AURORA WESTBOROUGH BHS
1. Target Overview & Investment Thesis
AURORA WESTBOROUGH BHS is a 123-bed under-performing / distressed in nan, MA with $18.0M in net patient revenue and a -46.6% operating margin. The hospital serves a payer mix of 8.8% Medicare, 1.0% Medicaid, and 90.2% commercial.
Thesis: Undervalued. Our ML models identify $1.3M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -46.6% to -39.3% (+736bps).
| Net Revenue HCRIS | $18.0M |
| Current EBITDA COMPUTED | $-8.4M |
| Operating Margin COMPUTED | -46.6% |
| Occupancy HCRIS | 31.4% |
| Revenue / Bed COMPUTED | $146K |
| Net-to-Gross HCRIS | 50.7% |
| Distress Probability ML | 54.8% |
2. Market Context & Competitive Position
MA has 99 Medicare-certified hospitals with a median operating margin of -12.2%. The target's margin of -46.6% places it below the state median. Among 57 size-comparable peers (62-246 beds), the median margin is -9.3%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (62-246), prioritizing same-state peers. 57 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| AURORA WESTBOROUGH BHS (Target) | MA | 123 | $18.0M | -46.6% |
| NEWTON WELLESLEY HOSPITAL | MA | 216 | $624.3M | -4.7% |
| CAPE COD HOSPITAL | MA | 239 | $620.3M | -1.3% |
| BERKSHIRE MEDICAL CENTER | MA | 238 | $522.9M | -12.9% |
| STEWARD ST. ELIZABETHS MEDICAL | MA | 244 | $428.5M | 0.7% |
| SAINT VINCENT HOSPITAL | MA | 232 | $404.2M | 0.2% |
| CAMBRIDGE HEALTH ALLIANCE | MA | 225 | $383.9M | -50.0% |
| BETH ISRAEL DEACONESS - PLYMOU | MA | 150 | $349.1M | 2.6% |
| MOUNT AUBURN HOSPITAL | MA | 186 | $337.4M | -8.4% |
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: $1.3M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $377K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $360K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $356K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $219K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $12K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-8.4M |
| + RCM Uplift | +$1.3M |
| Pro Forma EBITDA | $-7.1M |
| Current Margin | -46.6% |
| Pro Forma Margin | -39.3% |
| WC Released (1x) | $689K |
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 | $-12.9M | $-42.1M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-12.9M | $-50.4M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-11.6M | $-50.3M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-11.6M | $-58.3M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-14.2M | $-44.5M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-14.2M | $-53.5M | 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 |
| Medium | Low occupancy | At 31.4%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
| High | Elevated distress probability | Model estimates 54.8% 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
- 57 hospitals with 62-246 beds
- Same-state prioritization (n=58)
- Comp margins: P25=-17.9% / P50=-9.3% / P75=1.0%
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.