ST. ELIZABETH FLORENCE
1. Target Overview & Investment Thesis
ST. ELIZABETH FLORENCE is a 134-bed suburban community hospital in BOONE, KY with $212.6M in net patient revenue and a 8.8% operating margin. The hospital serves a payer mix of 29.7% Medicare, 2.5% Medicaid, and 67.8% commercial.
Thesis: Turnaround. Our ML models identify $15.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 8.8% to 16.2% (+736bps).
| Net Revenue HCRIS | $212.6M |
| Current EBITDA COMPUTED | $18.7M |
| Operating Margin COMPUTED | 8.8% |
| Occupancy HCRIS | 80.1% |
| Revenue / Bed COMPUTED | $1.6M |
| Net-to-Gross HCRIS | 34.9% |
| Distress Probability ML | 41.0% |
2. Market Context & Competitive Position
KY has 114 Medicare-certified hospitals with a median operating margin of -0.6%. The target's margin of 8.8% places it above the state median. Among 39 size-comparable peers (67-268 beds), the median margin is 0.1%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (67-268), prioritizing same-state peers. 39 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ST. ELIZABETH FLORENCE (Target) | KY | 134 | $212.6M | 8.8% |
| BAPTIST HEALTH HARDIN | KY | 259 | $459.5M | -1.5% |
| 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% |
| 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: $15.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $4.5M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $4.3M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $4.2M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $2.6M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $136K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $18.7M |
| + RCM Uplift | +$15.6M |
| Pro Forma EBITDA | $34.4M |
| Current Margin | 8.8% |
| Pro Forma Margin | 16.2% |
| WC Released (1x) | $8.2M |
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 | $28.8M | $280.0M | 9.72x | 57.6% |
| Base (11x exit) | 10.0x | 11.0x | $28.8M | $317.4M | 11.01x | 61.6% |
| Bull Case | 9.0x | 11.0x | $25.9M | $378.4M | 14.59x | 70.9% |
| Bull (12x exit) | 9.0x | 12.0x | $25.9M | $420.5M | 16.21x | 74.6% |
| Bear Case | 11.0x | 10.0x | $31.7M | $192.4M | 6.07x | 43.4% |
| Bear (11x exit) | 11.0x | 11.0x | $31.7M | $222.0M | 7.00x | 47.6% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Standard execution risk | RCM improvement requires management buy-in and 12-18 month implementation timeline |
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
- 39 hospitals with 67-268 beds
- Same-state prioritization (n=40)
- Comp margins: P25=-10.1% / P50=0.1% / P75=10.3%
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.