BROUGHTON HOSPITAL
1. Target Overview & Investment Thesis
BROUGHTON HOSPITAL is a 384-bed under-performing / distressed in BURKE, NC with $70.6M in net patient revenue and a -100.0% operating margin. The hospital serves a payer mix of 1.0% Medicare, 4.1% Medicaid, and 94.8% commercial.
Thesis: Undervalued. Our ML models identify $5.2M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -100.0% to -167.3% (+736bps).
| Net Revenue HCRIS | $70.6M |
| Current EBITDA COMPUTED | $-123.4M |
| Operating Margin COMPUTED | -100.0% |
| Occupancy HCRIS | 44.5% |
| Revenue / Bed COMPUTED | $184K |
| Net-to-Gross HCRIS | 100.0% |
| Distress Probability ML | 58.5% |
2. Market Context & Competitive Position
NC has 129 Medicare-certified hospitals with a median operating margin of -2.0%. The target's margin of -100.0% places it below the state median. Among 21 size-comparable peers (192-768 beds), the median margin is 1.4%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (192-768), prioritizing same-state peers. 21 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| BROUGHTON HOSPITAL (Target) | NC | 384 | $70.6M | -100.0% |
| REX HOSPITAL | NC | 489 | $1.51B | -0.8% |
| PRESBYTERIAN HOSPITAL | NC | 561 | $1.33B | 1.0% |
| MISSION HOSPITAL INC | NC | 733 | $1.30B | 7.4% |
| NEW HANOVER REGIONAL MEDICAL C | NC | 694 | $1.22B | -19.4% |
| WAKEMED RALEIGH CAMPUS | NC | 609 | $1.15B | -1.4% |
| CAPE FEAR VALLEY MEDICAL CENTE | NC | 627 | $880.9M | -9.6% |
| FIRSTHEALTH MOORE REGIONAL HOS | NC | 412 | $813.8M | 8.8% |
| ATRIUM HEALTH CABARRUS | NC | 447 | $758.9M | 13.9% |
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: $5.2M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.5M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.4M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.4M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $859K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $45K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-123.4M |
| + RCM Uplift | +$5.2M |
| Pro Forma EBITDA | $-118.2M |
| Current Margin | -100.0% |
| Pro Forma Margin | -167.3% |
| WC Released (1x) | $2.7M |
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 | $-189.8M | $-761.7M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-189.8M | $-899.5M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-170.8M | $-944.0M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-170.8M | $-1.08B | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-208.8M | $-726.1M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-208.8M | $-866.5M | 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 |
| High | Elevated distress probability | Model estimates 58.5% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
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
- 21 hospitals with 192-768 beds
- Same-state prioritization (n=22)
- Comp margins: P25=-3.5% / P50=1.4% / 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.