BAPTIST HEALTH RICHMOND
1. Target Overview & Investment Thesis
BAPTIST HEALTH RICHMOND is a 53-bed suburban community hospital in MADISON, KY with $145.6M in net patient revenue and a -3.7% operating margin. The hospital serves a payer mix of 23.1% Medicare, 0.9% Medicaid, and 76.0% commercial.
Thesis: Turnaround. Our ML models identify $10.7M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -3.7% to 3.7% (+736bps).
| Net Revenue HCRIS | $145.6M |
| Current EBITDA COMPUTED | $-5.4M |
| Operating Margin COMPUTED | -3.7% |
| Occupancy HCRIS | 65.3% |
| Revenue / Bed COMPUTED | $2.7M |
| Net-to-Gross HCRIS | 15.4% |
| Distress Probability ML | 39.7% |
2. Market Context & Competitive Position
KY has 114 Medicare-certified hospitals with a median operating margin of -0.6%. The target's margin of -3.7% places it below the state median. Among 45 size-comparable peers (26-106 beds), the median margin is 0.1%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (26-106), prioritizing same-state peers. 45 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| BAPTIST HEALTH RICHMOND (Target) | KY | 53 | $145.6M | -3.7% |
| BAPTIST HEALTH LAGRANGE | KY | 42 | $236.9M | 2.7% |
| ST. CLAIRE MEDICAL CENTER | KY | 100 | $204.5M | -8.5% |
| CLARK REGIONAL MEDICAL CENTER | KY | 54 | $156.4M | 16.5% |
| MURRAY CALLOWAY COUNTY HOSPITA | KY | 99 | $154.2M | 0.1% |
| GEORGETOWN COMMUNITY HOSPITAL | KY | 75 | $118.5M | 15.1% |
| TAYLOR REGIONAL HOSPITAL | KY | 90 | $109.9M | -6.7% |
| HIGHLANDS REGIONAL MEDICAL CEN | KY | 63 | $96.5M | -32.6% |
| JACKSON PURCHASE MEDICAL CENTE | KY | 95 | $91.1M | -6.8% |
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: $10.7M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $3.1M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $2.9M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $2.9M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $1.8M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $93K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-5.4M |
| + RCM Uplift | +$10.7M |
| Pro Forma EBITDA | $5.3M |
| Current Margin | -3.7% |
| Pro Forma Margin | 3.7% |
| WC Released (1x) | $5.6M |
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 | $-8.3M | $71.6M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-8.3M | $76.0M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-7.5M | $108.7M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-7.5M | $116.4M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-9.1M | $20.7M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-9.1M | $19.8M | 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 |
| 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
- 45 hospitals with 26-106 beds
- Same-state prioritization (n=46)
- Comp margins: P25=-11.0% / 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.