CHEROKEE MEDICAL CENTER
1. Target Overview & Investment Thesis
CHEROKEE MEDICAL CENTER is a 25-bed suburban community hospital in CHEROKEE, SC with $61.2M in net patient revenue and a 8.3% operating margin. The hospital serves a payer mix of 28.2% Medicare, 1.2% Medicaid, and 70.6% commercial.
Thesis: Turnaround. Our ML models identify $4.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 8.3% to 15.6% (+736bps).
| Net Revenue HCRIS | $61.2M |
| Current EBITDA COMPUTED | $5.1M |
| Operating Margin COMPUTED | 8.3% |
| Occupancy HCRIS | 49.0% |
| Revenue / Bed COMPUTED | $2.4M |
| Net-to-Gross HCRIS | 24.3% |
| Distress Probability ML | 45.0% |
2. Market Context & Competitive Position
SC has 85 Medicare-certified hospitals with a median operating margin of 1.3%. The target's margin of 8.3% places it above the state median. Among 31 size-comparable peers (12-50 beds), the median margin is 1.1%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (12-50), prioritizing same-state peers. 31 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CHEROKEE MEDICAL CENTER (Target) | SC | 25 | $61.2M | 8.3% |
| PELHAM MEDICAL CENTER | SC | 48 | $137.2M | 17.1% |
| PH HILLCREST HOSPITAL | SC | 43 | $123.6M | 30.8% |
| ROPER ST. FRANCIS HOSPITAL-BER | SC | 46 | $119.0M | 13.0% |
| PH LAURENS COUNTY HOSPITAL | SC | 41 | $109.4M | 13.5% |
| COASTAL CAROLINA MEDICAL CENTE | SC | 41 | $94.8M | 24.9% |
| NEWBERRY COUNTY MEMORIAL HOSPI | SC | 48 | $56.8M | -5.9% |
| MUSC HEALTH CHESTER MEDICAL CE | SC | 16 | $56.5M | -18.1% |
| MCLEOD HEALTH CHERAW | SC | 46 | $54.7M | 1.1% |
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: $4.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.3M | +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% | $745K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $39K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $5.1M |
| + RCM Uplift | +$4.5M |
| Pro Forma EBITDA | $9.6M |
| Current Margin | 8.3% |
| Pro Forma Margin | 15.6% |
| WC Released (1x) | $2.3M |
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 | $7.8M | $78.5M | 10.07x | 58.7% |
| Base (11x exit) | 10.0x | 11.0x | $7.8M | $88.8M | 11.41x | 62.7% |
| Bull Case | 9.0x | 11.0x | $7.0M | $106.2M | 15.16x | 72.2% |
| Bull (12x exit) | 9.0x | 12.0x | $7.0M | $118.0M | 16.83x | 75.9% |
| Bear Case | 11.0x | 10.0x | $8.6M | $53.4M | 6.23x | 44.2% |
| Bear (11x exit) | 11.0x | 11.0x | $8.6M | $61.5M | 7.18x | 48.3% |
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
- 31 hospitals with 12-50 beds
- Same-state prioritization (n=32)
- Comp margins: P25=-14.5% / P50=1.1% / P75=13.3%
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.