HILLCREST MEDICAL CENTER
1. Target Overview & Investment Thesis
HILLCREST MEDICAL CENTER is a 424-bed safety-net/medicaid heavy in TULSA, OK with $590.1M in net patient revenue and a -3.3% operating margin. The hospital serves a payer mix of 21.4% Medicare, 33.2% Medicaid, and 45.3% commercial.
Thesis: Undervalued. Our ML models identify $43.4M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -3.3% to 4.0% (+736bps).
| Net Revenue HCRIS | $590.1M |
| Current EBITDA COMPUTED | $-19.6M |
| Operating Margin COMPUTED | -3.3% |
| Occupancy HCRIS | 75.6% |
| Revenue / Bed COMPUTED | $1.4M |
| Net-to-Gross HCRIS | 13.7% |
| Distress Probability ML | 48.2% |
2. Market Context & Competitive Position
OK has 147 Medicare-certified hospitals with a median operating margin of -8.8%. The target's margin of -3.3% places it above the state median. Among 1100 size-comparable peers (212-848 beds), the median margin is -3.8%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (212-848), prioritizing same-state peers. 1100 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| HILLCREST MEDICAL CENTER (Target) | OK | 424 | $590.1M | -3.3% |
| ST. LUKES HOSPITAL | PA | 633 | $8.94B | 87.9% |
| STANFORD HEALTH CARE | CA | 657 | $6.76B | 3.7% |
| UCSF MEDICAL CENTER | CA | 834 | $5.44B | -5.4% |
| UT MD ANDERSON CANCER CENTER | TX | 721 | $4.90B | -0.8% |
| MEMORIAL HOSPITAL FOR CANCER A | NY | 514 | $4.34B | -32.5% |
| STRONG MEMORIAL HOSPITAL | NY | 749 | $3.31B | 5.2% |
| UC DAVIS MEDICAL CENTER | CA | 666 | $3.28B | -11.5% |
| UCSD MEDICAL CENTER | CA | 718 | $3.06B | -7.2% |
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: $43.4M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $12.4M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $11.8M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $11.7M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $7.2M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $378K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-19.6M |
| + RCM Uplift | +$43.4M |
| Pro Forma EBITDA | $23.8M |
| Current Margin | -3.3% |
| Pro Forma Margin | 4.0% |
| WC Released (1x) | $22.6M |
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 | $-30.2M | $305.0M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-30.2M | $325.7M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-27.2M | $459.2M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-27.2M | $492.9M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-33.2M | $97.6M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-33.2M | $96.6M | 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 |
| Medium | Elevated Medicaid exposure (33.2%) | Medicaid reimburses below cost in most states. Mitigant: denial reduction lever has highest impact on Medicaid claims |
| 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
- 1100 hospitals with 212-848 beds
- Same-state prioritization (n=8)
- Comp margins: P25=-13.5% / P50=-3.8% / P75=5.1%
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.