DENVER SPRINGS
1. Target Overview & Investment Thesis
DENVER SPRINGS is a 96-bed suburban community hospital in nan, CO with $32.2M in net patient revenue and a 0.8% operating margin. The hospital serves a payer mix of 2.5% Medicare, 0.2% Medicaid, and 97.3% commercial.
Thesis: Turnaround. Our ML models identify $2.4M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 0.8% to 8.2% (+736bps).
| Net Revenue HCRIS | $32.2M |
| Current EBITDA COMPUTED | $262K |
| Operating Margin COMPUTED | 0.8% |
| Occupancy HCRIS | 76.8% |
| Revenue / Bed COMPUTED | $335K |
| Net-to-Gross HCRIS | 37.0% |
| Distress Probability ML | 42.0% |
2. Market Context & Competitive Position
CO has 108 Medicare-certified hospitals with a median operating margin of -3.6%. The target's margin of 0.8% places it above the state median. Among 35 size-comparable peers (48-192 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 (48-192), prioritizing same-state peers. 35 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| DENVER SPRINGS (Target) | CO | 96 | $32.2M | 0.8% |
| MEDICAL CENTER OF THE ROCKIES | CO | 180 | $541.1M | 11.6% |
| BOULDER COMMUNITY HOSPITAL | CO | 139 | $418.3M | -1.6% |
| CENTURA PARKER ADVENTIST HOSPI | CO | 162 | $351.5M | 12.9% |
| CENTURA PORTER ADVENTIST HOSPI | CO | 180 | $319.8M | -10.5% |
| GOOD SAMARITAN MEDICAL CTR | CO | 183 | $314.3M | -1.0% |
| 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% |
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: $2.4M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $676K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $644K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $637K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $392K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $21K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $262K |
| + RCM Uplift | +$2.4M |
| Pro Forma EBITDA | $2.6M |
| Current Margin | 0.8% |
| Pro Forma Margin | 8.2% |
| WC Released (1x) | $1.2M |
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 | $403K | $25.4M | 63.08x | 129.1% |
| Base (11x exit) | 10.0x | 11.0x | $403K | $28.1M | 69.71x | 133.7% |
| Bull Case | 9.0x | 11.0x | $363K | $36.0M | 99.38x | 150.9% |
| Bull (12x exit) | 9.0x | 12.0x | $363K | $39.4M | 108.71x | 155.4% |
| Bear Case | 11.0x | 10.0x | $443K | $13.4M | 30.33x | 97.9% |
| Bear (11x exit) | 11.0x | 11.0x | $443K | $14.9M | 33.68x | 102.1% |
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
- 35 hospitals with 48-192 beds
- Same-state prioritization (n=36)
- Comp margins: P25=-10.0% / P50=-2.7% / P75=7.5%
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.