ST. CLARES HOSPITAL
1. Target Overview & Investment Thesis
ST. CLARES HOSPITAL is a 217-bed suburban community hospital in nan, NJ with $291.4M in net patient revenue and a -0.2% operating margin. The hospital serves a payer mix of 33.8% Medicare, 3.9% Medicaid, and 62.3% commercial.
Thesis: Undervalued. Our ML models identify $21.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -0.2% to 7.2% (+736bps).
| Net Revenue HCRIS | $291.4M |
| Current EBITDA COMPUTED | $-614K |
| Operating Margin COMPUTED | -0.2% |
| Occupancy HCRIS | 60.1% |
| Revenue / Bed COMPUTED | $1.3M |
| Net-to-Gross HCRIS | 20.1% |
| 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 -0.2% places it above the state median. Among 52 size-comparable peers (108-434 beds), the median margin is -6.8%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (108-434), prioritizing same-state peers. 52 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ST. CLARES HOSPITAL (Target) | NJ | 217 | $291.4M | -0.2% |
| 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% |
| NEWARK BETH ISRAEL MEDICAL CEN | NJ | 422 | $669.9M | -9.1% |
| PRINCETON HEALTHCARE SYSTEM | NJ | 206 | $587.8M | -5.7% |
| ST. PETERS UNIVERSITY HOSPITAL | NJ | 352 | $543.0M | 1.9% |
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: $21.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $6.1M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $5.8M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $5.8M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.5M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $187K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-614K |
| + RCM Uplift | +$21.5M |
| Pro Forma EBITDA | $20.8M |
| Current Margin | -0.2% |
| Pro Forma Margin | 7.2% |
| WC Released (1x) | $11.2M |
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 | $-944K | $210.5M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-944K | $231.2M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-850K | $301.7M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-850K | $328.9M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-1.0M | $103.5M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-1.0M | $113.5M | 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 |
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
- 52 hospitals with 108-434 beds
- Same-state prioritization (n=53)
- Comp margins: P25=-19.0% / P50=-6.8% / P75=2.0%
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.