THE HOSPITALS OF PROVIDENCE SIERRA C
1. Target Overview & Investment Thesis
THE HOSPITALS OF PROVIDENCE SIERRA C is a 282-bed suburban community hospital in EL PASO, TX with $249.9M in net patient revenue and a 7.5% operating margin. The hospital serves a payer mix of 20.3% Medicare, 3.0% Medicaid, and 76.7% commercial.
Thesis: Platform Growth. Our ML models identify $18.4M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 7.5% to 14.9% (+736bps).
| Net Revenue HCRIS | $249.9M |
| Current EBITDA COMPUTED | $18.7M |
| Operating Margin COMPUTED | 7.5% |
| Occupancy HCRIS | 38.5% |
| Revenue / Bed COMPUTED | $886K |
| Net-to-Gross HCRIS | 9.2% |
| Distress Probability ML | 49.0% |
2. Market Context & Competitive Position
TX has 583 Medicare-certified hospitals with a median operating margin of -0.7%. The target's margin of 7.5% places it above the state median. Among 133 size-comparable peers (141-564 beds), the median margin is 4.5%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (141-564), prioritizing same-state peers. 133 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| THE HOSPITALS OF PROVIDENCE SI (Target) | TX | 282 | $249.9M | 7.5% |
| CHILDRENS MEDICAL CENTER OF DA | TX | 377 | $1.56B | 10.3% |
| COOK CHILDRENS MEDICAL CENTER | TX | 423 | $1.51B | 16.5% |
| CHRISTUS MOTHER FRANCES HOSP-T | TX | 518 | $971.6M | -17.0% |
| DELL CHILDRENS MEDICAL CENTER | TX | 262 | $901.9M | 25.5% |
| ST. DAVIDS MEDICAL CENTER | TX | 525 | $870.9M | 26.4% |
| DOCTORS HOSPITAL AT RENAISSANC | TX | 394 | $847.8M | 9.2% |
| TEXAS HEALTH DALLAS | TX | 558 | $710.6M | -1.9% |
| LAS PALMAS MEDICAL CENTER | TX | 533 | $704.7M | 41.1% |
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: $18.4M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $5.2M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $5.0M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $4.9M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.0M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $160K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $18.7M |
| + RCM Uplift | +$18.4M |
| Pro Forma EBITDA | $37.1M |
| Current Margin | 7.5% |
| Pro Forma Margin | 14.9% |
| WC Released (1x) | $9.6M |
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 | $28.8M | $307.4M | 10.67x | 60.6% |
| Base (11x exit) | 10.0x | 11.0x | $28.8M | $347.5M | 12.07x | 64.6% |
| Bull Case | 9.0x | 11.0x | $25.9M | $417.6M | 16.11x | 74.4% |
| Bull (12x exit) | 9.0x | 12.0x | $25.9M | $463.2M | 17.87x | 78.0% |
| Bear Case | 11.0x | 10.0x | $31.7M | $206.1M | 6.51x | 45.4% |
| Bear (11x exit) | 11.0x | 11.0x | $31.7M | $237.0M | 7.48x | 49.5% |
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
- 133 hospitals with 141-564 beds
- Same-state prioritization (n=134)
- Comp margins: P25=-7.9% / P50=4.5% / P75=14.7%
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.