THE HOSPITALS OF PROVIDENCE-MEMORIAL
1. Target Overview & Investment Thesis
THE HOSPITALS OF PROVIDENCE-MEMORIAL is a 410-bed suburban community hospital in EL PASO, TX with $283.3M in net patient revenue and a 10.8% operating margin. The hospital serves a payer mix of 8.2% Medicare, 7.6% Medicaid, and 84.1% commercial.
Thesis: Platform Growth. Our ML models identify $20.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 10.8% to 18.1% (+736bps).
| Net Revenue HCRIS | $283.3M |
| Current EBITDA COMPUTED | $30.5M |
| Operating Margin COMPUTED | 10.8% |
| Occupancy HCRIS | 34.5% |
| Revenue / Bed COMPUTED | $691K |
| Net-to-Gross HCRIS | 10.9% |
| Distress Probability ML | 51.4% |
2. Market Context & Competitive Position
TX has 583 Medicare-certified hospitals with a median operating margin of -0.7%. The target's margin of 10.8% places it above the state median. Among 99 size-comparable peers (205-820 beds), the median margin is 4.1%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (205-820), prioritizing same-state peers. 99 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| THE HOSPITALS OF PROVIDENCE-ME (Target) | TX | 410 | $283.3M | 10.8% |
| UT MD ANDERSON CANCER CENTER | TX | 721 | $4.90B | -0.8% |
| UT SOUTHWESTERN UNIVERSITY HOS | TX | 737 | $2.28B | -4.6% |
| SCOTT AND WHITE MEMORIAL HOSPI | TX | 616 | $1.85B | -10.5% |
| CHILDRENS MEDICAL CENTER OF DA | TX | 377 | $1.56B | 10.3% |
| COOK CHILDRENS MEDICAL CENTER | TX | 423 | $1.51B | 16.5% |
| MEDICAL CITY DALLAS | TX | 819 | $1.33B | 49.7% |
| BAYLOR UNIVERSITY MEDICAL CTR | TX | 800 | $1.26B | 0.4% |
| THE UNIVERSITY OF TEXAS MEDICA | TX | 819 | $1.19B | -29.9% |
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: $20.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $5.9M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $5.7M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $5.6M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.4M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $181K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $30.5M |
| + RCM Uplift | +$20.9M |
| Pro Forma EBITDA | $51.4M |
| Current Margin | 10.8% |
| Pro Forma Margin | 18.1% |
| WC Released (1x) | $10.9M |
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 | $46.9M | $409.8M | 8.73x | 54.2% |
| Base (11x exit) | 10.0x | 11.0x | $46.9M | $466.0M | 9.93x | 58.3% |
| Bull Case | 9.0x | 11.0x | $42.2M | $550.0M | 13.02x | 67.1% |
| Bull (12x exit) | 9.0x | 12.0x | $42.2M | $612.5M | 14.50x | 70.7% |
| Bear Case | 11.0x | 10.0x | $51.6M | $290.3M | 5.62x | 41.2% |
| Bear (11x exit) | 11.0x | 11.0x | $51.6M | $336.1M | 6.51x | 45.4% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Low occupancy | At 34.5%, 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 51.4% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
| 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
- 99 hospitals with 205-820 beds
- Same-state prioritization (n=100)
- Comp margins: P25=-10.0% / P50=4.1% / P75=15.1%
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.