KETTERING HEALTH TROY
1. Target Overview & Investment Thesis
KETTERING HEALTH TROY is a 28-bed suburban community hospital in MIAMI, OH with $64.1M in net patient revenue and a -7.2% operating margin. The hospital serves a payer mix of 29.6% Medicare, 1.9% Medicaid, and 68.5% commercial.
Thesis: Turnaround. Our ML models identify $4.7M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -7.2% to 0.2% (+736bps).
| Net Revenue HCRIS | $64.1M |
| Current EBITDA COMPUTED | $-4.6M |
| Operating Margin COMPUTED | -7.2% |
| Occupancy HCRIS | 45.9% |
| Revenue / Bed COMPUTED | $2.3M |
| Net-to-Gross HCRIS | 18.4% |
| Distress Probability ML | 45.5% |
2. Market Context & Competitive Position
OH has 235 Medicare-certified hospitals with a median operating margin of -0.3%. The target's margin of -7.2% places it below the state median. Among 87 size-comparable peers (14-56 beds), the median margin is -1.8%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (14-56), prioritizing same-state peers. 87 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| KETTERING HEALTH TROY (Target) | OH | 28 | $64.1M | -7.2% |
| THE SURGICAL HOSPITAL AT SOUTH | OH | 24 | $166.6M | -3.1% |
| MEMORIAL HOSPITAL OF UNION COU | OH | 51 | $151.0M | 8.0% |
| GALION COMMUNITY HOSPITAL | OH | 25 | $128.2M | 16.6% |
| MARY RUTAN HOSPITAL | OH | 39 | $113.0M | -12.5% |
| AVITA ONTARIO HOSPITAL | OH | 49 | $109.2M | 16.0% |
| MERCY HEALTH-TIFFIN HOSPITAL | OH | 35 | $103.0M | 18.1% |
| ALLIANCE COMMUNITY HOSPITAL | OH | 50 | $100.2M | -3.5% |
| JOINT TOWNSHIP DISTRICT MEMORI | OH | 33 | $95.6M | 9.3% |
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: $4.7M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.3M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.3M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.3M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $780K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $41K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-4.6M |
| + RCM Uplift | +$4.7M |
| Pro Forma EBITDA | $120K |
| Current Margin | -7.2% |
| Pro Forma Margin | 0.2% |
| WC Released (1x) | $2.5M |
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 | $-7.1M | $16.9M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-7.1M | $16.2M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-6.4M | $29.5M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-6.4M | $30.3M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-7.8M | $-4.4M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-7.8M | $-7.4M | 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 |
| Low | Low net-to-gross ratio | Large contractual allowances suggest pricing discipline issues. Mitigant: payer renegotiation is an additional upside lever |
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
- 87 hospitals with 14-56 beds
- Same-state prioritization (n=88)
- Comp margins: P25=-11.4% / P50=-1.8% / P75=11.5%
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.