8% |
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: $87.0M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $24.8M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $23.6M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $23.4M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $14.4M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $756K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $167.2M |
| + RCM Uplift | +$87.0M |
| Pro Forma EBITDA | $254.1M |
| Current Margin | 14.2% |
| Pro Forma Margin | 21.5% |
| WC Released (1x) | $45.3M |
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 | $257.2M | $1.97B | 7.67x | 50.3% |
| Base (11x exit) | 10.0x | 11.0x | $257.2M | $2.25B | 8.76x | 54.4% |
| Bull Case | 9.0x | 11.0x | $231.5M | $2.62B | 11.33x | 62.5% |
| Bull (12x exit) | 9.0x | 12.0x | $231.5M | $2.93B | 12.66x | 66.1% |
| Bear Case | 11.0x | 10.0x | $282.9M | $1.45B | 5.14x | 38.7% |
| Bear (11x exit) | 11.0x | 11.0x | $282.9M | $1.69B | 5.98x | 43.0% |
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
- 155 hospitals with 176-704 beds
- Same-state prioritization (n=156)
- Comp margins: P25=-15.9% / P50=-4.3% / P75=3.5%
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.