SWEDISH MEDICAL CENTER
1. Target Overview & Investment Thesis
SWEDISH MEDICAL CENTER is a 351-bed suburban community hospital in ARAPAHOE, CO with $670.0M in net patient revenue and a 23.8% operating margin. The hospital serves a payer mix of 20.8% Medicare, 24.9% Medicaid, and 54.3% commercial.
Thesis: Platform Growth. Our ML models identify $49.3M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 23.8% to 31.2% (+736bps).
| Net Revenue HCRIS | $670.0M |
| Current EBITDA COMPUTED | $159.6M |
| Operating Margin COMPUTED | 23.8% |
| Occupancy HCRIS | 84.6% |
| Revenue / Bed COMPUTED | $1.9M |
| Net-to-Gross HCRIS | 11.0% |
| Distress Probability ML | 42.7% |
2. Market Context & Competitive Position
CO has 108 Medicare-certified hospitals with a median operating margin of -3.6%. The target's margin of 23.8% places it above the state median. Among 20 size-comparable peers (176-702 beds), the median margin is 0.7%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (176-702), prioritizing same-state peers. 20 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SWEDISH MEDICAL CENTER (Target) | CO | 351 | $670.0M | 23.8% |
| CHILDRENS HOSPITAL COLORADO | CO | 486 | $1.42B | -2.3% |
| MEMORIAL HEALTH SYSTEM | CO | 501 | $1.11B | 3.5% |
| DENVER HEALTH MEDICAL CENTER | CO | 396 | $1.11B | -8.1% |
| CENTURA PENROSE HOSPITAL | CO | 484 | $809.7M | 0.2% |
| POUDRE VALLEY HOSPITAL | CO | 218 | $722.4M | 10.8% |
| PRESBYTERIAN ST. LUKES MEDICAL | CO | 287 | $646.0M | 27.6% |
| SAINT JOSEPH HOSPITAL | CO | 400 | $567.5M | -6.1% |
| ST. MARYS HOSPITAL & MEDICAL C | CO | 237 | $554.0M | -11.0% |
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: $49.3M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $14.1M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $13.4M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $13.3M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $8.2M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $429K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $159.6M |
| + RCM Uplift | +$49.3M |
| Pro Forma EBITDA | $208.9M |
| Current Margin | 23.8% |
| Pro Forma Margin | 31.2% |
| WC Released (1x) | $25.7M |
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 | $245.6M | $1.55B | 6.30x | 44.5% |
| Base (11x exit) | 10.0x | 11.0x | $245.6M | $1.78B | 7.25x | 48.6% |
| Bull Case | 9.0x | 11.0x | $221.0M | $2.02B | 9.15x | 55.7% |
| Bull (12x exit) | 9.0x | 12.0x | $221.0M | $2.27B | 10.28x | 59.4% |
| Bear Case | 11.0x | 10.0x | $270.1M | $1.22B | 4.52x | 35.2% |
| Bear (11x exit) | 11.0x | 11.0x | $270.1M | $1.43B | 5.29x | 39.6% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Elevated Medicaid exposure (24.9%) | Medicaid reimburses below cost in most states. Mitigant: denial reduction lever has highest impact on Medicaid claims |
| 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
- 20 hospitals with 176-702 beds
- Same-state prioritization (n=21)
- Comp margins: P25=-8.7% / P50=0.7% / P75=10.0%
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.