CALLAWAY DISTRICT HOSPITAL
1. Target Overview & Investment Thesis
CALLAWAY DISTRICT HOSPITAL is a 12-bed rural/critical access in CUSTER, NE with $12.1M in net patient revenue and a 5.6% operating margin. The hospital serves a payer mix of 70.6% Medicare, 1.6% Medicaid, and 27.8% commercial.
Thesis: Turnaround. Our ML models identify $891K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 5.6% to 13.0% (+739bps).
| Net Revenue HCRIS | $12.1M |
| Current EBITDA COMPUTED | $673K |
| Operating Margin COMPUTED | 5.6% |
| Occupancy HCRIS | 17.3% |
| Revenue / Bed COMPUTED | $1.0M |
| Net-to-Gross HCRIS | 80.3% |
| Distress Probability ML | 62.3% |
2. Market Context & Competitive Position
NE has 98 Medicare-certified hospitals with a median operating margin of -6.3%. The target's margin of 5.6% places it above the state median. Among 53 size-comparable peers (6-24 beds), the median margin is -7.7%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (6-24), prioritizing same-state peers. 53 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CALLAWAY DISTRICT HOSPITAL (Target) | NE | 12 | $12.1M | 5.6% |
| NEBRASKA ORTHOPAEDIC HOSPITAL | NE | 24 | $112.1M | 22.5% |
| LINCOLN SURGICAL HOSPITAL | NE | 20 | $80.9M | 18.8% |
| MIDWEST SURGICAL HOSPITAL | NE | 19 | $70.1M | 36.2% |
| SIDNEY REGIONAL MEDICAL CENTER | NE | 19 | $68.0M | 0.8% |
| MEMORIAL COMMUNITY HOSPITAL | NE | 21 | $44.8M | 1.2% |
| MEMORIAL HEALTH CARE SYSTEMS | NE | 24 | $42.0M | 4.4% |
| SAINT MARYS HOSPITAL | NE | 18 | $39.5M | 3.4% |
| SAUNDERS COUNTY HEALTH SERVICE | NE | 16 | $35.9M | -0.0% |
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: $891K (739bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $253K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $241K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $240K | +199bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $147K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +8bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $673K |
| + RCM Uplift | +$891K |
| Pro Forma EBITDA | $1.6M |
| Current Margin | 5.6% |
| Pro Forma Margin | 13.0% |
| WC Released (1x) | $463K |
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 | $1.0M | $13.3M | 12.90x | 66.8% |
| Base (11x exit) | 10.0x | 11.0x | $1.0M | $15.0M | 14.51x | 70.7% |
| Bull Case | 9.0x | 11.0x | $931K | $18.3M | 19.64x | 81.4% |
| Bull (12x exit) | 9.0x | 12.0x | $931K | $20.2M | 21.72x | 85.1% |
| Bear Case | 11.0x | 10.0x | $1.1M | $8.6M | 7.52x | 49.7% |
| Bear (11x exit) | 11.0x | 11.0x | $1.1M | $9.8M | 8.59x | 53.8% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 70.6% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
| Medium | Low occupancy | At 17.3%, 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
- 53 hospitals with 6-24 beds
- Same-state prioritization (n=54)
- Comp margins: P25=-13.4% / P50=-7.7% / P75=-1.4%
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 27, 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.