TEXAS HEALTH CLEBURNE
1. Target Overview & Investment Thesis
TEXAS HEALTH CLEBURNE is a 75-bed suburban community hospital in JOHNSON, TX with $84.9M in net patient revenue and a 0.1% operating margin. The hospital serves a payer mix of 23.5% Medicare, 1.6% Medicaid, and 74.9% commercial.
Thesis: Turnaround. Our ML models identify $6.3M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 0.1% to 7.4% (+736bps).
| Net Revenue HCRIS | $84.9M |
| Current EBITDA COMPUTED | $74K |
| Operating Margin COMPUTED | 0.1% |
| Occupancy HCRIS | 50.7% |
| Revenue / Bed COMPUTED | $1.1M |
| Net-to-Gross HCRIS | 25.3% |
| Distress Probability ML | 46.7% |
2. Market Context & Competitive Position
TX has 583 Medicare-certified hospitals with a median operating margin of -0.7%. The target's margin of 0.1% places it above the state median. Among 216 size-comparable peers (38-150 beds), the median margin is 1.5%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (38-150), prioritizing same-state peers. 216 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| TEXAS HEALTH CLEBURNE (Target) | TX | 75 | $84.9M | 0.1% |
| THE HEART HOSPITAL BAYLOR PLAN | TX | 109 | $464.6M | 25.7% |
| COLLEGE STATION HOSPITAL | TX | 135 | $397.7M | -0.9% |
| DECATUR COMMUNITY HOSPITAL | TX | 81 | $361.0M | -15.5% |
| CHILDRENS MEDICAL CENTER OF PL | TX | 72 | $336.7M | 20.9% |
| BAYLOR SW MEDICAL CENTER- WAXA | TX | 123 | $273.6M | 15.9% |
| BAYLOR HEART AND VASCULAR HOSP | TX | 53 | $255.0M | 30.0% |
| TEXAS ORTHOPEDIC HOSPITA | TX | 42 | $237.8M | 46.3% |
| PRESBYTERIAN HOSP FLOWER MOUND | TX | 99 | $215.0M | 28.3% |
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: $6.3M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.8M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.7M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.7M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $1.0M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $54K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $74K |
| + RCM Uplift | +$6.3M |
| Pro Forma EBITDA | $6.3M |
| Current Margin | 0.1% |
| Pro Forma Margin | 7.4% |
| WC Released (1x) | $3.3M |
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 | $114K | $63.0M | 550.82x | 253.4% |
| Base (11x exit) | 10.0x | 11.0x | $114K | $69.3M | 606.23x | 260.2% |
| Bull Case | 9.0x | 11.0x | $103K | $90.0M | 874.34x | 287.6% |
| Bull (12x exit) | 9.0x | 12.0x | $103K | $98.2M | 954.12x | 294.4% |
| Bear Case | 11.0x | 10.0x | $126K | $31.7M | 252.03x | 202.2% |
| Bear (11x exit) | 11.0x | 11.0x | $126K | $34.9M | 277.55x | 208.1% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Standard execution risk | RCM improvement requires management buy-in and 12-18 month implementation timeline |
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
- 216 hospitals with 38-150 beds
- Same-state prioritization (n=217)
- Comp margins: P25=-11.9% / P50=1.5% / P75=11.7%
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.