STATE HOSPITAL SOUTH
1. Target Overview & Investment Thesis
STATE HOSPITAL SOUTH is a 110-bed safety-net/medicaid heavy in BINGHAM, ID with $27.7M in net patient revenue and a -29.4% operating margin. The hospital serves a payer mix of 10.0% Medicare, 29.4% Medicaid, and 60.7% commercial.
Thesis: Undervalued. Our ML models identify $2.0M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -29.4% to -22.0% (+736bps).
| Net Revenue HCRIS | $27.7M |
| Current EBITDA COMPUTED | $-8.1M |
| Operating Margin COMPUTED | -29.4% |
| Occupancy HCRIS | 84.2% |
| Revenue / Bed COMPUTED | $251K |
| Net-to-Gross HCRIS | 95.5% |
| Distress Probability ML | 54.5% |
2. Market Context & Competitive Position
ID has 51 Medicare-certified hospitals with a median operating margin of -3.5%. The target's margin of -29.4% places it below the state median. Among 9 size-comparable peers (55-220 beds), the median margin is 13.4%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (55-220), prioritizing same-state peers. 9 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| STATE HOSPITAL SOUTH (Target) | ID | 110 | $27.7M | -29.4% |
| ST LUKES MAGIC VALLEY REG MED | ID | 175 | $482.9M | -6.8% |
| PORTNEUF MEDICAL CENTER | ID | 142 | $390.3M | 13.4% |
| ST. ALPHONSUS MEDICAL CENTER - | ID | 96 | $263.3M | 15.2% |
| ST. LUKES NAMPA MEDICAL CENTER | ID | 87 | $255.6M | -10.1% |
| ST JOSEPH REGIONAL MEDICAL CEN | ID | 110 | $168.4M | -3.0% |
| WEST VALLEY MEDICAL CENTER | ID | 112 | $118.1M | 24.6% |
| IDAHO FALLS COMMUNITY HOSPITAL | ID | 88 | $98.9M | -23.1% |
| INTERMOUNTAIN | ID | 150 | $31.5M | 26.3% |
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: $2.0M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $581K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $553K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $548K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $337K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $18K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-8.1M |
| + RCM Uplift | +$2.0M |
| Pro Forma EBITDA | $-6.1M |
| Current Margin | -29.4% |
| Pro Forma Margin | -22.0% |
| WC Released (1x) | $1.1M |
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 | $-12.5M | $-33.3M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-12.5M | $-40.7M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-11.3M | $-38.0M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-11.3M | $-44.8M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-13.8M | $-39.4M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-13.8M | $-47.8M | 0.00x | -100.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| High | Negative operating margin | RCM uplift bridge shows clear path to profitability; working capital release provides near-term cash cushion |
| Medium | Elevated Medicaid exposure (29.4%) | Medicaid reimburses below cost in most states. Mitigant: denial reduction lever has highest impact on Medicaid claims |
| High | Elevated distress probability | Model estimates 54.5% 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
- 9 hospitals with 55-220 beds
- Same-state prioritization (n=10)
- Comp margins: P25=-6.8% / P50=13.4% / P75=15.2%
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.