KINDRED HOSPITAL AURORA
1. Target Overview & Investment Thesis
KINDRED HOSPITAL AURORA is a 37-bed safety-net/medicaid heavy in ARAPAHOE, CO with $25.9M in net patient revenue and a 7.3% operating margin. The hospital serves a payer mix of 9.9% Medicare, 68.7% Medicaid, and 21.4% commercial.
Thesis: Turnaround. Our ML models identify $1.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 7.3% to 14.6% (+736bps).
| Net Revenue HCRIS | $25.9M |
| Current EBITDA COMPUTED | $1.9M |
| Operating Margin COMPUTED | 7.3% |
| Occupancy HCRIS | 92.5% |
| Revenue / Bed COMPUTED | $699K |
| Net-to-Gross HCRIS | 23.3% |
| Distress Probability ML | 53.4% |
2. Market Context & Competitive Position
CO has 108 Medicare-certified hospitals with a median operating margin of -3.6%. The target's margin of 7.3% places it above the state median. Among 48 size-comparable peers (18-74 beds), the median margin is -4.7%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (18-74), prioritizing same-state peers. 48 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| KINDRED HOSPITAL AURORA (Target) | CO | 37 | $25.9M | 7.3% |
| VALLEY VIEW HOSPITAL | CO | 31 | $285.3M | -3.1% |
| CENTURA MERCY HOSPITAL | CO | 73 | $270.4M | 10.0% |
| 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% |
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: $1.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $543K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $517K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $512K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $315K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $17K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.9M |
| + RCM Uplift | +$1.9M |
| Pro Forma EBITDA | $3.8M |
| Current Margin | 7.3% |
| Pro Forma Margin | 14.6% |
| WC Released (1x) | $992K |
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 | $2.9M | $31.4M | 10.88x | 61.2% |
| Base (11x exit) | 10.0x | 11.0x | $2.9M | $35.5M | 12.30x | 65.2% |
| Bull Case | 9.0x | 11.0x | $2.6M | $42.7M | 16.44x | 75.1% |
| Bull (12x exit) | 9.0x | 12.0x | $2.6M | $47.4M | 18.23x | 78.7% |
| Bear Case | 11.0x | 10.0x | $3.2M | $21.0M | 6.60x | 45.9% |
| Bear (11x exit) | 11.0x | 11.0x | $3.2M | $24.1M | 7.59x | 50.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Elevated Medicaid exposure (68.7%) | Medicaid reimburses below cost in most states. Mitigant: denial reduction lever has highest impact on Medicaid claims |
| High | Elevated distress probability | Model estimates 53.4% 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
- 48 hospitals with 18-74 beds
- Same-state prioritization (n=49)
- Comp margins: P25=-8.8% / P50=-4.7% / 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.