SKYLINE MEDICAL CENTER
1. Target Overview & Investment Thesis
SKYLINE MEDICAL CENTER is a 350-bed suburban community hospital in DAVIDSON, TN with $360.4M in net patient revenue and a 15.1% operating margin. The hospital serves a payer mix of 19.4% Medicare, 8.9% Medicaid, and 71.7% commercial.
Thesis: Platform Growth. Our ML models identify $26.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 15.1% to 22.4% (+736bps).
| Net Revenue HCRIS | $360.4M |
| Current EBITDA COMPUTED | $54.3M |
| Operating Margin COMPUTED | 15.1% |
| Occupancy HCRIS | 73.4% |
| Revenue / Bed COMPUTED | $1.0M |
| Net-to-Gross HCRIS | 12.0% |
| Distress Probability ML | 42.7% |
2. Market Context & Competitive Position
TN has 141 Medicare-certified hospitals with a median operating margin of -0.6%. The target's margin of 15.1% places it above the state median. Among 23 size-comparable peers (175-700 beds), the median margin is 1.3%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (175-700), prioritizing same-state peers. 23 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SKYLINE MEDICAL CENTER (Target) | TN | 350 | $360.4M | 15.1% |
| UNIVERSITY OF TENNESSEE MEDICA | TN | 698 | $1.08B | -17.6% |
| SAINT THOMAS WEST HOSPITAL | TN | 643 | $1.06B | 0.2% |
| TRISTAR CENTENNIAL MEDICAL CEN | TN | 598 | $991.8M | 23.0% |
| JACKSON-MADISON COUNTY GENERAL | TN | 580 | $797.1M | 1.4% |
| MEMORIAL HEALTH CARE SYSTEM IN | TN | 431 | $583.9M | -9.0% |
| JOHNSON CITY MEDICAL CENTER | TN | 537 | $546.1M | -8.6% |
| SAINT THOMAS RUTHERFORD HOSPIT | TN | 354 | $447.4M | 1.3% |
| PARKRIDGE MEDICAL CENTER | TN | 396 | $433.4M | 30.1% |
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: $26.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $7.6M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $7.2M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $7.1M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $4.4M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $231K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $54.3M |
| + RCM Uplift | +$26.5M |
| Pro Forma EBITDA | $80.9M |
| Current Margin | 15.1% |
| Pro Forma Margin | 22.4% |
| WC Released (1x) | $13.8M |
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 | $83.6M | $623.7M | 7.46x | 49.5% |
| Base (11x exit) | 10.0x | 11.0x | $83.6M | $713.2M | 8.53x | 53.5% |
| Bull Case | 9.0x | 11.0x | $75.2M | $827.9M | 11.00x | 61.6% |
| Bull (12x exit) | 9.0x | 12.0x | $75.2M | $925.4M | 12.30x | 65.2% |
| Bear Case | 11.0x | 10.0x | $92.0M | $463.9M | 5.04x | 38.2% |
| Bear (11x exit) | 11.0x | 11.0x | $92.0M | $540.2M | 5.87x | 42.5% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Low | Low net-to-gross ratio | Large contractual allowances suggest pricing discipline issues. Mitigant: payer renegotiation is an additional upside lever |
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
- 23 hospitals with 175-700 beds
- Same-state prioritization (n=24)
- Comp margins: P25=-8.8% / P50=1.3% / P75=7.7%
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.