CHILTON HOSPITAL
1. Target Overview & Investment Thesis
CHILTON HOSPITAL is a 198-bed suburban community hospital in MORRIS, NJ with $253.5M in net patient revenue and a 4.9% operating margin. The hospital serves a payer mix of 49.5% Medicare, 2.4% Medicaid, and 48.0% commercial.
Thesis: Undervalued. Our ML models identify $18.7M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 4.9% to 12.3% (+736bps).
| Net Revenue HCRIS | $253.5M |
| Current EBITDA COMPUTED | $12.4M |
| Operating Margin COMPUTED | 4.9% |
| Occupancy HCRIS | 52.6% |
| Revenue / Bed COMPUTED | $1.3M |
| Net-to-Gross HCRIS | 16.8% |
| Distress Probability ML | 46.8% |
2. Market Context & Competitive Position
NJ has 95 Medicare-certified hospitals with a median operating margin of -3.9%. The target's margin of 4.9% places it above the state median. Among 53 size-comparable peers (99-396 beds), the median margin is -5.7%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (99-396), prioritizing same-state peers. 53 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CHILTON HOSPITAL (Target) | NJ | 198 | $253.5M | 4.9% |
| ENGLEWOOD HOSPITAL & MED CTR | NJ | 292 | $967.3M | 0.1% |
| THE VALLEY HOSPITAL | NJ | 385 | $951.8M | 17.5% |
| CAPITAL HEALTH MED CENTER - HO | NJ | 209 | $746.8M | 0.8% |
| UH - UNIVERSITY HOSPITAL | NJ | 358 | $702.0M | -27.5% |
| JFK UNIVERSITY MEDICAL CENTER | NJ | 351 | $688.7M | -6.8% |
| PRINCETON HEALTHCARE SYSTEM | NJ | 206 | $587.8M | -5.7% |
| ST. PETERS UNIVERSITY HOSPITAL | NJ | 352 | $543.0M | 1.9% |
| INSPIRA MEDICAL CENTER VINELAN | NJ | 280 | $505.5M | -12.0% |
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: $18.7M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $5.3M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $5.1M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $5.0M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.1M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $162K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $12.4M |
| + RCM Uplift | +$18.7M |
| Pro Forma EBITDA | $31.1M |
| Current Margin | 4.9% |
| Pro Forma Margin | 12.3% |
| WC Released (1x) | $9.7M |
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 | $19.1M | $268.7M | 14.04x | 69.6% |
| Base (11x exit) | 10.0x | 11.0x | $19.1M | $301.8M | 15.77x | 73.6% |
| Bull Case | 9.0x | 11.0x | $17.2M | $369.6M | 21.46x | 84.6% |
| Bull (12x exit) | 9.0x | 12.0x | $17.2M | $408.2M | 23.70x | 88.3% |
| Bear Case | 11.0x | 10.0x | $21.0M | $169.1M | 8.04x | 51.7% |
| Bear (11x exit) | 11.0x | 11.0x | $21.0M | $192.9M | 9.16x | 55.8% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Low | Low net-to-gross ratio | Large contractual allowances suggest pricing discipline issues. Mitigant: payer renegotiation is an additional upside lever |
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 99-396 beds
- Same-state prioritization (n=54)
- Comp margins: P25=-22.0% / P50=-5.7% / P75=1.9%
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.