CENTURA CASTLE ROCK ADVENTIST HOSP
1. Target Overview & Investment Thesis
CENTURA CASTLE ROCK ADVENTIST HOSP is a 89-bed suburban community hospital in DOUGLAS, CO with $171.0M in net patient revenue and a 8.8% operating margin. The hospital serves a payer mix of 21.1% Medicare, 13.3% Medicaid, and 65.6% commercial.
Thesis: Turnaround. Our ML models identify $12.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 8.8% to 16.2% (+736bps).
| Net Revenue HCRIS | $171.0M |
| Current EBITDA COMPUTED | $15.1M |
| Operating Margin COMPUTED | 8.8% |
| Occupancy HCRIS | 55.6% |
| Revenue / Bed COMPUTED | $1.9M |
| Net-to-Gross HCRIS | 21.9% |
| Distress Probability ML | 46.8% |
2. Market Context & Competitive Position
CO has 108 Medicare-certified hospitals with a median operating margin of -3.6%. The target's margin of 8.8% places it above the state median. Among 33 size-comparable peers (44-178 beds), the median margin is -2.7%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (44-178), prioritizing same-state peers. 33 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CENTURA CASTLE ROCK ADVENTIST (Target) | CO | 89 | $171.0M | 8.8% |
| BOULDER COMMUNITY HOSPITAL | CO | 139 | $418.3M | -1.6% |
| CENTURA PARKER ADVENTIST HOSPI | CO | 162 | $351.5M | 12.9% |
| CENTURA MERCY HOSPITAL | CO | 73 | $270.4M | 10.0% |
| 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% |
| VAIL VALLEY MEDICAL CENTER | CO | 54 | $214.4M | -28.1% |
| UCHEALTH LONGS PEAK HOSPITAL | CO | 83 | $181.8M | -1.7% |
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: $12.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $3.6M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $3.4M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $3.4M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $2.1M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $109K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $15.1M |
| + RCM Uplift | +$12.6M |
| Pro Forma EBITDA | $27.7M |
| Current Margin | 8.8% |
| Pro Forma Margin | 16.2% |
| WC Released (1x) | $6.6M |
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 | $23.2M | $225.3M | 9.71x | 57.6% |
| Base (11x exit) | 10.0x | 11.0x | $23.2M | $255.4M | 11.01x | 61.6% |
| Bull Case | 9.0x | 11.0x | $20.9M | $304.4M | 14.58x | 70.9% |
| Bull (12x exit) | 9.0x | 12.0x | $20.9M | $338.3M | 16.20x | 74.6% |
| Bear Case | 11.0x | 10.0x | $25.5M | $154.8M | 6.07x | 43.4% |
| Bear (11x exit) | 11.0x | 11.0x | $25.5M | $178.6M | 7.00x | 47.6% |
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
- 33 hospitals with 44-178 beds
- Same-state prioritization (n=34)
- Comp margins: P25=-9.8% / P50=-2.7% / P75=2.6%
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.