SOUTHWEST GENERAL HEALTH CENTER
1. Target Overview & Investment Thesis
SOUTHWEST GENERAL HEALTH CENTER is a 191-bed suburban community hospital in CUYAHOGA, OH with $406.9M in net patient revenue and a 2.5% operating margin. The hospital serves a payer mix of 28.4% Medicare, 2.1% Medicaid, and 69.5% commercial.
Thesis: Undervalued. Our ML models identify $29.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 2.5% to 9.9% (+736bps).
| Net Revenue HCRIS | $406.9M |
| Current EBITDA COMPUTED | $10.2M |
| Operating Margin COMPUTED | 2.5% |
| Occupancy HCRIS | 78.4% |
| Revenue / Bed COMPUTED | $2.1M |
| Net-to-Gross HCRIS | 28.5% |
| Distress Probability ML | 40.0% |
2. Market Context & Competitive Position
OH has 235 Medicare-certified hospitals with a median operating margin of -0.3%. The target's margin of 2.5% places it above the state median. Among 78 size-comparable peers (96-382 beds), the median margin is 0.6%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (96-382), prioritizing same-state peers. 78 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SOUTHWEST GENERAL HEALTH CENTE (Target) | OH | 191 | $406.9M | 2.5% |
| RAINBOW BABIES & CHILDRENS HOS | OH | 231 | $2.22B | -5.0% |
| ARTHUR G JAMES CANCER HOSPITAL | OH | 356 | $1.95B | 21.0% |
| GOOD SAMARITAN HOSPITAL | OH | 361 | $870.9M | 3.5% |
| KETTERING HEALTH DAYTON | OH | 317 | $667.6M | 3.3% |
| AULTMAN HOSPITAL | OH | 365 | $586.2M | -5.6% |
| DAYTON CHILDRENS HOSPITAL | OH | 181 | $569.1M | 7.9% |
| GENESIS HEALTHCARE SYSTEM | OH | 282 | $527.6M | 0.6% |
| ST. RITAS MEDICAL CENTER LLC | OH | 329 | $497.6M | 6.5% |
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: $29.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $8.5M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $8.1M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $8.1M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $5.0M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $260K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $10.2M |
| + RCM Uplift | +$29.9M |
| Pro Forma EBITDA | $40.1M |
| Current Margin | 2.5% |
| Pro Forma Margin | 9.9% |
| WC Released (1x) | $15.6M |
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 | $15.7M | $366.7M | 23.39x | 87.8% |
| Base (11x exit) | 10.0x | 11.0x | $15.7M | $408.5M | 26.05x | 91.9% |
| Bull Case | 9.0x | 11.0x | $14.1M | $512.4M | 36.31x | 105.1% |
| Bull (12x exit) | 9.0x | 12.0x | $14.1M | $563.1M | 39.91x | 109.0% |
| Bear Case | 11.0x | 10.0x | $17.2M | $211.9M | 12.28x | 65.1% |
| Bear (11x exit) | 11.0x | 11.0x | $17.2M | $238.7M | 13.84x | 69.1% |
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
- 78 hospitals with 96-382 beds
- Same-state prioritization (n=79)
- Comp margins: P25=-9.0% / P50=0.6% / P75=7.1%
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.