WEST JERSEY HEALTH SYSTEM
1. Target Overview & Investment Thesis
WEST JERSEY HEALTH SYSTEM is a 587-bed suburban community hospital in CAMDEN, NJ with $958.4M in net patient revenue and a 7.1% operating margin. The hospital serves a payer mix of 30.5% Medicare, 2.3% Medicaid, and 67.2% commercial.
Thesis: Platform Growth. Our ML models identify $70.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 7.1% to 14.5% (+736bps).
| Net Revenue HCRIS | $958.4M |
| Current EBITDA COMPUTED | $68.3M |
| Operating Margin COMPUTED | 7.1% |
| Occupancy HCRIS | 69.4% |
| Revenue / Bed COMPUTED | $1.6M |
| Net-to-Gross HCRIS | 16.6% |
| Distress Probability ML | 42.9% |
2. Market Context & Competitive Position
NJ has 95 Medicare-certified hospitals with a median operating margin of -3.9%. The target's margin of 7.1% places it above the state median. Among 23 size-comparable peers (294-1174 beds), the median margin is -4.0%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (294-1174), prioritizing same-state peers. 23 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| WEST JERSEY HEALTH SYSTEM (Target) | NJ | 587 | $958.4M | 7.1% |
| HACKENSACK UNIVERSITY MEDICAL | NJ | 779 | $2.00B | -2.5% |
| MORRISTOWN MEDICAL CENTER | NJ | 705 | $1.70B | 10.3% |
| COOPER UNIVERSITY HOSPITAL | NJ | 580 | $1.43B | 2.0% |
| ROBERT WOOD JOHNSON UNIVERSITY | NJ | 639 | $1.41B | -4.0% |
| JERSEY SHORE UNIVERSITY MED CT | NJ | 604 | $1.17B | 8.4% |
| COOPERMAN BARNABAS MEDICAL CEN | NJ | 554 | $1.07B | -4.3% |
| THE VALLEY HOSPITAL | NJ | 385 | $951.8M | 17.5% |
| OVERLOOK MEDICAL CENTER | NJ | 440 | $880.2M | 8.9% |
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: $70.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $20.1M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $19.2M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $19.0M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $11.7M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $613K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $68.3M |
| + RCM Uplift | +$70.5M |
| Pro Forma EBITDA | $138.8M |
| Current Margin | 7.1% |
| Pro Forma Margin | 14.5% |
| WC Released (1x) | $36.8M |
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 | $105.0M | $1.16B | 11.01x | 61.6% |
| Base (11x exit) | 10.0x | 11.0x | $105.0M | $1.31B | 12.43x | 65.5% |
| Bull Case | 9.0x | 11.0x | $94.5M | $1.57B | 16.64x | 75.5% |
| Bull (12x exit) | 9.0x | 12.0x | $94.5M | $1.74B | 18.44x | 79.1% |
| Bear Case | 11.0x | 10.0x | $115.5M | $768.9M | 6.66x | 46.1% |
| Bear (11x exit) | 11.0x | 11.0x | $115.5M | $883.3M | 7.65x | 50.2% |
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
- 23 hospitals with 294-1174 beds
- Same-state prioritization (n=24)
- Comp margins: P25=-9.1% / P50=-4.0% / P75=2.4%
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 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.