EPISCOPAL HEALTH SERVICES
1. Target Overview & Investment Thesis
EPISCOPAL HEALTH SERVICES is a 126-bed under-performing / distressed in QUEENS, NY with $214.7M in net patient revenue and a -54.4% operating margin. The hospital serves a payer mix of 32.4% Medicare, 13.3% Medicaid, and 54.3% commercial.
Thesis: Undervalued. Our ML models identify $15.8M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -54.4% to -47.0% (+736bps).
| Net Revenue HCRIS | $214.7M |
| Current EBITDA COMPUTED | $-116.7M |
| Operating Margin COMPUTED | -54.4% |
| Occupancy HCRIS | 87.7% |
| Revenue / Bed COMPUTED | $1.7M |
| Net-to-Gross HCRIS | 30.8% |
| Distress Probability ML | 41.4% |
2. Market Context & Competitive Position
NY has 196 Medicare-certified hospitals with a median operating margin of -17.5%. The target's margin of -54.4% places it below the state median. Among 85 size-comparable peers (63-252 beds), the median margin is -16.4%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (63-252), prioritizing same-state peers. 85 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| EPISCOPAL HEALTH SERVICES (Target) | NY | 126 | $214.7M | -54.4% |
| HOSPITAL FOR SPECIAL SURGERY | NY | 200 | $1.12B | -29.3% |
| ROSWELL PARK CANCER INSTITUTE | NY | 142 | $772.3M | -40.1% |
| QUEENS HOSPITAL CENTER | NY | 200 | $637.2M | 4.9% |
| NYC HEALTH + HOSPITAL / SOUTH | NY | 252 | $588.5M | -16.5% |
| WOODHULL HOSPITAL CENTER | NY | 238 | $529.9M | -8.6% |
| MARY IMOGENE BASSETT HOSPITAL | NY | 160 | $529.1M | -31.6% |
| HARLEM HOSPITAL CENTER | NY | 217 | $519.6M | -22.9% |
| SARATOGA HOSPITAL | NY | 171 | $431.9M | -12.3% |
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: $15.8M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $4.5M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $4.3M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $4.3M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $2.6M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $137K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-116.7M |
| + RCM Uplift | +$15.8M |
| Pro Forma EBITDA | $-100.9M |
| Current Margin | -54.4% |
| Pro Forma Margin | -47.0% |
| WC Released (1x) | $8.2M |
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 | $-179.6M | $-611.8M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-179.6M | $-731.3M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-161.6M | $-737.5M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-161.6M | $-852.2M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-197.5M | $-632.5M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-197.5M | $-759.9M | 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
- 85 hospitals with 63-252 beds
- Same-state prioritization (n=86)
- Comp margins: P25=-28.3% / P50=-16.4% / P75=-8.8%
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.