KELSEY MEMORIAL HOSPITAL
1. Target Overview & Investment Thesis
KELSEY MEMORIAL HOSPITAL is a 12-bed community hospital in MONTCALM, MI with $16.4M in net patient revenue and a 5.6% operating margin. The hospital serves a payer mix of 0.0% Medicare, 0.0% Medicaid, and 100.0% commercial.
Thesis: Turnaround. Our ML models identify $1.2M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 5.6% to 12.9% (+736bps).
| Net Revenue HCRIS | $16.4M |
| Current EBITDA COMPUTED | $910K |
| Operating Margin COMPUTED | 5.6% |
| Occupancy HCRIS | nan% |
| Revenue / Bed COMPUTED | $1.4M |
| Net-to-Gross HCRIS | 48.6% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
MI has 163 Medicare-certified hospitals with a median operating margin of -5.2%. The target's margin of 5.6% places it above the state median. Among 17 size-comparable peers (6-24 beds), the median margin is -6.2%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (6-24), prioritizing same-state peers. 17 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| KELSEY MEMORIAL HOSPITAL (Target) | MI | 12 | $16.4M | 5.6% |
| BRONSON LAKEVIEW HOSPITAL | MI | 16 | $67.9M | 14.6% |
| SPARROW IONIA HOSPITAL | MI | 22 | $65.0M | 9.7% |
| MACKINAC STRAITS HEALTH SYSTEM | MI | 15 | $62.2M | 1.1% |
| FOREST HEALTH MEDICAL CENTER | MI | 24 | $46.9M | 12.6% |
| SCHOOLCRAFT MEMORIAL HOSPITAL | MI | 12 | $44.7M | -11.1% |
| MH-LAKESHORE CAMPUS | MI | 24 | $41.9M | 12.3% |
| EATON RAPIDS MEDICAL CENTER | MI | 20 | $34.8M | -4.0% |
| INSIGHT SURGICAL HOSPITAL | MI | 13 | $28.3M | -8.5% |
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: $1.2M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $344K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $327K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $324K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $199K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $910K |
| + RCM Uplift | +$1.2M |
| Pro Forma EBITDA | $2.1M |
| Current Margin | 5.6% |
| Pro Forma Margin | 12.9% |
| WC Released (1x) | $628K |
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 | $1.4M | $18.0M | 12.89x | 66.8% |
| Base (11x exit) | 10.0x | 11.0x | $1.4M | $20.3M | 14.51x | 70.7% |
| Bull Case | 9.0x | 11.0x | $1.3M | $24.7M | 19.64x | 81.4% |
| Bull (12x exit) | 9.0x | 12.0x | $1.3M | $27.3M | 21.72x | 85.1% |
| Bear Case | 11.0x | 10.0x | $1.5M | $11.6M | 7.51x | 49.7% |
| Bear (11x exit) | 11.0x | 11.0x | $1.5M | $13.2M | 8.59x | 53.8% |
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
- 17 hospitals with 6-24 beds
- Same-state prioritization (n=22)
- Comp margins: P25=-10.7% / P50=-6.2% / 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.