SUN BEHAVIORAL HEALTH - KENTUCKY
1. Target Overview & Investment Thesis
SUN BEHAVIORAL HEALTH - KENTUCKY is a 197-bed suburban community hospital in nan, KY with $60.8M in net patient revenue and a 25.3% operating margin. The hospital serves a payer mix of 4.8% Medicare, 0.7% Medicaid, and 94.5% commercial.
Thesis: Turnaround. Our ML models identify $4.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 25.3% to 32.7% (+736bps).
| Net Revenue HCRIS | $60.8M |
| Current EBITDA COMPUTED | $15.4M |
| Operating Margin COMPUTED | 25.3% |
| Occupancy HCRIS | 46.0% |
| Revenue / Bed COMPUTED | $309K |
| Net-to-Gross HCRIS | 76.4% |
| Distress Probability ML | 54.0% |
2. Market Context & Competitive Position
KY has 114 Medicare-certified hospitals with a median operating margin of -0.6%. The target's margin of 25.3% places it above the state median. Among 32 size-comparable peers (98-394 beds), the median margin is -1.0%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (98-394), prioritizing same-state peers. 32 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SUN BEHAVIORAL HEALTH - KENTUC (Target) | KY | 197 | $60.8M | 25.3% |
| UNIVERSITY OF LOUISVILLE HOSPI | KY | 333 | $806.1M | -6.9% |
| OWENSBORO HEALTH REGIONAL HOSP | KY | 302 | $678.6M | 11.1% |
| PIKEVILLE MEDICAL CENTER | KY | 328 | $555.1M | -16.6% |
| KINGS DAUGHTERS MEDICAL CENTER | KY | 367 | $542.4M | -20.5% |
| BAPTIST HEALTH HARDIN | KY | 259 | $459.5M | -1.5% |
| THE MEDICAL CENTER | KY | 310 | $451.0M | 4.2% |
| BAPTIST HEALTH PADUCAH | KY | 190 | $391.7M | -0.5% |
| SAINT JOSEPH HOSPITAL | KY | 252 | $322.8M | -17.3% |
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: $4.5M (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% | $1.2M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.2M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $740K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $39K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $15.4M |
| + RCM Uplift | +$4.5M |
| Pro Forma EBITDA | $19.9M |
| Current Margin | 25.3% |
| Pro Forma Margin | 32.7% |
| WC Released (1x) | $2.3M |
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 | $23.7M | $146.2M | 6.18x | 43.9% |
| Base (11x exit) | 10.0x | 11.0x | $23.7M | $168.5M | 7.12x | 48.1% |
| Bull Case | 9.0x | 11.0x | $21.3M | $191.0M | 8.97x | 55.1% |
| Bull (12x exit) | 9.0x | 12.0x | $21.3M | $214.6M | 10.08x | 58.7% |
| Bear Case | 11.0x | 10.0x | $26.0M | $116.1M | 4.46x | 34.9% |
| Bear (11x exit) | 11.0x | 11.0x | $26.0M | $136.2M | 5.23x | 39.2% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| 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
- 32 hospitals with 98-394 beds
- Same-state prioritization (n=33)
- Comp margins: P25=-11.4% / P50=-1.0% / P75=5.7%
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.