ST. MARYS HOSPITAL
1. Target Overview & Investment Thesis
ST. MARYS HOSPITAL is a 105-bed suburban community hospital in nan, MD with $198.5M in net patient revenue and a -1.5% operating margin. The hospital serves a payer mix of 49.1% Medicare, 7.1% Medicaid, and 43.7% commercial.
Thesis: Undervalued. Our ML models identify $14.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -1.5% to 5.8% (+736bps).
| Net Revenue HCRIS | $198.5M |
| Current EBITDA COMPUTED | $-3.0M |
| Operating Margin COMPUTED | -1.5% |
| Occupancy HCRIS | 68.1% |
| Revenue / Bed COMPUTED | $1.9M |
| Net-to-Gross HCRIS | 78.1% |
| Distress Probability ML | 50.0% |
2. Market Context & Competitive Position
MD has 59 Medicare-certified hospitals with a median operating margin of -8.3%. The target's margin of -1.5% places it above the state median. Among 31 size-comparable peers (52-210 beds), the median margin is -7.9%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (52-210), prioritizing same-state peers. 31 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ST. MARYS HOSPITAL (Target) | MD | 105 | $198.5M | -1.5% |
| MERCY MEDICAL CENTER | MD | 173 | $561.3M | -3.3% |
| ST. AGNES HOSPITAL | MD | 183 | $506.7M | -12.2% |
| MEDSTAR UNION MEMORIAL HOSPITA | MD | 191 | $409.3M | -8.7% |
| AHC WHITE OAK MEDICAL CENTER | MD | 196 | $323.2M | -43.2% |
| UPPER CHESAPEAKE MEDICAL CENTE | MD | 202 | $320.2M | 2.5% |
| UPMC-WESTERN MARYLAND CORP | MD | 200 | $312.5M | -12.1% |
| NORTHWEST HOSPITAL CENTER | MD | 193 | $289.0M | -8.3% |
| MEMORIAL EASTON | MD | 143 | $287.6M | -4.1% |
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: $14.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $4.2M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $4.0M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $3.9M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $2.4M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $127K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-3.0M |
| + RCM Uplift | +$14.6M |
| Pro Forma EBITDA | $11.6M |
| Current Margin | -1.5% |
| Pro Forma Margin | 5.8% |
| WC Released (1x) | $7.6M |
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 | $-4.7M | $126.1M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-4.7M | $137.2M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-4.2M | $183.9M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-4.2M | $199.3M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-5.1M | $54.5M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-5.1M | $58.3M | 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
- 31 hospitals with 52-210 beds
- Same-state prioritization (n=32)
- Comp margins: P25=-12.8% / P50=-7.9% / P75=-1.2%
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 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.