MONTANA STATE HOSPITAL
1. Target Overview & Investment Thesis
MONTANA STATE HOSPITAL is a 174-bed community hospital in DEER LODGE, MT with $39.1M in net patient revenue and a -16.1% operating margin. The hospital serves a payer mix of 8.0% Medicare, 0.0% Medicaid, and 92.0% commercial.
Thesis: Undervalued. Our ML models identify $2.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -16.1% to -8.8% (+736bps).
| Net Revenue HCRIS | $39.1M |
| Current EBITDA COMPUTED | $-6.3M |
| Operating Margin COMPUTED | -16.1% |
| Occupancy HCRIS | 100.0% |
| Revenue / Bed COMPUTED | $225K |
| Net-to-Gross HCRIS | 100.0% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
MT has 66 Medicare-certified hospitals with a median operating margin of -9.6%. The target's margin of -16.1% places it below the state median. Among 8 size-comparable peers (87-348 beds), the median margin is -8.5%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (87-348), prioritizing same-state peers. 8 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| MONTANA STATE HOSPITAL (Target) | MT | 174 | $39.1M | -16.1% |
| BILLINGS CLINIC | MT | 334 | $871.5M | -17.3% |
| LOGAN HEALTH MEDICAL CENTER | MT | 210 | $587.5M | 7.7% |
| ST VINCENT HEALTHCARE | MT | 226 | $549.8M | -18.4% |
| BENEFIS HOSPITALS INC. | MT | 312 | $528.1M | -5.3% |
| ST PATRICK HOSPITAL | MT | 206 | $396.8M | -6.2% |
| BOZEMAN DEACONESS HEALTH SERVI | MT | 124 | $395.6M | -13.0% |
| ST. PETERS HOSPITAL | MT | 125 | $289.2M | -10.8% |
| COMMUNITY MEDICAL CENTER | MT | 141 | $238.2M | 7.8% |
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: $2.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $821K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $782K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $774K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $476K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $25K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-6.3M |
| + RCM Uplift | +$2.9M |
| Pro Forma EBITDA | $-3.4M |
| Current Margin | -16.1% |
| Pro Forma Margin | -8.8% |
| WC Released (1x) | $1.5M |
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 | $-9.7M | $-12.9M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-9.7M | $-17.3M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-8.7M | $-11.0M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-8.7M | $-14.5M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-10.7M | $-24.1M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-10.7M | $-30.0M | 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 |
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
- 8 hospitals with 87-348 beds
- Same-state prioritization (n=9)
- Comp margins: P25=-14.1% / P50=-8.5% / P75=-2.1%
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.