SCOTTISH RITE CHILDRENS MEDICAL CTR
1. Target Overview & Investment Thesis
SCOTTISH RITE CHILDRENS MEDICAL CTR is a 319-bed suburban community hospital in FULTON, GA with $905.6M in net patient revenue and a 44.8% operating margin. The hospital serves a payer mix of 0.0% Medicare, 18.2% Medicaid, and 81.8% commercial.
Thesis: Platform Growth. Our ML models identify $66.7M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 44.8% to 52.2% (+736bps).
| Net Revenue HCRIS | $905.6M |
| Current EBITDA COMPUTED | $405.9M |
| Operating Margin COMPUTED | 44.8% |
| Occupancy HCRIS | 73.3% |
| Revenue / Bed COMPUTED | $2.8M |
| Net-to-Gross HCRIS | 44.4% |
| Distress Probability ML | 45.0% |
2. Market Context & Competitive Position
GA has 165 Medicare-certified hospitals with a median operating margin of -2.8%. The target's margin of 44.8% places it above the state median. Among 43 size-comparable peers (160-638 beds), the median margin is -2.5%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (160-638), prioritizing same-state peers. 43 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SCOTTISH RITE CHILDRENS MEDICA (Target) | GA | 319 | $905.6M | 44.8% |
| EMORY UNIVERSITY HOSPITAL MIDT | GA | 548 | $1.37B | -15.4% |
| PIEDMONT HOSPITAL INC. | GA | 569 | $1.32B | 4.0% |
| NORTHSIDE HOSPITAL - GWINNETT | GA | 404 | $1.07B | -2.5% |
| EGLESTON CHILDRENS HOSPITAL AT | GA | 330 | $941.9M | 41.5% |
| COBB HOSPITAL AND MEDICAL CENT | GA | 367 | $897.0M | 6.1% |
| AU MEDICAL CENTER INC | GA | 494 | $789.4M | -35.7% |
| AHN THE MEDICAL CENTER | GA | 632 | $767.3M | -0.1% |
| MEMORIAL HEALTH UNIV MED CENTE | GA | 564 | $708.4M | -1.0% |
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: $66.7M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $19.0M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $18.1M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $17.9M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $11.0M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $580K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $405.9M |
| + RCM Uplift | +$66.7M |
| Pro Forma EBITDA | $472.5M |
| Current Margin | 44.8% |
| Pro Forma Margin | 52.2% |
| WC Released (1x) | $34.7M |
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 | $624.4M | $3.34B | 5.36x | 39.9% |
| Base (11x exit) | 10.0x | 11.0x | $624.4M | $3.88B | 6.22x | 44.1% |
| Bull Case | 9.0x | 11.0x | $562.0M | $4.30B | 7.66x | 50.2% |
| Bull (12x exit) | 9.0x | 12.0x | $562.0M | $4.86B | 8.65x | 54.0% |
| Bear Case | 11.0x | 10.0x | $686.9M | $2.81B | 4.09x | 32.5% |
| Bear (11x exit) | 11.0x | 11.0x | $686.9M | $3.31B | 4.82x | 37.0% |
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
- 43 hospitals with 160-638 beds
- Same-state prioritization (n=44)
- Comp margins: P25=-14.7% / P50=-2.5% / P75=4.7%
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.