SARAH D CULBERTSON
1. Target Overview & Investment Thesis
SARAH D CULBERTSON is a 22-bed rural/critical access in SCHUYLER, IL with $26.0M in net patient revenue and a -3.3% operating margin. The hospital serves a payer mix of 55.4% Medicare, 5.2% Medicaid, and 39.4% commercial.
Thesis: Turnaround. Our ML models identify $1.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -3.3% to 4.0% (+736bps).
| Net Revenue HCRIS | $26.0M |
| Current EBITDA COMPUTED | $-868K |
| Operating Margin COMPUTED | -3.3% |
| Occupancy HCRIS | 5.8% |
| Revenue / Bed COMPUTED | $1.2M |
| Net-to-Gross HCRIS | 46.9% |
| Distress Probability ML | 61.3% |
2. Market Context & Competitive Position
IL has 208 Medicare-certified hospitals with a median operating margin of -5.3%. The target's margin of -3.3% places it above the state median. Among 67 size-comparable peers (11-44 beds), the median margin is -1.2%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (11-44), prioritizing same-state peers. 67 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SARAH D CULBERTSON (Target) | IL | 22 | $26.0M | -3.3% |
| GIBSON AREA HOSPITAL AND HEALT | IL | 25 | $125.0M | -6.7% |
| GRAHAM HOSPITAL ASSOCIATION | IL | 43 | $105.0M | -4.7% |
| PARIS COMMUNITY HOSPITAL | IL | 25 | $100.7M | -4.2% |
| ST. MARGARETS HEALTH - SPRING | IL | 44 | $88.1M | -12.7% |
| SAINT JOSEPH MEMORIAL HOSPITAL | IL | 25 | $86.0M | 33.9% |
| WABASH GENERAL HOSPITAL | IL | 25 | $71.8M | 4.5% |
| HOOPESTON COMMUNITY MEMORIAL H | IL | 22 | $71.5M | -5.2% |
| SAINT JAMES HOSPITAL | IL | 42 | $70.4M | 11.6% |
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: $1.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $546K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $520K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $514K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $316K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $17K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-868K |
| + RCM Uplift | +$1.9M |
| Pro Forma EBITDA | $1.0M |
| Current Margin | -3.3% |
| Pro Forma Margin | 4.0% |
| WC Released (1x) | $996K |
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 | $-1.3M | $13.4M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-1.3M | $14.3M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-1.2M | $20.2M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-1.2M | $21.7M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-1.5M | $4.3M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-1.5M | $4.2M | 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 | Heavy Medicare dependence | Medicare comprises 55.4% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
| Medium | Low occupancy | At 5.8%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
| High | Elevated distress probability | Model estimates 61.3% 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
- 67 hospitals with 11-44 beds
- Same-state prioritization (n=68)
- Comp margins: P25=-6.7% / P50=-1.2% / P75=7.8%
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 27, 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.