MATHENY SCHOOL & HOSPITAL
1. Target Overview & Investment Thesis
MATHENY SCHOOL & HOSPITAL is a 101-bed community hospital in SOMERSET, NJ with $38.0M in net patient revenue and a -52.3% operating margin. The hospital serves a payer mix of 0.0% Medicare, 55.2% Medicaid, and 44.8% commercial.
Thesis: Undervalued. Our ML models identify $2.8M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -52.3% to -45.0% (+736bps).
| Net Revenue HCRIS | $38.0M |
| Current EBITDA COMPUTED | $-19.9M |
| Operating Margin COMPUTED | -52.3% |
| Occupancy HCRIS | 97.9% |
| Revenue / Bed COMPUTED | $376K |
| Net-to-Gross HCRIS | 100.0% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
NJ has 95 Medicare-certified hospitals with a median operating margin of -3.9%. The target's margin of -52.3% places it below the state median. Among 47 size-comparable peers (50-202 beds), the median margin is -6.7%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (50-202), prioritizing same-state peers. 47 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| MATHENY SCHOOL & HOSPITAL (Target) | NJ | 101 | $38.0M | -52.3% |
| HELENE FULD MEDICAL CENTER | NJ | 162 | $430.2M | -3.2% |
| HUNTERDON MEDICAL CENTER | NJ | 184 | $358.4M | -9.6% |
| MOUNTAINSIDE HOSPITAL | NJ | 184 | $306.3M | 12.2% |
| TRINITAS HOSPITAL | NJ | 192 | $256.4M | -27.3% |
| CHILTON HOSPITAL | NJ | 198 | $253.5M | 4.9% |
| SHORE MEMORIAL HOSPITAL | NJ | 199 | $249.8M | 19.9% |
| SOUTHERN OCEAN MEDICAL CENTER | NJ | 147 | $233.0M | 10.5% |
| DEBORAH HEART AND LUNG CENTER | NJ | 85 | $211.9M | -5.5% |
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: $2.8M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $797K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $759K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $752K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $462K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $24K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-19.9M |
| + RCM Uplift | +$2.8M |
| Pro Forma EBITDA | $-17.1M |
| Current Margin | -52.3% |
| Pro Forma Margin | -45.0% |
| WC Released (1x) | $1.5M |
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 | $-30.6M | $-103.1M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-30.6M | $-123.3M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-27.5M | $-124.0M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-27.5M | $-143.4M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-33.6M | $-107.1M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-33.6M | $-128.8M | 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 | Elevated Medicaid exposure (55.2%) | Medicaid reimburses below cost in most states. Mitigant: denial reduction lever has highest impact on Medicaid claims |
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
- 47 hospitals with 50-202 beds
- Same-state prioritization (n=48)
- Comp margins: P25=-26.5% / P50=-6.7% / P75=2.5%
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.