THE VILLAGES REGIONAL HOSPITAL
1. Target Overview & Investment Thesis
THE VILLAGES REGIONAL HOSPITAL is a 277-bed suburban community hospital in SUMTER, FL with $218.9M in net patient revenue and a 2.1% operating margin. The hospital serves a payer mix of 42.8% Medicare, 4.3% Medicaid, and 52.9% commercial.
Thesis: Undervalued. Our ML models identify $16.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 2.1% to 9.5% (+736bps).
| Net Revenue HCRIS | $218.9M |
| Current EBITDA COMPUTED | $4.7M |
| Operating Margin COMPUTED | 2.1% |
| Occupancy HCRIS | 68.8% |
| Revenue / Bed COMPUTED | $790K |
| Net-to-Gross HCRIS | 20.5% |
| Distress Probability ML | 44.6% |
2. Market Context & Competitive Position
FL has 261 Medicare-certified hospitals with a median operating margin of 3.2%. The target's margin of 2.1% places it below the state median. Among 106 size-comparable peers (138-554 beds), the median margin is 3.7%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (138-554), prioritizing same-state peers. 106 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| THE VILLAGES REGIONAL HOSPITAL (Target) | FL | 277 | $218.9M | 2.1% |
| UNIVERSITY OF MIAMI HOSP & CLI | FL | 532 | $2.36B | 0.9% |
| MOFFITT CANCER CENTER | FL | 218 | $1.91B | 16.0% |
| MAYO CLINIC FLORIDA | FL | 304 | $1.09B | 21.6% |
| MOUNT SINAI MEDICAL CENTER OF | FL | 481 | $904.2M | 12.2% |
| TALLAHASSEE MEMORIAL HOSPITAL | FL | 483 | $871.6M | -4.8% |
| SHANDS JACKSONVILLE MEDICAL CE | FL | 481 | $861.4M | -7.1% |
| NICKLAUS CHILDRENS HOSPITAL | FL | 259 | $769.3M | 5.5% |
| HCA FLORIDA OCALA HOSPITAL | FL | 509 | $761.7M | 27.6% |
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: $16.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $4.6M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $4.4M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $4.3M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $2.7M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $140K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $4.7M |
| + RCM Uplift | +$16.1M |
| Pro Forma EBITDA | $20.8M |
| Current Margin | 2.1% |
| Pro Forma Margin | 9.5% |
| WC Released (1x) | $8.4M |
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 | $7.2M | $191.9M | 26.76x | 93.0% |
| Base (11x exit) | 10.0x | 11.0x | $7.2M | $213.4M | 29.76x | 97.1% |
| Bull Case | 9.0x | 11.0x | $6.5M | $268.9M | 41.66x | 110.8% |
| Bull (12x exit) | 9.0x | 12.0x | $6.5M | $295.2M | 45.75x | 114.8% |
| Bear Case | 11.0x | 10.0x | $7.9M | $109.0M | 13.82x | 69.1% |
| Bear (11x exit) | 11.0x | 11.0x | $7.9M | $122.4M | 15.52x | 73.1% |
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
- 106 hospitals with 138-554 beds
- Same-state prioritization (n=107)
- Comp margins: P25=-4.8% / P50=3.7% / P75=17.3%
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.