SSH - TRI-CITIES INC.
1. Target Overview & Investment Thesis
SSH - TRI-CITIES INC. is a 35-bed community hospital in SULLIVAN, TN with $20.0M in net patient revenue and a 9.0% operating margin. The hospital serves a payer mix of 24.1% Medicare, 0.0% Medicaid, and 75.9% commercial.
Thesis: Turnaround. Our ML models identify $1.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 9.0% to 16.4% (+736bps).
| Net Revenue HCRIS | $20.0M |
| Current EBITDA COMPUTED | $1.8M |
| Operating Margin COMPUTED | 9.0% |
| Occupancy HCRIS | 87.4% |
| Revenue / Bed COMPUTED | $572K |
| Net-to-Gross HCRIS | 13.2% |
| 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 9.0% places it above the state median. Among 63 size-comparable peers (18-70 beds), the median margin is -0.8%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (18-70), prioritizing same-state peers. 63 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SSH - TRI-CITIES INC. (Target) | TN | 35 | $20.0M | 9.0% |
| BAPTIST MEM HOSPITAL TIPTON CO | TN | 48 | $179.0M | -5.8% |
| INDIAN PATH COMMUNITY HOSPITAL | TN | 35 | $142.8M | 12.0% |
| LECONTE MEDICAL CENTER | TN | 60 | $126.3M | 6.4% |
| HENRY COUNTY MEDICAL CENTER | TN | 43 | $81.7M | -13.0% |
| THE CENTER FOR SPINAL SURGERY | TN | 23 | $78.7M | 39.3% |
| JEFFERSON MEMORIAL HOSPITAL | TN | 58 | $61.3M | 12.7% |
| SWEETWATER HOSPITAL ASSOCIATIO | TN | 55 | $56.6M | -10.8% |
| ASCENSION ST THOMAS RIVER PARK | TN | 56 | $53.9M | -11.2% |
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: $1.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $421K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $401K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $397K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $244K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $13K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.8M |
| + RCM Uplift | +$1.5M |
| Pro Forma EBITDA | $3.3M |
| Current Margin | 9.0% |
| Pro Forma Margin | 16.4% |
| WC Released (1x) | $768K |
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 | $2.8M | $26.7M | 9.59x | 57.2% |
| Base (11x exit) | 10.0x | 11.0x | $2.8M | $30.2M | 10.88x | 61.2% |
| Bull Case | 9.0x | 11.0x | $2.5M | $36.0M | 14.39x | 70.5% |
| Bull (12x exit) | 9.0x | 12.0x | $2.5M | $40.0M | 16.00x | 74.1% |
| Bear Case | 11.0x | 10.0x | $3.1M | $18.4M | 6.01x | 43.2% |
| Bear (11x exit) | 11.0x | 11.0x | $3.1M | $21.2M | 6.94x | 47.3% |
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
- 63 hospitals with 18-70 beds
- Same-state prioritization (n=64)
- Comp margins: P25=-14.9% / P50=-0.8% / P75=7.9%
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.