SUMMIT SURGICAL LLC
1. Target Overview & Investment Thesis
SUMMIT SURGICAL LLC is a 10-bed suburban community hospital in RENO, KS with $13.1M in net patient revenue and a 5.2% operating margin. The hospital serves a payer mix of 39.8% Medicare, 0.4% Medicaid, and 59.8% commercial.
Thesis: Turnaround. Our ML models identify $966K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 5.2% to 12.6% (+738bps).
| Net Revenue HCRIS | $13.1M |
| Current EBITDA COMPUTED | $686K |
| Operating Margin COMPUTED | 5.2% |
| Occupancy HCRIS | 24.4% |
| Revenue / Bed COMPUTED | $1.3M |
| Net-to-Gross HCRIS | 37.2% |
| Distress Probability ML | 54.0% |
2. Market Context & Competitive Position
KS has 152 Medicare-certified hospitals with a median operating margin of -17.7%. The target's margin of 5.2% places it above the state median. Among 41 size-comparable peers (5-20 beds), the median margin is -22.0%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (5-20), prioritizing same-state peers. 41 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SUMMIT SURGICAL LLC (Target) | KS | 10 | $13.1M | 5.2% |
| KANSAS CITY ORTHOPAEDIC INSTIT | KS | 17 | $86.3M | 21.1% |
| MANHATTAN SURGICAL HOSPITAL | KS | 13 | $42.0M | 13.1% |
| CLARA BARTON HOSPITAL ASSOCIAT | KS | 18 | $35.1M | -8.2% |
| SUSAN B. ALLEN MEMORIAL HOSPIT | KS | 20 | $32.6M | -18.5% |
| CLAY COUNTY MEDICAL CENTER | KS | 20 | $30.5M | -14.5% |
| SALINA SURGICAL HOSPITAL | KS | 16 | $28.3M | 20.9% |
| MIAMI COUNTY MEDICAL CENTER | KS | 18 | $28.0M | -17.2% |
| ANDERSON COUNTY HOSPITAL | KS | 12 | $27.8M | -15.4% |
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: $966K (738bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $275K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $262K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $260K | +199bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $159K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +7bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $686K |
| + RCM Uplift | +$966K |
| Pro Forma EBITDA | $1.7M |
| Current Margin | 5.2% |
| Pro Forma Margin | 12.6% |
| WC Released (1x) | $502K |
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 | $1.1M | $14.2M | 13.44x | 68.1% |
| Base (11x exit) | 10.0x | 11.0x | $1.1M | $15.9M | 15.11x | 72.1% |
| Bull Case | 9.0x | 11.0x | $950K | $19.5M | 20.50x | 83.0% |
| Bull (12x exit) | 9.0x | 12.0x | $950K | $21.5M | 22.66x | 86.7% |
| Bear Case | 11.0x | 10.0x | $1.2M | $9.0M | 7.76x | 50.7% |
| Bear (11x exit) | 11.0x | 11.0x | $1.2M | $10.3M | 8.86x | 54.7% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Low occupancy | At 24.4%, 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 54.0% 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
- 41 hospitals with 5-20 beds
- Same-state prioritization (n=45)
- Comp margins: P25=-38.1% / P50=-22.0% / P75=-11.2%
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 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.