WAKE MED CARY HOSPITAL
1. Target Overview & Investment Thesis
WAKE MED CARY HOSPITAL is a 189-bed suburban community hospital in WAKE, NC with $318.1M in net patient revenue and a -3.6% operating margin. The hospital serves a payer mix of 26.9% Medicare, 2.3% Medicaid, and 70.7% commercial.
Thesis: Undervalued. Our ML models identify $23.4M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -3.6% to 3.7% (+736bps).
| Net Revenue HCRIS | $318.1M |
| Current EBITDA COMPUTED | $-11.6M |
| Operating Margin COMPUTED | -3.6% |
| Occupancy HCRIS | 89.4% |
| Revenue / Bed COMPUTED | $1.7M |
| Net-to-Gross HCRIS | 24.7% |
| Distress Probability ML | 37.8% |
2. Market Context & Competitive Position
NC has 129 Medicare-certified hospitals with a median operating margin of -2.0%. The target's margin of -3.6% places it below the state median. Among 50 size-comparable peers (94-378 beds), the median margin is -1.1%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (94-378), prioritizing same-state peers. 50 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| WAKE MED CARY HOSPITAL (Target) | NC | 189 | $318.1M | -3.6% |
| DUKE RALEIGH HOSPITAL | NC | 186 | $683.0M | 3.7% |
| ATRIUM HEALTH PINEVILLE | NC | 365 | $575.1M | 25.8% |
| CATAWBA VALLEY MEDICAL CENTER | NC | 200 | $451.9M | 5.9% |
| DUKE REGIONAL HOSPITAL | NC | 301 | $421.0M | -19.8% |
| HIGH POINT MEDICAL CENTER | NC | 288 | $406.1M | 0.3% |
| CAROLINAEAST MEDICAL CENTER | NC | 312 | $365.1M | -2.9% |
| MARGARET R. PARDEE MEMORIAL HO | NC | 160 | $341.3M | -5.7% |
| JOHNSTON HEALTH | NC | 179 | $331.7M | 9.6% |
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: $23.4M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $6.7M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $6.4M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $6.3M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.9M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $204K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-11.6M |
| + RCM Uplift | +$23.4M |
| Pro Forma EBITDA | $11.8M |
| Current Margin | -3.6% |
| Pro Forma Margin | 3.7% |
| WC Released (1x) | $12.2M |
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 | $-17.9M | $157.6M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-17.9M | $167.6M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-16.1M | $239.1M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-16.1M | $256.1M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-19.6M | $46.3M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-19.6M | $44.6M | 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
- 50 hospitals with 94-378 beds
- Same-state prioritization (n=51)
- Comp margins: P25=-8.0% / P50=-1.1% / P75=8.9%
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.