KANSAS SURGERY & RECOVERY CENTER
1. Target Overview & Investment Thesis
KANSAS SURGERY & RECOVERY CENTER is a 30-bed community hospital in SEDGWICK, KS with $62.8M in net patient revenue and a 20.0% operating margin. The hospital serves a payer mix of 26.0% Medicare, 0.0% Medicaid, and 74.0% commercial.
Thesis: Turnaround. Our ML models identify $4.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 20.0% to 27.4% (+736bps).
| Net Revenue HCRIS | $62.8M |
| Current EBITDA COMPUTED | $12.6M |
| Operating Margin COMPUTED | 20.0% |
| Occupancy HCRIS | 7.7% |
| Revenue / Bed COMPUTED | $2.1M |
| Net-to-Gross HCRIS | 33.8% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
KS has 152 Medicare-certified hospitals with a median operating margin of -17.7%. The target's margin of 20.0% places it above the state median. Among 112 size-comparable peers (15-60 beds), the median margin is -20.3%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (15-60), prioritizing same-state peers. 112 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| KANSAS SURGERY & RECOVERY CENT (Target) | KS | 30 | $62.8M | 20.0% |
| CHILDRENS MERCY HOSPITAL KANSA | KS | 42 | $108.5M | 14.7% |
| KANSAS CITY ORTHOPAEDIC INSTIT | KS | 17 | $86.3M | 21.1% |
| LABETTE COUNTY MEDICAL CENTER | KS | 49 | $80.6M | -14.3% |
| NEWMAN REGIONAL HEALTH | KS | 23 | $73.9M | -15.6% |
| KANSAS SPINE & SPECIALTY HOSPI | KS | 35 | $69.6M | 19.1% |
| KANSAS MEDICAL CENTER | KS | 58 | $59.2M | 3.2% |
| VIA CHRISTI HOSP. WICHITA ST. | KS | 38 | $55.1M | 16.7% |
| UKHS GREAT BEND CAMPUS | KS | 29 | $53.8M | -22.8% |
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: $4.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.3M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.3M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.2M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $764K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $40K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $12.6M |
| + RCM Uplift | +$4.6M |
| Pro Forma EBITDA | $17.2M |
| Current Margin | 20.0% |
| Pro Forma Margin | 27.4% |
| WC Released (1x) | $2.4M |
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 | $19.3M | $129.1M | 6.68x | 46.2% |
| Base (11x exit) | 10.0x | 11.0x | $19.3M | $148.3M | 7.67x | 50.3% |
| Bull Case | 9.0x | 11.0x | $17.4M | $169.8M | 9.76x | 57.7% |
| Bull (12x exit) | 9.0x | 12.0x | $17.4M | $190.4M | 10.94x | 61.4% |
| Bear Case | 11.0x | 10.0x | $21.3M | $99.7M | 4.69x | 36.2% |
| Bear (11x exit) | 11.0x | 11.0x | $21.3M | $116.6M | 5.48x | 40.5% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Low occupancy | At 7.7%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
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
- 112 hospitals with 15-60 beds
- Same-state prioritization (n=113)
- Comp margins: P25=-31.3% / P50=-20.3% / P75=-8.0%
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.