BAYLOR S&W MEDICAL CENTER - IRVING
1. Target Overview & Investment Thesis
BAYLOR S&W MEDICAL CENTER - IRVING is a 205-bed suburban community hospital in nan, TX with $244.7M in net patient revenue and a -12.8% operating margin. The hospital serves a payer mix of 18.8% Medicare, 3.1% Medicaid, and 78.1% commercial.
Thesis: Undervalued. Our ML models identify $18.0M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -12.8% to -5.5% (+736bps).
| Net Revenue HCRIS | $244.7M |
| Current EBITDA COMPUTED | $-31.4M |
| Operating Margin COMPUTED | -12.8% |
| Occupancy HCRIS | 75.3% |
| Revenue / Bed COMPUTED | $1.2M |
| Net-to-Gross HCRIS | 23.5% |
| Distress Probability ML | 41.3% |
2. Market Context & Competitive Position
TX has 583 Medicare-certified hospitals with a median operating margin of -0.7%. The target's margin of -12.8% places it below the state median. Among 148 size-comparable peers (102-410 beds), the median margin is 4.9%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (102-410), prioritizing same-state peers. 148 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| BAYLOR S&W MEDICAL CENTER - IR (Target) | TX | 205 | $244.7M | -12.8% |
| CHILDRENS MEDICAL CENTER OF DA | TX | 377 | $1.56B | 10.3% |
| DELL CHILDRENS MEDICAL CENTER | TX | 262 | $901.9M | 25.5% |
| DOCTORS HOSPITAL AT RENAISSANC | TX | 394 | $847.8M | 9.2% |
| ASCENSION SETON MEDICAL CENTER | TX | 391 | $702.5M | 12.6% |
| DRISCOLL CHILDRENS HOSPITAL | TX | 215 | $694.3M | 29.4% |
| ROUND ROCK HOSPITAL | TX | 165 | $681.4M | 8.7% |
| METHODIST SUGAR LAND HOSPITAL | TX | 337 | $679.6M | 12.6% |
| METHODIST WILLOWBROOK HOSPITAL | TX | 346 | $661.8M | 10.8% |
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: $18.0M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $5.1M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $4.9M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $4.8M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.0M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $157K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-31.4M |
| + RCM Uplift | +$18.0M |
| Pro Forma EBITDA | $-13.4M |
| Current Margin | -12.8% |
| Pro Forma Margin | -5.5% |
| WC Released (1x) | $9.4M |
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 | $-48.3M | $-27.0M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-48.3M | $-45.4M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-43.5M | $-1.6M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-43.5M | $-14.6M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-53.1M | $-101.3M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-53.1M | $-128.7M | 0.00x | -100.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| High | Negative operating margin | RCM uplift bridge shows clear path to profitability; working capital release provides near-term cash cushion |
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
- 148 hospitals with 102-410 beds
- Same-state prioritization (n=149)
- Comp margins: P25=-6.7% / P50=4.9% / P75=13.4%
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.