REGIONAL WEST MEDICAL CENTER
1. Target Overview & Investment Thesis
REGIONAL WEST MEDICAL CENTER is a 122-bed suburban community hospital in SCOTTS BLUFF, NE with $218.4M in net patient revenue and a -12.9% operating margin. The hospital serves a payer mix of 48.5% Medicare, 17.5% Medicaid, and 33.9% commercial.
Thesis: Undervalued. Our ML models identify $16.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -12.9% to -5.6% (+736bps).
| Net Revenue HCRIS | $218.4M |
| Current EBITDA COMPUTED | $-28.2M |
| Operating Margin COMPUTED | -12.9% |
| Occupancy HCRIS | 55.1% |
| Revenue / Bed COMPUTED | $1.8M |
| Net-to-Gross HCRIS | 30.5% |
| Distress Probability ML | 50.5% |
2. Market Context & Competitive Position
NE has 98 Medicare-certified hospitals with a median operating margin of -6.3%. The target's margin of -12.9% places it below the state median. Among 16 size-comparable peers (61-244 beds), the median margin is -8.8%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (61-244), prioritizing same-state peers. 16 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| REGIONAL WEST MEDICAL CENTER (Target) | NE | 122 | $218.4M | -12.9% |
| CHILDRENS HOSPITAL & MEDICAL C | NE | 186 | $501.1M | -10.3% |
| GREAT PLAINS HEALTH | NE | 96 | $268.8M | 3.9% |
| CHI HEALTH LAKESIDE | NE | 125 | $200.3M | 15.3% |
| MARY LANNING MEMORIAL HOSPITAL | NE | 97 | $200.0M | -8.9% |
| FAITH REGIONAL HEALTH SERVICES | NE | 122 | $198.1M | 10.1% |
| CHI HEALTH IMMANUEL | NE | 177 | $187.9M | -8.8% |
| MADONNA REHABILITATION LTC HOS | NE | 77 | $177.1M | -8.8% |
| MADONNA REHAB OMAHA LTC HOSPIT | NE | 67 | $177.1M | -8.8% |
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: $16.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $4.6M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $4.4M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $4.3M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $2.7M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $140K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-28.2M |
| + RCM Uplift | +$16.1M |
| Pro Forma EBITDA | $-12.1M |
| Current Margin | -12.9% |
| Pro Forma Margin | -5.6% |
| WC Released (1x) | $8.4M |
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 | $-43.4M | $-25.3M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-43.4M | $-41.9M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-39.0M | $-2.9M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-39.0M | $-14.7M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-47.7M | $-91.5M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-47.7M | $-116.2M | 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 |
| High | Elevated distress probability | Model estimates 50.5% 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
- 16 hospitals with 61-244 beds
- Same-state prioritization (n=17)
- Comp margins: P25=-9.1% / P50=-8.8% / P75=4.7%
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.