SALEM HEALTH WEST VALLEY
1. Target Overview & Investment Thesis
SALEM HEALTH WEST VALLEY is a 39-bed suburban community hospital in POLK, OR with $74.2M in net patient revenue and a 20.4% operating margin. The hospital serves a payer mix of 25.2% Medicare, 0.3% Medicaid, and 74.6% commercial.
Thesis: Turnaround. Our ML models identify $5.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 20.4% to 27.8% (+736bps).
| Net Revenue HCRIS | $74.2M |
| Current EBITDA COMPUTED | $15.2M |
| Operating Margin COMPUTED | 20.4% |
| Occupancy HCRIS | 53.8% |
| Revenue / Bed COMPUTED | $1.9M |
| Net-to-Gross HCRIS | 54.7% |
| Distress Probability ML | 47.7% |
2. Market Context & Competitive Position
OR has 63 Medicare-certified hospitals with a median operating margin of -8.1%. The target's margin of 20.4% places it above the state median. Among 28 size-comparable peers (20-78 beds), the median margin is -6.8%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (20-78), prioritizing same-state peers. 28 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SALEM HEALTH WEST VALLEY (Target) | OR | 39 | $74.2M | 20.4% |
| SAMARITAN ALBANY GENERAL HOSPI | OR | 67 | $220.1M | -12.0% |
| GOOD SHEPHERD MEDICAL CENTER | OR | 25 | $177.5M | 5.3% |
| COLUMBIA MEMORIAL HOSPITAL | OR | 25 | $165.9M | 5.2% |
| SAMARITAN LEBANON COMM HOSPITA | OR | 25 | $157.9M | 3.9% |
| PROVIDENCE NEWBERG MEDICAL CEN | OR | 40 | $151.5M | 10.0% |
| SAMARITAN PACIFIC COMM HOSPITA | OR | 25 | $141.7M | 3.7% |
| GRANDE RONDE HOSPITAL | OR | 25 | $134.8M | -4.1% |
| PROVIDENCE MILWAUKIE HOSPITAL | OR | 40 | $128.8M | -9.6% |
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: $5.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.6M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.5M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.5M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $903K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $47K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $15.2M |
| + RCM Uplift | +$5.5M |
| Pro Forma EBITDA | $20.6M |
| Current Margin | 20.4% |
| Pro Forma Margin | 27.8% |
| WC Released (1x) | $2.8M |
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 | $23.3M | $154.6M | 6.63x | 46.0% |
| Base (11x exit) | 10.0x | 11.0x | $23.3M | $177.7M | 7.62x | 50.1% |
| Bull Case | 9.0x | 11.0x | $21.0M | $203.3M | 9.68x | 57.5% |
| Bull (12x exit) | 9.0x | 12.0x | $21.0M | $228.0M | 10.86x | 61.1% |
| Bear Case | 11.0x | 10.0x | $25.7M | $119.8M | 4.67x | 36.1% |
| Bear (11x exit) | 11.0x | 11.0x | $25.7M | $140.1M | 5.46x | 40.4% |
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
- 28 hospitals with 20-78 beds
- Same-state prioritization (n=29)
- Comp margins: P25=-16.5% / P50=-6.8% / P75=3.2%
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.