ST. FRANCIS - TRENTON
1. Target Overview & Investment Thesis
ST. FRANCIS - TRENTON is a 134-bed under-performing / distressed in MERCER, NJ with $41.9M in net patient revenue and a -100.0% operating margin. The hospital serves a payer mix of 19.2% Medicare, 21.4% Medicaid, and 59.4% commercial.
Thesis: Undervalued. Our ML models identify $3.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -100.0% to -266.6% (+736bps).
| Net Revenue HCRIS | $41.9M |
| Current EBITDA COMPUTED | $-114.8M |
| Operating Margin COMPUTED | -100.0% |
| Occupancy HCRIS | 26.5% |
| Revenue / Bed COMPUTED | $313K |
| Net-to-Gross HCRIS | 14.3% |
| Distress Probability ML | 57.2% |
2. Market Context & Competitive Position
NJ has 95 Medicare-certified hospitals with a median operating margin of -3.9%. The target's margin of -100.0% places it below the state median. Among 49 size-comparable peers (67-268 beds), the median margin is -5.5%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (67-268), prioritizing same-state peers. 49 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ST. FRANCIS - TRENTON (Target) | NJ | 134 | $41.9M | -100.0% |
| 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% |
| RIVERVIEW MEDICAL CENTER | NJ | 267 | $365.4M | 5.6% |
| CLARA MAASS MEDICAL CENTER | NJ | 259 | $360.2M | -3.1% |
| HUNTERDON MEDICAL CENTER | NJ | 184 | $358.4M | -9.6% |
| CENTRASTATE MEDICAL CENTER | NJ | 240 | $307.8M | -23.2% |
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: $3.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $880K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $838K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $830K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $510K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $27K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-114.8M |
| + RCM Uplift | +$3.1M |
| Pro Forma EBITDA | $-111.8M |
| Current Margin | -100.0% |
| Pro Forma Margin | -266.6% |
| WC Released (1x) | $1.6M |
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 | $-176.7M | $-726.7M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-176.7M | $-856.7M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-159.0M | $-903.9M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-159.0M | $-1.03B | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-194.4M | $-684.7M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-194.4M | $-816.3M | 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 |
| Medium | Low occupancy | At 26.5%, 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 57.2% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
| 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
- 49 hospitals with 67-268 beds
- Same-state prioritization (n=50)
- Comp margins: P25=-22.0% / P50=-5.5% / 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.