ATRIUM HEALTH CLEVELAND
1. Target Overview & Investment Thesis
ATRIUM HEALTH CLEVELAND is a 308-bed suburban community hospital in CLEVELAND, NC with $305.8M in net patient revenue and a 1.8% operating margin. The hospital serves a payer mix of 24.0% Medicare, 5.2% Medicaid, and 70.8% commercial.
Thesis: Undervalued. Our ML models identify $22.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 1.8% to 9.2% (+736bps).
| Net Revenue HCRIS | $305.8M |
| Current EBITDA COMPUTED | $5.6M |
| Operating Margin COMPUTED | 1.8% |
| Occupancy HCRIS | 62.5% |
| Revenue / Bed COMPUTED | $993K |
| Net-to-Gross HCRIS | 22.3% |
| Distress Probability ML | 45.5% |
2. Market Context & Competitive Position
NC has 129 Medicare-certified hospitals with a median operating margin of -2.0%. The target's margin of 1.8% places it above the state median. Among 33 size-comparable peers (154-616 beds), the median margin is 3.7%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (154-616), prioritizing same-state peers. 33 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ATRIUM HEALTH CLEVELAND (Target) | NC | 308 | $305.8M | 1.8% |
| REX HOSPITAL | NC | 489 | $1.51B | -0.8% |
| PRESBYTERIAN HOSPITAL | NC | 561 | $1.33B | 1.0% |
| WAKEMED RALEIGH CAMPUS | NC | 609 | $1.15B | -1.4% |
| FIRSTHEALTH MOORE REGIONAL HOS | NC | 412 | $813.8M | 8.8% |
| ATRIUM HEALTH CABARRUS | NC | 447 | $758.9M | 13.9% |
| DUKE RALEIGH HOSPITAL | NC | 186 | $683.0M | 3.7% |
| GASTON MEMORIAL HOSPITAL | NC | 424 | $641.8M | 7.0% |
| ATRIUM HEALTH PINEVILLE | NC | 365 | $575.1M | 25.8% |
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: $22.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $6.4M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $6.1M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $6.1M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.7M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $196K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $5.6M |
| + RCM Uplift | +$22.5M |
| Pro Forma EBITDA | $28.1M |
| Current Margin | 1.8% |
| Pro Forma Margin | 9.2% |
| WC Released (1x) | $11.7M |
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 | $8.6M | $261.9M | 30.53x | 98.1% |
| Base (11x exit) | 10.0x | 11.0x | $8.6M | $290.8M | 33.91x | 102.3% |
| Bull Case | 9.0x | 11.0x | $7.7M | $367.9M | 47.66x | 116.6% |
| Bull (12x exit) | 9.0x | 12.0x | $7.7M | $403.6M | 52.29x | 120.6% |
| Bear Case | 11.0x | 10.0x | $9.4M | $146.5M | 15.53x | 73.1% |
| Bear (11x exit) | 11.0x | 11.0x | $9.4M | $164.2M | 17.41x | 77.1% |
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
- 33 hospitals with 154-616 beds
- Same-state prioritization (n=34)
- Comp margins: P25=-3.9% / P50=3.7% / 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.