MCKENZIE-WILLAMETTE HOSPITAL
1. Target Overview & Investment Thesis
MCKENZIE-WILLAMETTE HOSPITAL is a 113-bed suburban community hospital in LANE, OR with $247.7M in net patient revenue and a -2.6% operating margin. The hospital serves a payer mix of 21.8% Medicare, 5.1% Medicaid, and 73.0% commercial.
Thesis: Undervalued. Our ML models identify $18.2M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -2.6% to 4.8% (+736bps).
| Net Revenue HCRIS | $247.7M |
| Current EBITDA COMPUTED | $-6.5M |
| Operating Margin COMPUTED | -2.6% |
| Occupancy HCRIS | 71.7% |
| Revenue / Bed COMPUTED | $2.2M |
| Net-to-Gross HCRIS | 23.3% |
| Distress Probability ML | 41.0% |
2. Market Context & Competitive Position
OR has 63 Medicare-certified hospitals with a median operating margin of -8.1%. The target's margin of -2.6% places it above the state median. Among 16 size-comparable peers (56-226 beds), the median margin is -12.4%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (56-226), prioritizing same-state peers. 16 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| MCKENZIE-WILLAMETTE HOSPITAL (Target) | OR | 113 | $247.7M | -2.6% |
| GOOD SAMARITAN HOSPITAL CORVAL | OR | 169 | $466.4M | -20.9% |
| LEGACY GOOD SAMARITAN HOSPITAL | OR | 177 | $415.0M | -10.6% |
| ADVENTIST MEDICAL CENTER-PORTL | OR | 168 | $324.3M | -14.1% |
| TUALITY HEALTHCARE | OR | 113 | $268.5M | -13.1% |
| LEGACY MERIDIAN PARK HOSPITAL | OR | 123 | $265.2M | -0.4% |
| THREE RIVERS MEDICAL CENTER | OR | 142 | $252.5M | -12.4% |
| SKY LAKES MEDICAL CENTER | OR | 90 | $251.4M | -20.9% |
| MERCY MEDICAL CENTER | OR | 130 | $247.1M | -2.1% |
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: $18.2M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $5.2M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $5.0M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $4.9M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.0M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $159K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-6.5M |
| + RCM Uplift | +$18.2M |
| Pro Forma EBITDA | $11.8M |
| Current Margin | -2.6% |
| Pro Forma Margin | 4.8% |
| WC Released (1x) | $9.5M |
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 | $-9.9M | $139.7M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-9.9M | $150.4M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-8.9M | $207.4M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-8.9M | $223.6M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-10.9M | $51.8M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-10.9M | $53.4M | 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 |
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
- 16 hospitals with 56-226 beds
- Same-state prioritization (n=17)
- Comp margins: P25=-19.1% / P50=-12.4% / P75=-10.4%
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.