PSYCH INSTITUE OF WASHINGTON
1. Target Overview & Investment Thesis
PSYCH INSTITUE OF WASHINGTON is a 130-bed suburban community hospital in DC, DC with $37.7M in net patient revenue and a 15.5% operating margin. The hospital serves a payer mix of 10.5% Medicare, 17.5% Medicaid, and 72.0% commercial.
Thesis: Turnaround. Our ML models identify $2.8M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 15.5% to 22.9% (+736bps).
| Net Revenue HCRIS | $37.7M |
| Current EBITDA COMPUTED | $5.9M |
| Operating Margin COMPUTED | 15.5% |
| Occupancy HCRIS | 77.1% |
| Revenue / Bed COMPUTED | $290K |
| Net-to-Gross HCRIS | 59.4% |
| Distress Probability ML | 49.2% |
2. Market Context & Competitive Position
DC has 12 Medicare-certified hospitals with a median operating margin of -2.9%. The target's margin of 15.5% places it above the state median. Among 2097 size-comparable peers (65-260 beds), the median margin is -3.5%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (65-260), prioritizing same-state peers. 2097 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| PSYCH INSTITUE OF WASHINGTON (Target) | DC | 130 | $37.7M | 15.5% |
| RAINBOW BABIES & CHILDRENS HOS | OH | 231 | $2.22B | -5.0% |
| MOFFITT CANCER CENTER | FL | 218 | $1.91B | 16.0% |
| CITY OF HOPE NATIONAL MEDICAL | CA | 217 | $1.83B | -10.7% |
| MIDWESTERN REGIONAL MEDICAL CE | IL | 73 | $1.38B | 80.5% |
| HOSPITAL FOR SPECIAL SURGERY | NY | 200 | $1.12B | -29.3% |
| VIRGINIA MASON MEDICAL CENTER | WA | 222 | $1.11B | -23.2% |
| ENLOE MEDICAL CENTER | CA | 258 | $834.4M | -0.5% |
| KFH - SOUTH SACRAMENTO | CA | 233 | $803.9M | 5.9% |
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: $2.8M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $792K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $754K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $747K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $459K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $24K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $5.9M |
| + RCM Uplift | +$2.8M |
| Pro Forma EBITDA | $8.6M |
| Current Margin | 15.5% |
| Pro Forma Margin | 22.9% |
| WC Released (1x) | $1.4M |
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 | $9.0M | $66.4M | 7.37x | 49.1% |
| Base (11x exit) | 10.0x | 11.0x | $9.0M | $76.0M | 8.43x | 53.2% |
| Bull Case | 9.0x | 11.0x | $8.1M | $88.0M | 10.86x | 61.1% |
| Bull (12x exit) | 9.0x | 12.0x | $8.1M | $98.4M | 12.14x | 64.8% |
| Bear Case | 11.0x | 10.0x | $9.9M | $49.6M | 5.00x | 38.0% |
| Bear (11x exit) | 11.0x | 11.0x | $9.9M | $57.8M | 5.83x | 42.3% |
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
- 2097 hospitals with 65-260 beds
- Same-state prioritization (n=6)
- Comp margins: P25=-13.9% / P50=-3.5% / P75=7.3%
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.