CENTURA ST. ELIZABETH HOSPITAL
1. Target Overview & Investment Thesis
CENTURA ST. ELIZABETH HOSPITAL is a 36-bed safety-net/medicaid heavy in MORGAN, CO with $6.3M in net patient revenue and a -6.8% operating margin. The hospital serves a payer mix of 29.3% Medicare, 34.7% Medicaid, and 36.0% commercial.
Thesis: Turnaround. Our ML models identify $472K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -6.8% to 0.7% (+753bps).
| Net Revenue HCRIS | $6.3M |
| Current EBITDA COMPUTED | $-427K |
| Operating Margin COMPUTED | -6.8% |
| Occupancy HCRIS | 21.6% |
| Revenue / Bed COMPUTED | $174K |
| Net-to-Gross HCRIS | 30.0% |
| Distress Probability ML | 63.4% |
2. Market Context & Competitive Position
CO has 108 Medicare-certified hospitals with a median operating margin of -3.6%. The target's margin of -6.8% places it below the state median. Among 47 size-comparable peers (18-72 beds), the median margin is -4.5%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (18-72), prioritizing same-state peers. 47 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CENTURA ST. ELIZABETH HOSPITAL (Target) | CO | 36 | $6.3M | -6.8% |
| VALLEY VIEW HOSPITAL | CO | 31 | $285.3M | -3.1% |
| COMMUNITY HOSPITAL | CO | 44 | $216.5M | -5.5% |
| VAIL VALLEY MEDICAL CENTER | CO | 54 | $214.4M | -28.1% |
| MONTROSE MEMORIAL HOSPITAL | CO | 47 | $147.2M | -0.7% |
| ASPEN VALLEY HOSPITAL DISTRICT | CO | 25 | $130.1M | 0.4% |
| CENTURA ST. MARY CORWIN HOSPIT | CO | 42 | $121.8M | -12.0% |
| CENTURA ST. ANTHONY SUMMIT HOS | CO | 34 | $121.5M | 28.8% |
| HEART OF THE ROCKIES REG MED C | CO | 25 | $117.5M | 5.4% |
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: $472K (753bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $132K | +210bp | 18mo |
| Denial Rate Reduction | 12.0% | 6.5% | $129K | +206bp | 12mo |
| Cost to Collect | 4.5% | 2.5% | $125K | +200bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $76K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +15bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-427K |
| + RCM Uplift | +$472K |
| Pro Forma EBITDA | $45K |
| Current Margin | -6.8% |
| Pro Forma Margin | 0.7% |
| WC Released (1x) | $241K |
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 | $-657K | $1.9M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-657K | $1.9M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-592K | $3.2M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-592K | $3.3M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-723K | $-244K | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-723K | $-504K | 0.00x | -100.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| High | Negative operating margin | RCM uplift bridge shows clear path to profitability; working capital release provides near-term cash cushion |
| Medium | Elevated Medicaid exposure (34.7%) | Medicaid reimburses below cost in most states. Mitigant: denial reduction lever has highest impact on Medicaid claims |
| Medium | Low occupancy | At 21.6%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
| High | Elevated distress probability | Model estimates 63.4% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
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
- 47 hospitals with 18-72 beds
- Same-state prioritization (n=48)
- Comp margins: P25=-9.1% / P50=-4.5% / P75=2.9%
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.