ST ELIZABETH FT THOMAS
1. Target Overview & Investment Thesis
ST ELIZABETH FT THOMAS is a 128-bed suburban community hospital in CAMPBELL, KY with $124.3M in net patient revenue and a -9.6% operating margin. The hospital serves a payer mix of 27.4% Medicare, 1.1% Medicaid, and 71.5% commercial.
Thesis: Undervalued. Our ML models identify $9.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -9.6% to -2.2% (+736bps).
| Net Revenue HCRIS | $124.3M |
| Current EBITDA COMPUTED | $-11.9M |
| Operating Margin COMPUTED | -9.6% |
| Occupancy HCRIS | 62.2% |
| Revenue / Bed COMPUTED | $971K |
| Net-to-Gross HCRIS | 30.9% |
| Distress Probability ML | 45.1% |
2. Market Context & Competitive Position
KY has 114 Medicare-certified hospitals with a median operating margin of -0.6%. The target's margin of -9.6% places it below the state median. Among 40 size-comparable peers (64-256 beds), the median margin is 2.0%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (64-256), prioritizing same-state peers. 40 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ST ELIZABETH FT THOMAS (Target) | KY | 128 | $124.3M | -9.6% |
| BAPTIST HEALTH PADUCAH | KY | 190 | $391.7M | -0.5% |
| SAINT JOSEPH HOSPITAL | KY | 252 | $322.8M | -17.3% |
| MERCY HEALTH LOURDES HOSPITAL | KY | 178 | $288.1M | 7.7% |
| BAPTIST HEALTH CORBIN | KY | 197 | $285.4M | 1.4% |
| LAKE CUMBERLAND REGIONAL HOSP | KY | 179 | $278.7M | 5.6% |
| BAPTIST HEALTH MADISONVILLE | KY | 154 | $220.0M | -5.7% |
| ST. ELIZABETH FLORENCE | KY | 134 | $212.6M | 8.8% |
| SAINT JOSEPH EAST | KY | 138 | $209.5M | 2.6% |
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: $9.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $2.6M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $2.5M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $2.5M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $1.5M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $80K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-11.9M |
| + RCM Uplift | +$9.1M |
| Pro Forma EBITDA | $-2.8M |
| Current Margin | -9.6% |
| Pro Forma Margin | -2.2% |
| WC Released (1x) | $4.8M |
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 | $-18.3M | $12.9M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-18.3M | $8.3M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-16.5M | $32.5M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-16.5M | $30.6M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-20.1M | $-26.8M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-20.1M | $-36.1M | 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 |
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
- 40 hospitals with 64-256 beds
- Same-state prioritization (n=41)
- Comp margins: P25=-9.0% / P50=2.0% / P75=11.5%
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.