DE SMET MEMORIAL HOSPITAL
1. Target Overview & Investment Thesis
DE SMET MEMORIAL HOSPITAL is a 6-bed community hospital in KINGSBURY, SD with $8.3M in net patient revenue and a 20.3% operating margin. The hospital serves a payer mix of 74.5% Medicare, 0.0% Medicaid, and 25.5% commercial.
Thesis: Turnaround. Our ML models identify $620K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 20.3% to 27.7% (+746bps).
| Net Revenue HCRIS | $8.3M |
| Current EBITDA COMPUTED | $1.7M |
| Operating Margin COMPUTED | 20.3% |
| Occupancy HCRIS | 15.9% |
| Revenue / Bed COMPUTED | $1.4M |
| Net-to-Gross HCRIS | 52.2% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
SD has 63 Medicare-certified hospitals with a median operating margin of -3.2%. The target's margin of 20.3% places it above the state median. Among 114 size-comparable peers (3-12 beds), the median margin is -8.7%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (3-12), prioritizing same-state peers. 114 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| DE SMET MEMORIAL HOSPITAL (Target) | SD | 6 | $8.3M | 20.3% |
| WENATCHEE VALLEY HOSPITAL | WA | 11 | $277.5M | -4.9% |
| FRANCISCAN HEALTH HAMMOND | IN | 10 | $117.7M | -4.3% |
| OCONTO HOSPITAL & MEDICAL CENT | WI | 10 | $80.4M | 1.1% |
| SUMMIT PACIFIC MEDICAL CENTER | WA | 10 | $73.6M | 9.1% |
| PHYSICIANS MEDICAL CENTER | IN | 10 | $60.0M | 24.9% |
| SAMUEL SIMMONDS MEMORIAL HOSPI | AK | 10 | $57.8M | -50.0% |
| INSTITUTE FOR ORTHOPAEDIC SURG | OH | 12 | $55.6M | 39.5% |
| JOYCE EISENBERG KEEFER MEDICAL | CA | 10 | $52.9M | 18.8% |
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: $620K (746bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $175K | +210bp | 18mo |
| Denial Rate Reduction | 12.0% | 6.5% | $168K | +202bp | 12mo |
| Cost to Collect | 4.5% | 2.5% | $166K | +200bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $101K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +12bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.7M |
| + RCM Uplift | +$620K |
| Pro Forma EBITDA | $2.3M |
| Current Margin | 20.3% |
| Pro Forma Margin | 27.7% |
| WC Released (1x) | $319K |
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 | $2.6M | $17.3M | 6.68x | 46.2% |
| Base (11x exit) | 10.0x | 11.0x | $2.6M | $19.9M | 7.67x | 50.3% |
| Bull Case | 9.0x | 11.0x | $2.3M | $22.8M | 9.76x | 57.7% |
| Bull (12x exit) | 9.0x | 12.0x | $2.3M | $25.6M | 10.94x | 61.4% |
| Bear Case | 11.0x | 10.0x | $2.9M | $13.4M | 4.69x | 36.2% |
| Bear (11x exit) | 11.0x | 11.0x | $2.9M | $15.7M | 5.48x | 40.5% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 74.5% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
| Medium | Low occupancy | At 15.9%, 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
- 114 hospitals with 3-12 beds
- Same-state prioritization (n=13)
- Comp margins: P25=-22.5% / P50=-8.7% / P75=2.4%
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.