ADVANCED SURGICAL HOSPITAL
1. Target Overview & Investment Thesis
ADVANCED SURGICAL HOSPITAL is a 14-bed community hospital in WASHINGTON, PA with $20.4M in net patient revenue and a 4.9% operating margin. The hospital serves a payer mix of 54.7% Medicare, 0.0% Medicaid, and 45.3% commercial.
Thesis: Turnaround. Our ML models identify $1.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 4.9% to 12.3% (+736bps).
| Net Revenue HCRIS | $20.4M |
| Current EBITDA COMPUTED | $1.0M |
| Operating Margin COMPUTED | 4.9% |
| Occupancy HCRIS | 11.8% |
| Revenue / Bed COMPUTED | $1.5M |
| Net-to-Gross HCRIS | 26.3% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
PA has 225 Medicare-certified hospitals with a median operating margin of -4.4%. The target's margin of 4.9% places it above the state median. Among 29 size-comparable peers (7-28 beds), the median margin is -4.9%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (7-28), prioritizing same-state peers. 29 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ADVANCED SURGICAL HOSPITAL (Target) | PA | 14 | $20.4M | 4.9% |
| WELLSPAN SURGERY AND REHAB HOS | PA | 25 | $120.2M | 2.8% |
| LVH-COORDINATED ALLENTOWN | PA | 20 | $89.6M | 2.3% |
| CHARLES COLE MEMORIAL HOSPITAL | PA | 25 | $88.1M | -9.0% |
| WELLSBORO | PA | 25 | $85.6M | 2.3% |
| PENN HIGHLANDS ELK | PA | 25 | $67.4M | -0.5% |
| GOOD SHEPHERD PENN PARTNERS | PA | 18 | $66.1M | -50.0% |
| ROTHMAN ORTHOPAEDIC SPECIALTY | PA | 24 | $64.8M | 20.6% |
| SURGICAL INSTITUTE OF READING | PA | 15 | $58.5M | 28.1% |
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: $1.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $428K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $408K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $404K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $248K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $13K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.0M |
| + RCM Uplift | +$1.5M |
| Pro Forma EBITDA | $2.5M |
| Current Margin | 4.9% |
| Pro Forma Margin | 12.3% |
| WC Released (1x) | $783K |
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 | $1.5M | $21.6M | 14.02x | 69.6% |
| Base (11x exit) | 10.0x | 11.0x | $1.5M | $24.3M | 15.75x | 73.6% |
| Bull Case | 9.0x | 11.0x | $1.4M | $29.8M | 21.43x | 84.6% |
| Bull (12x exit) | 9.0x | 12.0x | $1.4M | $32.9M | 23.68x | 88.3% |
| Bear Case | 11.0x | 10.0x | $1.7M | $13.6M | 8.03x | 51.7% |
| Bear (11x exit) | 11.0x | 11.0x | $1.7M | $15.5M | 9.16x | 55.7% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Low occupancy | At 11.8%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
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
- 29 hospitals with 7-28 beds
- Same-state prioritization (n=30)
- Comp margins: P25=-20.8% / P50=-4.9% / P75=3.5%
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.