NORTHEAST MONTANA HEALTH SERVICES
1. Target Overview & Investment Thesis
NORTHEAST MONTANA HEALTH SERVICES is a 22-bed safety-net/medicaid heavy in ROOSEVELT, MT with $35.4M in net patient revenue and a -10.2% operating margin. The hospital serves a payer mix of 21.8% Medicare, 59.6% Medicaid, and 18.6% commercial.
Thesis: Turnaround. Our ML models identify $2.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -10.2% to -2.8% (+736bps).
| Net Revenue HCRIS | $35.4M |
| Current EBITDA COMPUTED | $-3.6M |
| Operating Margin COMPUTED | -10.2% |
| Occupancy HCRIS | 14.8% |
| Revenue / Bed COMPUTED | $1.6M |
| Net-to-Gross HCRIS | 74.2% |
| Distress Probability ML | 72.3% |
2. Market Context & Competitive Position
MT has 66 Medicare-certified hospitals with a median operating margin of -9.6%. The target's margin of -10.2% places it below the state median. Among 47 size-comparable peers (11-44 beds), the median margin is -9.1%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (11-44), prioritizing same-state peers. 47 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| NORTHEAST MONTANA HEALTH SERVI (Target) | MT | 22 | $35.4M | -10.2% |
| 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% |
| 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% |
| HEALTHCENTER NORTHWEST | MT | 17 | $67.2M | 24.0% |
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: $2.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $743K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $707K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $700K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $430K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $23K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-3.6M |
| + RCM Uplift | +$2.6M |
| Pro Forma EBITDA | $-1.0M |
| Current Margin | -10.2% |
| Pro Forma Margin | -2.8% |
| WC Released (1x) | $1.4M |
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 | $-5.6M | $2.2M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-5.6M | $631K | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-5.0M | $7.4M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-5.0M | $6.6M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-6.1M | $-9.0M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-6.1M | $-11.9M | 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 (59.6%) | Medicaid reimburses below cost in most states. Mitigant: denial reduction lever has highest impact on Medicaid claims |
| Medium | Low occupancy | At 14.8%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
| High | Elevated distress probability | Model estimates 72.3% 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
- 47 hospitals with 11-44 beds
- Same-state prioritization (n=48)
- Comp margins: P25=-21.2% / P50=-9.1% / 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.