DELTA MEDICAL CENTER MEMPHIS
1. Target Overview & Investment Thesis
DELTA MEDICAL CENTER MEMPHIS is a 10-bed community hospital in SHELBY, TN with $28.4M in net patient revenue and a 3.4% operating margin. The hospital serves a payer mix of 0.0% Medicare, 0.0% Medicaid, and 100.0% commercial.
Thesis: Turnaround. Our ML models identify $2.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 3.4% to 10.8% (+736bps).
| Net Revenue HCRIS | $28.4M |
| Current EBITDA COMPUTED | $964K |
| Operating Margin COMPUTED | 3.4% |
| Occupancy HCRIS | 0.1% |
| Revenue / Bed COMPUTED | $2.8M |
| Net-to-Gross HCRIS | 44.4% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
TN has 141 Medicare-certified hospitals with a median operating margin of -0.6%. The target's margin of 3.4% places it above the state median. Among 9 size-comparable peers (5-20 beds), the median margin is -7.9%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (5-20), prioritizing same-state peers. 9 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| DELTA MEDICAL CENTER MEMPHIS (Target) | TN | 10 | $28.4M | 3.4% |
| TRUSTPOINT HOSPITAL | TN | 18 | $50.8M | -0.8% |
| SAINT THOMAS HIGHLAND HOSPITAL | TN | 12 | $21.5M | -11.9% |
| RIDGEVIEW PSYCHIATRIC HOSPITAL | TN | 16 | $11.7M | -46.4% |
| ST THOMAS DEKALB HOSPITAL | TN | 18 | $10.8M | -32.3% |
| HANCOCK COUNTY HOSPITAL | TN | 10 | $7.2M | -7.9% |
| BEHAVORIAL HEALTH CENTERS | TN | 16 | $4.6M | -0.9% |
| BEHAVIORAL HEALTH CENTERS | TN | 16 | $4.4M | 8.2% |
| BEHAVORIAL HEALTHCARE CENTERS | TN | 16 | $4.4M | 11.5% |
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: $2.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $596K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $568K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $562K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $345K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $18K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $964K |
| + RCM Uplift | +$2.1M |
| Pro Forma EBITDA | $3.1M |
| Current Margin | 3.4% |
| Pro Forma Margin | 10.8% |
| WC Released (1x) | $1.1M |
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 | $1.5M | $27.3M | 18.38x | 79.0% |
| Base (11x exit) | 10.0x | 11.0x | $1.5M | $30.5M | 20.54x | 83.0% |
| Bull Case | 9.0x | 11.0x | $1.3M | $37.8M | 28.35x | 95.2% |
| Bull (12x exit) | 9.0x | 12.0x | $1.3M | $41.7M | 31.23x | 99.0% |
| Bear Case | 11.0x | 10.0x | $1.6M | $16.3M | 10.01x | 58.5% |
| Bear (11x exit) | 11.0x | 11.0x | $1.6M | $18.5M | 11.33x | 62.5% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Low occupancy | At 0.1%, 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
- 9 hospitals with 5-20 beds
- Same-state prioritization (n=12)
- Comp margins: P25=-32.3% / P50=-7.9% / P75=-0.8%
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.