ST. MARYS HOSPITAL - PASSAIC
1. Target Overview & Investment Thesis
ST. MARYS HOSPITAL - PASSAIC is a 122-bed suburban community hospital in PASSAIC, NJ with $173.8M in net patient revenue and a 0.9% operating margin. The hospital serves a payer mix of 25.2% Medicare, 4.4% Medicaid, and 70.3% commercial.
Thesis: Undervalued. Our ML models identify $12.8M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 0.9% to 8.3% (+736bps).
| Net Revenue HCRIS | $173.8M |
| Current EBITDA COMPUTED | $1.6M |
| Operating Margin COMPUTED | 0.9% |
| Occupancy HCRIS | 58.1% |
| Revenue / Bed COMPUTED | $1.4M |
| Net-to-Gross HCRIS | 22.1% |
| Distress Probability ML | 45.1% |
2. Market Context & Competitive Position
NJ has 95 Medicare-certified hospitals with a median operating margin of -3.9%. The target's margin of 0.9% places it above the state median. Among 50 size-comparable peers (61-244 beds), the median margin is -8.2%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (61-244), prioritizing same-state peers. 50 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ST. MARYS HOSPITAL - PASSAIC (Target) | NJ | 122 | $173.8M | 0.9% |
| CAPITAL HEALTH MED CENTER - HO | NJ | 209 | $746.8M | 0.8% |
| PRINCETON HEALTHCARE SYSTEM | NJ | 206 | $587.8M | -5.7% |
| MONMOUTH MEDICAL CENTER | NJ | 240 | $448.7M | -10.8% |
| HELENE FULD MEDICAL CENTER | NJ | 162 | $430.2M | -3.2% |
| HUNTERDON MEDICAL CENTER | NJ | 184 | $358.4M | -9.6% |
| CENTRASTATE MEDICAL CENTER | NJ | 240 | $307.8M | -23.2% |
| MOUNTAINSIDE HOSPITAL | NJ | 184 | $306.3M | 12.2% |
| ST. CLARES HOSPITAL | NJ | 217 | $291.4M | -0.2% |
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: $12.8M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $3.6M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $3.5M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $3.4M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $2.1M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $111K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.6M |
| + RCM Uplift | +$12.8M |
| Pro Forma EBITDA | $14.4M |
| Current Margin | 0.9% |
| Pro Forma Margin | 8.3% |
| WC Released (1x) | $6.7M |
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 | $2.5M | $138.4M | 56.43x | 124.0% |
| Base (11x exit) | 10.0x | 11.0x | $2.5M | $153.1M | 62.40x | 128.6% |
| Bull Case | 9.0x | 11.0x | $2.2M | $196.1M | 88.81x | 145.3% |
| Bull (12x exit) | 9.0x | 12.0x | $2.2M | $214.6M | 97.18x | 149.8% |
| Bear Case | 11.0x | 10.0x | $2.7M | $73.7M | 27.30x | 93.8% |
| Bear (11x exit) | 11.0x | 11.0x | $2.7M | $81.9M | 30.36x | 97.9% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Standard execution risk | RCM improvement requires management buy-in and 12-18 month implementation timeline |
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
- 50 hospitals with 61-244 beds
- Same-state prioritization (n=51)
- Comp margins: P25=-25.3% / P50=-8.2% / 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.