MCLEOD MED CTR - DARLINGTON
1. Target Overview & Investment Thesis
MCLEOD MED CTR - DARLINGTON is a 36-bed community hospital in DARLINGTON, SC with $2.1M in net patient revenue and a -49.5% operating margin. The hospital serves a payer mix of 21.6% Medicare, 0.0% Medicaid, and 78.4% commercial.
Thesis: Turnaround. Our ML models identify $173K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -49.5% to -41.4% (+808bps).
| Net Revenue HCRIS | $2.1M |
| Current EBITDA COMPUTED | $-1.1M |
| Operating Margin COMPUTED | -49.5% |
| Occupancy HCRIS | 3.8% |
| Revenue / Bed COMPUTED | $59K |
| Net-to-Gross HCRIS | 28.5% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
SC has 85 Medicare-certified hospitals with a median operating margin of 1.3%. The target's margin of -49.5% places it below the state median. Among 38 size-comparable peers (18-72 beds), the median margin is 1.8%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (18-72), prioritizing same-state peers. 38 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| MCLEOD MED CTR - DARLINGTON (Target) | SC | 36 | $2.1M | -49.5% |
| PH PATEWOOD HOSPITAL | SC | 64 | $229.8M | 38.0% |
| GEORGETOWN MEMORIAL HOSPITAL | SC | 68 | $168.0M | -4.6% |
| PH GREER MEMORIAL HOSPITAL | SC | 66 | $161.3M | 31.3% |
| 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 BAPTIST EASLEY HOSPITAL | SC | 64 | $118.3M | 19.6% |
| PH LAURENS COUNTY HOSPITAL | SC | 41 | $109.4M | 13.5% |
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: $173K (808bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Denial Rate Reduction | 12.0% | 6.5% | $49K | +231bp | 12mo |
| Net Collection Rate | 93.5% | 97.0% | $45K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $43K | +200bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $26K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +45bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-1.1M |
| + RCM Uplift | +$173K |
| Pro Forma EBITDA | $-885K |
| Current Margin | -49.5% |
| Pro Forma Margin | -41.4% |
| WC Released (1x) | $82K |
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 | $-1.6M | $-5.3M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-1.6M | $-6.3M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-1.5M | $-6.3M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-1.5M | $-7.3M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-1.8M | $-5.6M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-1.8M | $-6.7M | 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 | Low occupancy | At 3.8%, 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
- 38 hospitals with 18-72 beds
- Same-state prioritization (n=39)
- Comp margins: P25=-11.9% / P50=1.8% / P75=16.2%
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.