BOZEMAN DEACONESS HEALTH SERVICES
1. Target Overview & Investment Thesis
BOZEMAN DEACONESS HEALTH SERVICES is a 124-bed suburban community hospital in GALLATIN, MT with $395.6M in net patient revenue and a -13.0% operating margin. The hospital serves a payer mix of 32.5% Medicare, 16.9% Medicaid, and 50.6% commercial.
Thesis: Undervalued. Our ML models identify $29.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -13.0% to -5.7% (+736bps).
| Net Revenue HCRIS | $395.6M |
| Current EBITDA COMPUTED | $-51.6M |
| Operating Margin COMPUTED | -13.0% |
| Occupancy HCRIS | 58.4% |
| Revenue / Bed COMPUTED | $3.2M |
| Net-to-Gross HCRIS | 52.8% |
| Distress Probability ML | 49.3% |
2. Market Context & Competitive Position
MT has 66 Medicare-certified hospitals with a median operating margin of -9.6%. The target's margin of -13.0% places it below the state median. Among 2086 size-comparable peers (62-248 beds), the median margin is -3.4%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (62-248), prioritizing same-state peers. 2086 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| BOZEMAN DEACONESS HEALTH SERVI (Target) | MT | 124 | $395.6M | -13.0% |
| RAINBOW BABIES & CHILDRENS HOS | OH | 231 | $2.22B | -5.0% |
| MOFFITT CANCER CENTER | FL | 218 | $1.91B | 16.0% |
| CITY OF HOPE NATIONAL MEDICAL | CA | 217 | $1.83B | -10.7% |
| MIDWESTERN REGIONAL MEDICAL CE | IL | 73 | $1.38B | 80.5% |
| HOSPITAL FOR SPECIAL SURGERY | NY | 200 | $1.12B | -29.3% |
| VIRGINIA MASON MEDICAL CENTER | WA | 222 | $1.11B | -23.2% |
| KFH - SOUTH SACRAMENTO | CA | 233 | $803.9M | 5.9% |
| COMMUNITY HOSP. MONTEREY PENIN | CA | 227 | $797.2M | 9.3% |
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: $29.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $8.3M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $7.9M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $7.8M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $4.8M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $253K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-51.6M |
| + RCM Uplift | +$29.1M |
| Pro Forma EBITDA | $-22.5M |
| Current Margin | -13.0% |
| Pro Forma Margin | -5.7% |
| WC Released (1x) | $15.2M |
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 | $-79.4M | $-49.1M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-79.4M | $-79.7M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-71.4M | $-9.4M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-71.4M | $-31.4M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-87.3M | $-168.9M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-87.3M | $-214.1M | 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
- 2086 hospitals with 62-248 beds
- Same-state prioritization (n=8)
- Comp margins: P25=-14.1% / P50=-3.4% / P75=7.4%
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.