ST. LUKES CUSHING HOSPITAL
1. Target Overview & Investment Thesis
ST. LUKES CUSHING HOSPITAL is a 8-bed rural/critical access in nan, KS with $6.6M in net patient revenue and a -100.0% operating margin. The hospital serves a payer mix of 58.5% Medicare, 0.3% Medicaid, and 41.2% commercial.
Thesis: Turnaround. Our ML models identify $497K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -100.0% to -108.4% (+751bps).
| Net Revenue HCRIS | $6.6M |
| Current EBITDA COMPUTED | $-7.7M |
| Operating Margin COMPUTED | -100.0% |
| Occupancy HCRIS | 13.4% |
| Revenue / Bed COMPUTED | $826K |
| Net-to-Gross HCRIS | 16.6% |
| Distress Probability ML | 55.7% |
2. Market Context & Competitive Position
KS has 152 Medicare-certified hospitals with a median operating margin of -17.7%. The target's margin of -100.0% places it below the state median. Among 26 size-comparable peers (4-16 beds), the median margin is -20.3%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (4-16), prioritizing same-state peers. 26 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ST. LUKES CUSHING HOSPITAL (Target) | KS | 8 | $6.6M | -100.0% |
| MANHATTAN SURGICAL HOSPITAL | KS | 13 | $42.0M | 13.1% |
| SALINA SURGICAL HOSPITAL | KS | 16 | $28.3M | 20.9% |
| ANDERSON COUNTY HOSPITAL | KS | 12 | $27.8M | -15.4% |
| HOLTON COMMUNITY HOSPITAL | KS | 14 | $22.6M | -18.1% |
| GREAT PLAINS OF SMITH CO. INC | KS | 16 | $20.6M | -23.7% |
| PAWNEE VALLEY COMMUNITY HOSPIT | KS | 16 | $20.3M | 2.1% |
| WILSON MEDICAL CENTER | KS | 15 | $20.2M | -18.7% |
| GREAT PLAINS OF SABETHA INC. | KS | 16 | $15.9M | -14.8% |
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: $497K (751bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $139K | +210bp | 18mo |
| Denial Rate Reduction | 12.0% | 6.5% | $136K | +205bp | 12mo |
| Cost to Collect | 4.5% | 2.5% | $132K | +200bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $80K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +15bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-7.7M |
| + RCM Uplift | +$497K |
| Pro Forma EBITDA | $-7.2M |
| Current Margin | -100.0% |
| Pro Forma Margin | -108.4% |
| WC Released (1x) | $254K |
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 | $-11.8M | $-45.6M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-11.8M | $-53.9M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-10.6M | $-56.1M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-10.6M | $-64.4M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-13.0M | $-44.2M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-13.0M | $-52.8M | 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 | Heavy Medicare dependence | Medicare comprises 58.5% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
| Medium | Low occupancy | At 13.4%, 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 55.7% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
| Low | Low net-to-gross ratio | Large contractual allowances suggest pricing discipline issues. Mitigant: payer renegotiation is an additional upside lever |
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
- 26 hospitals with 4-16 beds
- Same-state prioritization (n=29)
- Comp margins: P25=-30.0% / P50=-20.3% / P75=-10.1%
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.