BIG SKY MEDICAL CENTER
1. Target Overview & Investment Thesis
BIG SKY MEDICAL CENTER is a 8-bed rural/critical access in GALLATIN, MT with $14.8M in net patient revenue and a -28.5% operating margin. The hospital serves a payer mix of 55.6% Medicare, 0.9% Medicaid, and 43.6% commercial.
Thesis: Turnaround. Our ML models identify $1.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -28.5% to -21.2% (+736bps).
| Net Revenue HCRIS | $14.8M |
| Current EBITDA COMPUTED | $-4.2M |
| Operating Margin COMPUTED | -28.5% |
| Occupancy HCRIS | 4.0% |
| Revenue / Bed COMPUTED | $1.9M |
| Net-to-Gross HCRIS | 71.1% |
| Distress Probability ML | 62.3% |
2. Market Context & Competitive Position
MT has 66 Medicare-certified hospitals with a median operating margin of -9.6%. The target's margin of -28.5% places it below the state median. Among 383 size-comparable peers (4-16 beds), the median margin is -9.5%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (4-16), prioritizing same-state peers. 383 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| BIG SKY MEDICAL CENTER (Target) | MT | 8 | $14.8M | -28.5% |
| WENATCHEE VALLEY HOSPITAL | WA | 11 | $277.5M | -4.9% |
| NATIONAL JEWISH HEALTH | CO | 13 | $150.4M | -50.0% |
| FRANCISCAN HEALTH HAMMOND | IN | 10 | $117.7M | -4.3% |
| NEW YORK EYE AND EAR INFIRMARY | NY | 15 | $112.8M | -28.0% |
| OAK LEAF SURGICAL HOSPITAL LLC | WI | 13 | $109.8M | 34.1% |
| ST MARYS HOSPITAL SUPERIOR | WI | 16 | $98.2M | 18.6% |
| ARIZONA GENERAL HOSPITAL | AZ | 16 | $97.1M | 10.4% |
| JEWISH HOME FOR THE AGED | CA | 13 | $88.0M | -48.0% |
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: $1.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $311K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $297K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $294K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $180K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-4.2M |
| + RCM Uplift | +$1.1M |
| Pro Forma EBITDA | $-3.1M |
| Current Margin | -28.5% |
| Pro Forma Margin | -21.2% |
| WC Released (1x) | $569K |
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 | $-6.5M | $-17.0M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-6.5M | $-20.8M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-5.9M | $-19.3M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-5.9M | $-22.8M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-7.2M | $-20.3M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-7.2M | $-24.7M | 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 | Heavy Medicare dependence | Medicare comprises 55.6% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
| Medium | Low occupancy | At 4.0%, 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 62.3% 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
- 383 hospitals with 4-16 beds
- Same-state prioritization (n=10)
- Comp margins: P25=-25.3% / P50=-9.5% / P75=3.1%
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.