MADISON MEMORIAL HOSPITAL
1. Target Overview & Investment Thesis
MADISON MEMORIAL HOSPITAL is a 53-bed safety-net/medicaid heavy in MADISON, ID with $94.0M in net patient revenue and a 1.1% operating margin. The hospital serves a payer mix of 11.5% Medicare, 39.0% Medicaid, and 49.5% commercial.
Thesis: Turnaround. Our ML models identify $6.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 1.1% to 8.4% (+736bps).
| Net Revenue HCRIS | $94.0M |
| Current EBITDA COMPUTED | $1.0M |
| Operating Margin COMPUTED | 1.1% |
| Occupancy HCRIS | 43.4% |
| Revenue / Bed COMPUTED | $1.8M |
| Net-to-Gross HCRIS | 49.1% |
| Distress Probability ML | 58.7% |
2. Market Context & Competitive Position
ID has 51 Medicare-certified hospitals with a median operating margin of -3.5%. The target's margin of 1.1% places it above the state median. Among 11 size-comparable peers (26-106 beds), the median margin is 8.7%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (26-106), prioritizing same-state peers. 11 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| MADISON MEMORIAL HOSPITAL (Target) | ID | 53 | $94.0M | 1.1% |
| MOUNTAIN VIEW HOSPITAL | ID | 43 | $382.5M | 8.7% |
| ST. ALPHONSUS MEDICAL CENTER - | ID | 96 | $263.3M | 15.2% |
| ST. LUKES NAMPA MEDICAL CENTER | ID | 87 | $255.6M | -10.1% |
| NORTHWEST SPECIALTY HOSPITAL | ID | 32 | $120.3M | 3.7% |
| TREASURE VALLEY HOSPITAL | ID | 28 | $114.8M | 36.1% |
| IDAHO FALLS COMMUNITY HOSPITAL | ID | 88 | $98.9M | -23.1% |
| COTTONWOOD CREEK BEHAVIORAL HO | ID | 92 | $24.2M | 14.0% |
| SAINT ALPHONSUS REGIONAL REHAB | ID | 40 | $22.7M | 16.5% |
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: $6.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $2.0M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.9M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.9M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $1.1M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $60K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.0M |
| + RCM Uplift | +$6.9M |
| Pro Forma EBITDA | $7.9M |
| Current Margin | 1.1% |
| Pro Forma Margin | 8.4% |
| WC Released (1x) | $3.6M |
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 | $1.6M | $75.9M | 48.69x | 117.5% |
| Base (11x exit) | 10.0x | 11.0x | $1.6M | $84.0M | 53.88x | 122.0% |
| Bull Case | 9.0x | 11.0x | $1.4M | $107.3M | 76.51x | 138.1% |
| Bull (12x exit) | 9.0x | 12.0x | $1.4M | $117.5M | 83.76x | 142.4% |
| Bear Case | 11.0x | 10.0x | $1.7M | $40.8M | 23.78x | 88.5% |
| Bear (11x exit) | 11.0x | 11.0x | $1.7M | $45.4M | 26.49x | 92.6% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Elevated Medicaid exposure (39.0%) | Medicaid reimburses below cost in most states. Mitigant: denial reduction lever has highest impact on Medicaid claims |
| High | Elevated distress probability | Model estimates 58.7% 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
- 11 hospitals with 26-106 beds
- Same-state prioritization (n=12)
- Comp margins: P25=-2.8% / P50=8.7% / P75=14.6%
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.