LIBERTY HOSPITAL
1. Target Overview & Investment Thesis
LIBERTY HOSPITAL is a 199-bed suburban community hospital in CLAY, MO with $303.2M in net patient revenue and a -3.1% operating margin. The hospital serves a payer mix of 31.9% Medicare, 7.3% Medicaid, and 60.8% commercial.
Thesis: Undervalued. Our ML models identify $22.3M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -3.1% to 4.2% (+736bps).
| Net Revenue HCRIS | $303.2M |
| Current EBITDA COMPUTED | $-9.4M |
| Operating Margin COMPUTED | -3.1% |
| Occupancy HCRIS | 46.5% |
| Revenue / Bed COMPUTED | $1.5M |
| Net-to-Gross HCRIS | 28.1% |
| Distress Probability ML | 49.6% |
2. Market Context & Competitive Position
MO has 138 Medicare-certified hospitals with a median operating margin of -6.2%. The target's margin of -3.1% places it above the state median. Among 41 size-comparable peers (100-398 beds), the median margin is -2.7%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (100-398), prioritizing same-state peers. 41 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| LIBERTY HOSPITAL (Target) | MO | 199 | $303.2M | -3.1% |
| CHILDRENS MERCY HOSPITAL | MO | 328 | $1.44B | 30.5% |
| SSM SAINT LOUIS UNIVERSITY HOS | MO | 317 | $772.2M | -6.4% |
| HEARTLAND REGIONAL MEDICAL CEN | MO | 352 | $676.9M | -6.2% |
| NORTH KANSAS CITY HOSPITAL | MO | 383 | $601.5M | 7.7% |
| FREEMAN OAK HILL HEALTH SYSTEM | MO | 363 | $587.5M | 3.0% |
| ST. LUKES HOSPITAL | MO | 390 | $573.7M | 2.8% |
| SAINT FRANCIS MEDICAL CENTER | MO | 282 | $556.6M | -1.3% |
| UNIVERSITY HEALTH TRUMAN MED C | MO | 258 | $540.8M | -13.5% |
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: $22.3M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $6.4M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $6.1M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $6.0M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.7M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $194K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-9.4M |
| + RCM Uplift | +$22.3M |
| Pro Forma EBITDA | $12.9M |
| Current Margin | -3.1% |
| Pro Forma Margin | 4.2% |
| WC Released (1x) | $11.6M |
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 | $-14.5M | $160.9M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-14.5M | $172.3M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-13.1M | $241.2M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-13.1M | $259.3M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-16.0M | $54.0M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-16.0M | $54.2M | 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
- 41 hospitals with 100-398 beds
- Same-state prioritization (n=42)
- Comp margins: P25=-15.2% / P50=-2.7% / P75=5.3%
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.