HOSPITAL CAYETANO COLL & TOSTE
1. Target Overview & Investment Thesis
HOSPITAL CAYETANO COLL & TOSTE is a 160-bed safety-net/medicaid heavy in ARECIBO, PR with $58.3M in net patient revenue and a -11.1% operating margin. The hospital serves a payer mix of 9.0% Medicare, 35.6% Medicaid, and 55.4% commercial.
Thesis: Undervalued. Our ML models identify $4.3M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -11.1% to -3.7% (+736bps).
| Net Revenue HCRIS | $58.3M |
| Current EBITDA COMPUTED | $-6.5M |
| Operating Margin COMPUTED | -11.1% |
| Occupancy HCRIS | 69.5% |
| Revenue / Bed COMPUTED | $364K |
| Net-to-Gross HCRIS | 57.7% |
| Distress Probability ML | 55.2% |
2. Market Context & Competitive Position
PR has 61 Medicare-certified hospitals with a median operating margin of -8.8%. The target's margin of -11.1% places it below the state median. Among 37 size-comparable peers (80-320 beds), the median margin is -5.7%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (80-320), prioritizing same-state peers. 37 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| HOSPITAL CAYETANO COLL & TOSTE (Target) | PR | 160 | $58.3M | -11.1% |
| HOSPITAL MENONITA DE CAYEY | PR | 225 | $186.2M | 15.0% |
| HOSPITAL DR. ALEJANDRO OTERO | PR | 263 | $129.0M | -1.0% |
| HOSPITAL MENONITA CAGUAS INC | PR | 232 | $114.1M | 6.8% |
| DOCTOR CENTER HOSPITAL MANATI | PR | 258 | $103.4M | 1.6% |
| MAYAGUEZ MEDICAL CENTER | PR | 210 | $102.8M | 7.6% |
| HOSPITAL PAVIA SANTURCE | PR | 156 | $101.9M | -9.4% |
| UNIVERSITY DISCTRICT HOSPITAL | PR | 210 | $97.4M | -43.2% |
| HOSPITAL MENONITA AIBONITO | PR | 129 | $92.1M | -3.1% |
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: $4.3M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.2M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.2M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.2M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $709K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $37K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-6.5M |
| + RCM Uplift | +$4.3M |
| Pro Forma EBITDA | $-2.2M |
| Current Margin | -11.1% |
| Pro Forma Margin | -3.7% |
| WC Released (1x) | $2.2M |
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 | $-10.0M | $200K | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-10.0M | $-3.0M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-9.0M | $7.9M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-9.0M | $6.0M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-11.0M | $-18.0M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-11.0M | $-23.4M | 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 |
| Medium | Elevated Medicaid exposure (35.6%) | Medicaid reimburses below cost in most states. Mitigant: denial reduction lever has highest impact on Medicaid claims |
| High | Elevated distress probability | Model estimates 55.2% 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
- 37 hospitals with 80-320 beds
- Same-state prioritization (n=38)
- Comp margins: P25=-20.7% / P50=-5.7% / P75=1.2%
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.