AVERA WESKOTA MEMORIAL MEDICAL CENTE
1. Target Overview & Investment Thesis
AVERA WESKOTA MEMORIAL MEDICAL CENTE is a 16-bed rural/critical access in JERAULD, SD with $5.4M in net patient revenue and a 13.0% operating margin. The hospital serves a payer mix of 89.2% Medicare, 4.8% Medicaid, and 6.0% commercial.
Thesis: Turnaround. Our ML models identify $412K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 13.0% to 20.6% (+757bps).
| Net Revenue HCRIS | $5.4M |
| Current EBITDA COMPUTED | $708K |
| Operating Margin COMPUTED | 13.0% |
| Occupancy HCRIS | 9.6% |
| Revenue / Bed COMPUTED | $340K |
| Net-to-Gross HCRIS | 62.3% |
| Distress Probability ML | 64.5% |
2. Market Context & Competitive Position
SD has 63 Medicare-certified hospitals with a median operating margin of -3.2%. The target's margin of 13.0% places it above the state median. Among 38 size-comparable peers (8-32 beds), the median margin is -2.4%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (8-32), prioritizing same-state peers. 38 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| AVERA WESKOTA MEMORIAL MEDICAL (Target) | SD | 16 | $5.4M | 13.0% |
| AVERA QUEEN OF PEACE | SD | 25 | $122.9M | -5.8% |
| MONUMENT HEALTH SPEARFISH HOSP | SD | 27 | $116.6M | 1.9% |
| BLACK HILLS SURGICAL HOSPITAL | SD | 26 | $91.1M | 15.3% |
| HURON REGIONAL MEDICAL CENTER | SD | 25 | $49.4M | -5.9% |
| MONUMENT HEALTH STURGIS REGION | SD | 25 | $39.1M | -3.3% |
| MADISON REGIONAL HEALTH SYSTEM | SD | 22 | $33.8M | -1.6% |
| SANFORD MEDICAL CENTER VERMILL | SD | 25 | $32.0M | 8.3% |
| FALL RIVER HOSPITAL | SD | 25 | $28.4M | 0.3% |
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: $412K (757bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $114K | +210bp | 18mo |
| Denial Rate Reduction | 12.0% | 6.5% | $113K | +208bp | 12mo |
| Cost to Collect | 4.5% | 2.5% | $109K | +200bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $66K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +18bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $708K |
| + RCM Uplift | +$412K |
| Pro Forma EBITDA | $1.1M |
| Current Margin | 13.0% |
| Pro Forma Margin | 20.6% |
| WC Released (1x) | $209K |
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 | $1.1M | $8.8M | 8.07x | 51.8% |
| Base (11x exit) | 10.0x | 11.0x | $1.1M | $10.0M | 9.20x | 55.9% |
| Bull Case | 9.0x | 11.0x | $980K | $11.7M | 11.98x | 64.3% |
| Bull (12x exit) | 9.0x | 12.0x | $980K | $13.1M | 13.36x | 67.9% |
| Bear Case | 11.0x | 10.0x | $1.2M | $6.4M | 5.32x | 39.7% |
| Bear (11x exit) | 11.0x | 11.0x | $1.2M | $7.4M | 6.18x | 44.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 89.2% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
| Medium | Low occupancy | At 9.6%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
| High | Elevated distress probability | Model estimates 64.5% 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
- 38 hospitals with 8-32 beds
- Same-state prioritization (n=41)
- Comp margins: P25=-9.6% / P50=-2.4% / P75=6.8%
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.