CONWAY HOSPITAL
1. Target Overview & Investment Thesis
CONWAY HOSPITAL is a 171-bed suburban community hospital in HORRY, SC with $250.2M in net patient revenue and a -14.7% operating margin. The hospital serves a payer mix of 28.3% Medicare, 7.0% Medicaid, and 64.7% commercial.
Thesis: Undervalued. Our ML models identify $18.4M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -14.7% to -7.3% (+736bps).
| Net Revenue HCRIS | $250.2M |
| Current EBITDA COMPUTED | $-36.7M |
| Operating Margin COMPUTED | -14.7% |
| Occupancy HCRIS | 58.2% |
| Revenue / Bed COMPUTED | $1.5M |
| Net-to-Gross HCRIS | 25.5% |
| Distress Probability ML | 46.3% |
2. Market Context & Competitive Position
SC has 85 Medicare-certified hospitals with a median operating margin of 1.3%. The target's margin of -14.7% places it below the state median. Among 27 size-comparable peers (86-342 beds), the median margin is 0.2%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (86-342), prioritizing same-state peers. 27 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CONWAY HOSPITAL (Target) | SC | 171 | $250.2M | -14.7% |
| ST. FRANCIS HOSPITAL INC | SC | 327 | $691.4M | 4.9% |
| GRAND STRAND REGIONAL MEDICAL | SC | 336 | $602.2M | 32.8% |
| SELF REGIONAL HEALTHCARE | SC | 290 | $410.1M | 4.7% |
| ROPER HOSPITAL INC. | SC | 266 | $400.8M | -3.0% |
| BON SECOURS ST. FRANCIS XAVIER | SC | 186 | $304.6M | 12.2% |
| PRISMA HEALTH BAPTIST HOSPITAL | SC | 246 | $277.5M | 0.4% |
| BEAUFORT MEMORIAL HOSPITAL | SC | 167 | $269.0M | -7.3% |
| MCLEOD LORIS SEACOAST HOSPITAL | SC | 155 | $262.3M | 10.1% |
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: $18.4M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $5.3M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $5.0M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $5.0M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.0M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $160K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-36.7M |
| + RCM Uplift | +$18.4M |
| Pro Forma EBITDA | $-18.3M |
| Current Margin | -14.7% |
| Pro Forma Margin | -7.3% |
| WC Released (1x) | $9.6M |
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 | $-56.4M | $-57.8M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-56.4M | $-81.9M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-50.8M | $-39.5M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-50.8M | $-58.1M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-62.1M | $-131.6M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-62.1M | $-164.9M | 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
- 27 hospitals with 86-342 beds
- Same-state prioritization (n=28)
- Comp margins: P25=-7.3% / P50=0.2% / P75=9.3%
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.