CENTRAL DESERT BEHAVIORAL HH
1. Target Overview & Investment Thesis
CENTRAL DESERT BEHAVIORAL HH is a 64-bed community hospital in BERNALILLO, NM with $18.0M in net patient revenue and a 6.7% operating margin. The hospital serves a payer mix of 19.0% Medicare, 0.0% Medicaid, and 81.0% commercial.
Thesis: Turnaround. Our ML models identify $1.3M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 6.7% to 14.1% (+736bps).
| Net Revenue HCRIS | $18.0M |
| Current EBITDA COMPUTED | $1.2M |
| Operating Margin COMPUTED | 6.7% |
| Occupancy HCRIS | 85.8% |
| Revenue / Bed COMPUTED | $282K |
| Net-to-Gross HCRIS | 55.6% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
NM has 55 Medicare-certified hospitals with a median operating margin of -2.7%. The target's margin of 6.7% places it above the state median. Among 24 size-comparable peers (32-128 beds), the median margin is 4.7%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (32-128), prioritizing same-state peers. 24 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CENTRAL DESERT BEHAVIORAL HH (Target) | NM | 64 | $18.0M | 6.7% |
| GERALD CHAMPION REGIONAL MEDIC | NM | 66 | $245.9M | -11.6% |
| EASTERN NEW MEXICO MEDICAL CEN | NM | 120 | $117.8M | 54.3% |
| PLAINS REGIONAL MEDICAL CTR - | NM | 100 | $113.3M | -1.4% |
| UNM SANDOVAL REGIONAL MEDICAL | NM | 60 | $104.5M | -11.9% |
| CARLSBAD MEDICAL CENTER | NM | 53 | $97.1M | 19.9% |
| SANTA FE MEDICAL CENTER | NM | 36 | $95.0M | -26.5% |
| ESPANOLA HOSPITAL | NM | 70 | $84.1M | -2.3% |
| LOVELACE WESTSIDE HOSPITAL | NM | 92 | $65.1M | 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: $1.3M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $378K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $360K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $357K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $219K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $12K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.2M |
| + RCM Uplift | +$1.3M |
| Pro Forma EBITDA | $2.5M |
| Current Margin | 6.7% |
| Pro Forma Margin | 14.1% |
| WC Released (1x) | $691K |
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 | $1.9M | $21.2M | 11.44x | 62.8% |
| Base (11x exit) | 10.0x | 11.0x | $1.9M | $23.9M | 12.91x | 66.8% |
| Bull Case | 9.0x | 11.0x | $1.7M | $28.9M | 17.33x | 76.9% |
| Bull (12x exit) | 9.0x | 12.0x | $1.7M | $32.0M | 19.20x | 80.6% |
| Bear Case | 11.0x | 10.0x | $2.0M | $14.0M | 6.85x | 46.9% |
| Bear (11x exit) | 11.0x | 11.0x | $2.0M | $16.0M | 7.86x | 51.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Standard execution risk | RCM improvement requires management buy-in and 12-18 month implementation timeline |
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
- 24 hospitals with 32-128 beds
- Same-state prioritization (n=25)
- Comp margins: P25=-11.8% / P50=4.7% / P75=12.8%
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.