LOGAN HEALTH CHESTER
1. Target Overview & Investment Thesis
LOGAN HEALTH CHESTER is a 25-bed safety-net/medicaid heavy in LIBERTY, MT with $6.2M in net patient revenue and a -34.5% operating margin. The hospital serves a payer mix of 1.4% Medicare, 51.1% Medicaid, and 47.5% commercial.
Thesis: Turnaround. Our ML models identify $469K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -34.5% to -26.9% (+753bps).
| Net Revenue HCRIS | $6.2M |
| Current EBITDA COMPUTED | $-2.1M |
| Operating Margin COMPUTED | -34.5% |
| Occupancy HCRIS | 77.9% |
| Revenue / Bed COMPUTED | $249K |
| Net-to-Gross HCRIS | 96.5% |
| Distress Probability ML | 60.7% |
2. Market Context & Competitive Position
MT has 66 Medicare-certified hospitals with a median operating margin of -9.6%. The target's margin of -34.5% places it below the state median. Among 48 size-comparable peers (12-50 beds), the median margin is -8.3%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (12-50), prioritizing same-state peers. 48 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| LOGAN HEALTH CHESTER (Target) | MT | 25 | $6.2M | -34.5% |
| GREAT FALLS CLINIC MEDICAL CEN | MT | 20 | $132.1M | 21.0% |
| MARCUS DALY MEMORIAL HOSPITAL | MT | 25 | $107.6M | -1.3% |
| LOGAN HEALTH WHITEFISH | MT | 25 | $101.8M | 13.8% |
| SIDNEY HEALTH CENTER | MT | 25 | $95.2M | -6.3% |
| NORTHERN MONTANA HOSPITAL | MT | 49 | $93.3M | -4.7% |
| COMMUNITY HOSPITAL OF ANACONDA | MT | 25 | $89.0M | 1.3% |
| LIVINGSTON HEALTHCARE | MT | 25 | $72.6M | -7.1% |
| HOLY ROSARY HEALTHCARE | MT | 25 | $67.3M | 1.3% |
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: $469K (753bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $131K | +210bp | 18mo |
| Denial Rate Reduction | 12.0% | 6.5% | $128K | +206bp | 12mo |
| Cost to Collect | 4.5% | 2.5% | $125K | +200bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $76K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +15bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-2.1M |
| + RCM Uplift | +$469K |
| Pro Forma EBITDA | $-1.7M |
| Current Margin | -34.5% |
| Pro Forma Margin | -26.9% |
| WC Released (1x) | $239K |
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 | $-3.3M | $-9.5M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-3.3M | $-11.5M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-3.0M | $-11.0M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-3.0M | $-12.9M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-3.6M | $-10.8M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-3.6M | $-13.0M | 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 |
| Medium | Elevated Medicaid exposure (51.1%) | Medicaid reimburses below cost in most states. Mitigant: denial reduction lever has highest impact on Medicaid claims |
| High | Elevated distress probability | Model estimates 60.7% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
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
- 48 hospitals with 12-50 beds
- Same-state prioritization (n=49)
- Comp margins: P25=-19.1% / P50=-8.3% / P75=-1.3%
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.