ST. JOHN BROKEN ARROW
1. Target Overview & Investment Thesis
ST. JOHN BROKEN ARROW is a 62-bed suburban community hospital in TULSA, OK with $65.3M in net patient revenue and a 3.3% operating margin. The hospital serves a payer mix of 32.4% Medicare, 15.4% Medicaid, and 52.1% commercial.
Thesis: Turnaround. Our ML models identify $4.8M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 3.3% to 10.6% (+736bps).
| Net Revenue HCRIS | $65.3M |
| Current EBITDA COMPUTED | $2.1M |
| Operating Margin COMPUTED | 3.3% |
| Occupancy HCRIS | 20.0% |
| Revenue / Bed COMPUTED | $1.1M |
| Net-to-Gross HCRIS | 24.1% |
| Distress Probability ML | 57.5% |
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 65 size-comparable peers (31-124 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 (31-124), prioritizing same-state peers. 65 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ST. JOHN BROKEN ARROW (Target) | OK | 62 | $65.3M | 3.3% |
| OKLAHOMA HEART HOSPITAL | OK | 97 | $342.0M | -2.8% |
| STILLWATER MEDICAL CENTER | OK | 52 | $270.2M | -9.9% |
| SAINT FRANCIS HOSPITAL SOUTH | OK | 104 | $198.3M | 34.4% |
| ST ANTHONY SHAWNEE HOSPITAL | OK | 57 | $169.2M | -6.1% |
| MCBRIDE CLINIC ORTHOPEDIC HOSP | OK | 68 | $166.9M | -5.0% |
| OKLAHOMA HEART HOSPITAL SOUTH | OK | 43 | $148.5M | -0.6% |
| OKLAHOMA SURGICAL HOSPITAL | OK | 74 | $146.2M | 17.7% |
| COMMUNITY HOSPITAL | OK | 45 | $143.9M | 21.7% |
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: $4.8M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.4M | +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% | $794K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $42K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $2.1M |
| + RCM Uplift | +$4.8M |
| Pro Forma EBITDA | $6.9M |
| Current Margin | 3.3% |
| Pro Forma Margin | 10.6% |
| 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 | $3.3M | $62.2M | 18.89x | 80.0% |
| Base (11x exit) | 10.0x | 11.0x | $3.3M | $69.4M | 21.10x | 84.0% |
| Bull Case | 9.0x | 11.0x | $3.0M | $86.4M | 29.17x | 96.3% |
| Bull (12x exit) | 9.0x | 12.0x | $3.0M | $95.1M | 32.11x | 100.1% |
| Bear Case | 11.0x | 10.0x | $3.6M | $37.1M | 10.24x | 59.2% |
| Bear (11x exit) | 11.0x | 11.0x | $3.6M | $41.9M | 11.59x | 63.2% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Low occupancy | At 20.0%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
| High | Elevated distress probability | Model estimates 57.5% 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
- 65 hospitals with 31-124 beds
- Same-state prioritization (n=66)
- Comp margins: P25=-19.8% / P50=-3.8% / P75=7.6%
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.