NORTH SUBURBAN MEDICAL CENTER
1. Target Overview & Investment Thesis
NORTH SUBURBAN MEDICAL CENTER is a 115-bed safety-net/medicaid heavy in ADAMS, CO with $160.3M in net patient revenue and a 4.6% operating margin. The hospital serves a payer mix of 14.2% Medicare, 39.5% Medicaid, and 46.3% commercial.
Thesis: Undervalued. Our ML models identify $11.8M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 4.6% to 12.0% (+736bps).
| Net Revenue HCRIS | $160.3M |
| Current EBITDA COMPUTED | $7.4M |
| Operating Margin COMPUTED | 4.6% |
| Occupancy HCRIS | 67.6% |
| Revenue / Bed COMPUTED | $1.4M |
| Net-to-Gross HCRIS | 7.3% |
| Distress Probability ML | 49.5% |
2. Market Context & Competitive Position
CO has 108 Medicare-certified hospitals with a median operating margin of -3.6%. The target's margin of 4.6% places it above the state median. Among 34 size-comparable peers (58-230 beds), the median margin is -1.7%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (58-230), prioritizing same-state peers. 34 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| NORTH SUBURBAN MEDICAL CENTER (Target) | CO | 115 | $160.3M | 4.6% |
| POUDRE VALLEY HOSPITAL | CO | 218 | $722.4M | 10.8% |
| MEDICAL CENTER OF THE ROCKIES | CO | 180 | $541.1M | 11.6% |
| CENTURA ST ANTHONY HOSPITAL | CO | 220 | $483.2M | 1.2% |
| BOULDER COMMUNITY HOSPITAL | CO | 139 | $418.3M | -1.6% |
| CENTURA PARKER ADVENTIST HOSPI | CO | 162 | $351.5M | 12.9% |
| NORTH COLORADO MEDICAL CENTER | CO | 202 | $321.9M | -13.1% |
| CENTURA PORTER ADVENTIST HOSPI | CO | 180 | $319.8M | -10.5% |
| GOOD SAMARITAN MEDICAL CTR | CO | 183 | $314.3M | -1.0% |
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: $11.8M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $3.4M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $3.2M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $3.2M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $2.0M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $103K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $7.4M |
| + RCM Uplift | +$11.8M |
| Pro Forma EBITDA | $19.2M |
| Current Margin | 4.6% |
| Pro Forma Margin | 12.0% |
| WC Released (1x) | $6.1M |
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 | $11.4M | $166.9M | 14.64x | 71.0% |
| Base (11x exit) | 10.0x | 11.0x | $11.4M | $187.3M | 16.42x | 75.0% |
| Bull Case | 9.0x | 11.0x | $10.3M | $229.9M | 22.40x | 86.2% |
| Bull (12x exit) | 9.0x | 12.0x | $10.3M | $253.8M | 24.74x | 90.0% |
| Bear Case | 11.0x | 10.0x | $12.5M | $104.2M | 8.31x | 52.7% |
| Bear (11x exit) | 11.0x | 11.0x | $12.5M | $118.7M | 9.46x | 56.7% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Elevated Medicaid exposure (39.5%) | 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
- 34 hospitals with 58-230 beds
- Same-state prioritization (n=35)
- Comp margins: P25=-10.1% / P50=-1.7% / P75=8.4%
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.