SSH - KALAMAZOO
1. Target Overview & Investment Thesis
SSH - KALAMAZOO is a 25-bed suburban community hospital in CALHOUN, MI with $13.2M in net patient revenue and a 5.2% operating margin. The hospital serves a payer mix of 35.5% Medicare, 0.3% Medicaid, and 64.2% commercial.
Thesis: Turnaround. Our ML models identify $973K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 5.2% to 12.6% (+738bps).
| Net Revenue HCRIS | $13.2M |
| Current EBITDA COMPUTED | $688K |
| Operating Margin COMPUTED | 5.2% |
| Occupancy HCRIS | 70.8% |
| Revenue / Bed COMPUTED | $528K |
| Net-to-Gross HCRIS | 12.6% |
| Distress Probability ML | 41.6% |
2. Market Context & Competitive Position
MI has 163 Medicare-certified hospitals with a median operating margin of -5.2%. The target's margin of 5.2% places it above the state median. Among 72 size-comparable peers (12-50 beds), the median margin is -3.5%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (12-50), prioritizing same-state peers. 72 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SSH - KALAMAZOO (Target) | MI | 25 | $13.2M | 5.2% |
| TRINITY HEALTH LIVINGSTON | MI | 42 | $200.4M | 15.2% |
| MYMICHIGAN MEDICAL CENTER ALMA | MI | 49 | $142.2M | -5.9% |
| SPECTRUM HEALTH UNITED MEMORIA | MI | 45 | $129.4M | 9.7% |
| DICKINSON COUNTY HEALTHCARE SY | MI | 49 | $126.3M | -4.7% |
| MUNSON HEALTHCARE CADILLAC HOS | MI | 49 | $122.7M | 1.0% |
| MCLAREN CENTRAL MICHIGAN | MI | 49 | $118.9M | -35.3% |
| SPECTRUM HEALTH GERBER | MI | 25 | $116.2M | 16.0% |
| SPECTRUM HEALTH LUDINGTON | MI | 45 | $110.1M | 5.3% |
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: $973K (738bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $277K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $264K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $262K | +199bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $161K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +7bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $688K |
| + RCM Uplift | +$973K |
| Pro Forma EBITDA | $1.7M |
| Current Margin | 5.2% |
| Pro Forma Margin | 12.6% |
| WC Released (1x) | $506K |
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 | $1.1M | $14.3M | 13.48x | 68.2% |
| Base (11x exit) | 10.0x | 11.0x | $1.1M | $16.0M | 15.15x | 72.2% |
| Bull Case | 9.0x | 11.0x | $953K | $19.6M | 20.57x | 83.1% |
| Bull (12x exit) | 9.0x | 12.0x | $953K | $21.7M | 22.73x | 86.8% |
| Bear Case | 11.0x | 10.0x | $1.2M | $9.1M | 7.78x | 50.7% |
| Bear (11x exit) | 11.0x | 11.0x | $1.2M | $10.3M | 8.88x | 54.8% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| 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
- 72 hospitals with 12-50 beds
- Same-state prioritization (n=73)
- Comp margins: P25=-11.8% / P50=-3.5% / P75=8.1%
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 27, 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.