WESTCHESTER MEDICAL CENTER
1. Target Overview & Investment Thesis
WESTCHESTER MEDICAL CENTER is a 696-bed large academic medical center in WESTCHESTER, NY with $1.63B in net patient revenue and a 2.6% operating margin. The hospital serves a payer mix of 23.5% Medicare, 8.4% Medicaid, and 68.1% commercial.
Thesis: Undervalued. Our ML models identify $120.2M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 2.6% to 9.9% (+736bps).
| Net Revenue HCRIS | $1.63B |
| Current EBITDA COMPUTED | $41.7M |
| Operating Margin COMPUTED | 2.6% |
| Occupancy HCRIS | 80.9% |
| Revenue / Bed COMPUTED | $2.3M |
| Net-to-Gross HCRIS | 17.7% |
| Distress Probability ML | 40.9% |
2. Market Context & Competitive Position
NY has 196 Medicare-certified hospitals with a median operating margin of -17.5%. The target's margin of 2.6% places it above the state median. Among 35 size-comparable peers (348-1392 beds), the median margin is -19.1%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (348-1392), prioritizing same-state peers. 35 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| WESTCHESTER MEDICAL CENTER (Target) | NY | 696 | $1.63B | 2.6% |
| MEMORIAL HOSPITAL FOR CANCER A | NY | 514 | $4.34B | -32.5% |
| STRONG MEMORIAL HOSPITAL | NY | 749 | $3.31B | 5.2% |
| MOUNT SINAI HOSPITAL | NY | 1085 | $3.20B | -12.1% |
| LONG ISLAND JEWISH MEDICAL CEN | NY | 1161 | $2.97B | -27.0% |
| NORTH SHORE UNIVERSITY HOSPITA | NY | 782 | $2.27B | -50.0% |
| STONY BROOK UNIVERSITY HOSPITA | NY | 725 | $1.90B | -4.9% |
| KALEIDA HEALTH | NY | 954 | $1.38B | -8.8% |
| UNIVERSITY HOSPITAL AT SYRACUS | NY | 625 | $1.33B | -17.2% |
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: $120.2M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $34.3M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $32.7M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $32.3M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $19.9M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $1.0M | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $41.7M |
| + RCM Uplift | +$120.2M |
| Pro Forma EBITDA | $161.9M |
| Current Margin | 2.6% |
| Pro Forma Margin | 9.9% |
| WC Released (1x) | $62.6M |
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 | $64.1M | $1.48B | 23.02x | 87.3% |
| Base (11x exit) | 10.0x | 11.0x | $64.1M | $1.65B | 25.65x | 91.3% |
| Bull Case | 9.0x | 11.0x | $57.7M | $2.06B | 35.73x | 104.5% |
| Bull (12x exit) | 9.0x | 12.0x | $57.7M | $2.27B | 39.28x | 108.4% |
| Bear Case | 11.0x | 10.0x | $70.6M | $855.1M | 12.12x | 64.7% |
| Bear (11x exit) | 11.0x | 11.0x | $70.6M | $963.5M | 13.66x | 68.7% |
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
- 35 hospitals with 348-1392 beds
- Same-state prioritization (n=36)
- Comp margins: P25=-27.9% / P50=-19.1% / P75=-9.0%
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.