MERIT HEALTH WOMANS HOSPITAL
1. Target Overview & Investment Thesis
MERIT HEALTH WOMANS HOSPITAL is a 34-bed safety-net/medicaid heavy in RANKIN, MS with $29.6M in net patient revenue and a 3.5% operating margin. The hospital serves a payer mix of 0.3% Medicare, 25.8% Medicaid, and 73.9% commercial.
Thesis: Turnaround. Our ML models identify $2.2M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 3.5% to 10.9% (+736bps).
| Net Revenue HCRIS | $29.6M |
| Current EBITDA COMPUTED | $1.0M |
| Operating Margin COMPUTED | 3.5% |
| Occupancy HCRIS | 35.6% |
| Revenue / Bed COMPUTED | $870K |
| Net-to-Gross HCRIS | 11.4% |
| Distress Probability ML | 53.9% |
2. Market Context & Competitive Position
MS has 110 Medicare-certified hospitals with a median operating margin of -12.5%. The target's margin of 3.5% places it above the state median. Among 68 size-comparable peers (17-68 beds), the median margin is -14.4%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (17-68), prioritizing same-state peers. 68 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| MERIT HEALTH WOMANS HOSPITAL (Target) | MS | 34 | $29.6M | 3.5% |
| KINGS DAUGHTERS MEDICAL CENTER | MS | 22 | $91.5M | -8.4% |
| METHODIST H/C OLIVE BRANCH HOS | MS | 65 | $75.4M | -25.6% |
| NORTH SUNFLOWER COUNTY HOSPITA | MS | 25 | $70.1M | -7.2% |
| MISSISSIPPI METHODIST REHAB CE | MS | 31 | $68.1M | -0.5% |
| UMMC-GRENADA | MS | 49 | $63.7M | 7.1% |
| NESHOBA COUNTY GENERAL HOSPITA | MS | 38 | $47.6M | -19.7% |
| MONROE REGIONAL HOSPITAL | MS | 25 | $45.6M | 0.9% |
| CLAY COUNTY MEDICAL CORPORATIO | MS | 49 | $45.4M | 0.5% |
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: $2.2M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $621K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $591K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $585K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $360K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $19K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.0M |
| + RCM Uplift | +$2.2M |
| Pro Forma EBITDA | $3.2M |
| Current Margin | 3.5% |
| Pro Forma Margin | 10.9% |
| WC Released (1x) | $1.1M |
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 | $1.6M | $28.7M | 17.79x | 77.8% |
| Base (11x exit) | 10.0x | 11.0x | $1.6M | $32.1M | 19.90x | 81.9% |
| Bull Case | 9.0x | 11.0x | $1.5M | $39.8M | 27.42x | 93.9% |
| Bull (12x exit) | 9.0x | 12.0x | $1.5M | $43.8M | 30.21x | 97.7% |
| Bear Case | 11.0x | 10.0x | $1.8M | $17.3M | 9.74x | 57.7% |
| Bear (11x exit) | 11.0x | 11.0x | $1.8M | $19.6M | 11.04x | 61.7% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Elevated Medicaid exposure (25.8%) | Medicaid reimburses below cost in most states. Mitigant: denial reduction lever has highest impact on Medicaid claims |
| High | Elevated distress probability | Model estimates 53.9% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
| 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
- 68 hospitals with 17-68 beds
- Same-state prioritization (n=69)
- Comp margins: P25=-25.5% / P50=-14.4% / P75=-5.4%
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.