MERCY HOSPITAL CARTHAGE
1. Target Overview & Investment Thesis
MERCY HOSPITAL CARTHAGE is a 25-bed suburban community hospital in JASPER, MO with $58.4M in net patient revenue and a 7.9% operating margin. The hospital serves a payer mix of 56.0% Medicare, 1.9% Medicaid, and 42.1% commercial.
Thesis: Turnaround. Our ML models identify $4.3M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 7.9% to 15.2% (+736bps).
| Net Revenue HCRIS | $58.4M |
| Current EBITDA COMPUTED | $4.6M |
| Operating Margin COMPUTED | 7.9% |
| Occupancy HCRIS | 59.8% |
| Revenue / Bed COMPUTED | $2.3M |
| Net-to-Gross HCRIS | 31.8% |
| Distress Probability ML | 44.8% |
2. Market Context & Competitive Position
MO has 138 Medicare-certified hospitals with a median operating margin of -6.2%. The target's margin of 7.9% places it above the state median. Among 61 size-comparable peers (12-50 beds), the median margin is -9.8%. 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. 61 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| MERCY HOSPITAL CARTHAGE (Target) | MO | 25 | $58.4M | 7.9% |
| GOLDEN VALLEY MEMORIAL HOSPITA | MO | 42 | $139.8M | -4.9% |
| WESTERN MISSOURI MEDICAL CENTE | MO | 45 | $108.5M | -9.2% |
| MERCY HOSPITAL LEBANON | MO | 43 | $94.1M | 15.5% |
| CASS REGIONAL MEDICAL CENTER | MO | 25 | $89.9M | 5.4% |
| MISSOURI BAPTIST SULLIVAN HOSP | MO | 25 | $73.4M | 2.7% |
| MOSAIC MEDICAL CENTER - MARYVI | MO | 29 | $73.3M | -40.5% |
| NORTHEAST REGIONAL MEDICAL CEN | MO | 40 | $70.6M | 43.6% |
| FULTON STATE HOSPITAL | MO | 49 | $68.9M | -50.0% |
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: $4.3M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.2M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.2M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.2M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $711K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $37K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $4.6M |
| + RCM Uplift | +$4.3M |
| Pro Forma EBITDA | $8.9M |
| Current Margin | 7.9% |
| Pro Forma Margin | 15.2% |
| WC Released (1x) | $2.2M |
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 | $7.1M | $73.2M | 10.38x | 59.7% |
| Base (11x exit) | 10.0x | 11.0x | $7.1M | $82.9M | 11.74x | 63.7% |
| Bull Case | 9.0x | 11.0x | $6.4M | $99.3M | 15.64x | 73.3% |
| Bull (12x exit) | 9.0x | 12.0x | $6.4M | $110.2M | 17.36x | 77.0% |
| Bear Case | 11.0x | 10.0x | $7.8M | $49.5M | 6.37x | 44.8% |
| Bear (11x exit) | 11.0x | 11.0x | $7.8M | $56.9M | 7.33x | 49.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 56.0% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
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
- 61 hospitals with 12-50 beds
- Same-state prioritization (n=62)
- Comp margins: P25=-17.8% / P50=-9.8% / P75=-1.6%
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.