FIRST CARE HEALTH CENTER
1. Target Overview & Investment Thesis
FIRST CARE HEALTH CENTER is a 14-bed rural/critical access in WALSH, ND with $17.9M in net patient revenue and a -2.2% operating margin. The hospital serves a payer mix of 68.3% Medicare, 4.8% Medicaid, and 26.9% commercial.
Thesis: Turnaround. Our ML models identify $1.3M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -2.2% to 5.1% (+736bps).
| Net Revenue HCRIS | $17.9M |
| Current EBITDA COMPUTED | $-397K |
| Operating Margin COMPUTED | -2.2% |
| Occupancy HCRIS | 64.7% |
| Revenue / Bed COMPUTED | $1.3M |
| Net-to-Gross HCRIS | 77.4% |
| Distress Probability ML | 51.5% |
2. Market Context & Competitive Position
ND has 52 Medicare-certified hospitals with a median operating margin of -9.3%. The target's margin of -2.2% places it above the state median. Among 36 size-comparable peers (7-28 beds), the median margin is -9.3%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (7-28), prioritizing same-state peers. 36 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| FIRST CARE HEALTH CENTER (Target) | ND | 14 | $17.9M | -2.2% |
| MERCY MEDICAL CENTER | ND | 25 | $85.2M | -14.2% |
| JAMESTOWN REGIONAL MEDICAL CEN | ND | 25 | $75.9M | 1.4% |
| ST JOSEPHS HOSPITAL & HEALTH C | ND | 25 | $70.0M | -0.8% |
| MCKENZIE COUNTY HEALTHCARE SYS | ND | 24 | $43.1M | -20.2% |
| MERCY HOSPITAL | ND | 25 | $25.9M | -9.3% |
| UNITY MEDICAL CENTER | ND | 14 | $25.7M | -0.5% |
| HEART OF AMERICA MEDICAL CENTE | ND | 25 | $25.5M | -12.1% |
| WEST RIVER REGIONAL MEDICAL CE | ND | 25 | $24.4M | -20.4% |
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: $1.3M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $376K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $358K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $354K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $218K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $11K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-397K |
| + RCM Uplift | +$1.3M |
| Pro Forma EBITDA | $921K |
| Current Margin | -2.2% |
| Pro Forma Margin | 5.1% |
| WC Released (1x) | $686K |
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 | $-610K | $10.6M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-610K | $11.4M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-549K | $15.6M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-549K | $16.8M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-671K | $4.2M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-671K | $4.4M | 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 |
| Medium | Heavy Medicare dependence | Medicare comprises 68.3% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
| High | Elevated distress probability | Model estimates 51.5% 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
- 36 hospitals with 7-28 beds
- Same-state prioritization (n=38)
- Comp margins: P25=-20.4% / P50=-9.3% / P75=-3.9%
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.