CENTURA MERCY HOSPITAL
1. Target Overview & Investment Thesis
CENTURA MERCY HOSPITAL is a 73-bed suburban community hospital in LA PLATA, CO with $270.4M in net patient revenue and a 10.0% operating margin. The hospital serves a payer mix of 29.2% Medicare, 19.8% Medicaid, and 51.0% commercial.
Thesis: Turnaround. Our ML models identify $19.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 10.0% to 17.3% (+736bps).
| Net Revenue HCRIS | $270.4M |
| Current EBITDA COMPUTED | $27.0M |
| Operating Margin COMPUTED | 10.0% |
| Occupancy HCRIS | 69.5% |
| Revenue / Bed COMPUTED | $3.7M |
| Net-to-Gross HCRIS | 25.7% |
| Distress Probability ML | 43.4% |
2. Market Context & Competitive Position
CO has 108 Medicare-certified hospitals with a median operating margin of -3.6%. The target's margin of 10.0% places it above the state median. Among 39 size-comparable peers (36-146 beds), the median margin is -4.1%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (36-146), prioritizing same-state peers. 39 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CENTURA MERCY HOSPITAL (Target) | CO | 73 | $270.4M | 10.0% |
| BOULDER COMMUNITY HOSPITAL | CO | 139 | $418.3M | -1.6% |
| CENTURA ST. ANTHONY NORTH HOSP | CO | 118 | $268.3M | 10.9% |
| UCHEALTH HIGHLANDS RANCH HOSPI | CO | 93 | $235.2M | -4.6% |
| CHCO - COLORADO SPRINGS | CO | 124 | $220.2M | -9.2% |
| COMMUNITY HOSPITAL | CO | 44 | $216.5M | -5.5% |
| VAIL VALLEY MEDICAL CENTER | CO | 54 | $214.4M | -28.1% |
| UCHEALTH LONGS PEAK HOSPITAL | CO | 83 | $181.8M | -1.7% |
| CENTURA AVISTA ADVENTIST HOSPI | CO | 108 | $181.3M | 8.4% |
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: $19.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $5.7M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $5.4M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $5.4M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.3M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $173K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $27.0M |
| + RCM Uplift | +$19.9M |
| Pro Forma EBITDA | $46.9M |
| Current Margin | 10.0% |
| Pro Forma Margin | 17.3% |
| WC Released (1x) | $10.4M |
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 | $41.5M | $377.1M | 9.08x | 55.5% |
| Base (11x exit) | 10.0x | 11.0x | $41.5M | $428.3M | 10.31x | 59.5% |
| Bull Case | 9.0x | 11.0x | $37.4M | $507.5M | 13.57x | 68.5% |
| Bull (12x exit) | 9.0x | 12.0x | $37.4M | $564.6M | 15.10x | 72.1% |
| Bear Case | 11.0x | 10.0x | $45.7M | $264.1M | 5.78x | 42.0% |
| Bear (11x exit) | 11.0x | 11.0x | $45.7M | $305.4M | 6.68x | 46.2% |
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
- 39 hospitals with 36-146 beds
- Same-state prioritization (n=40)
- Comp margins: P25=-9.7% / P50=-4.1% / P75=4.0%
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.