CARROLLTON REGIONAL MEDICAL CENTER
1. Target Overview & Investment Thesis
CARROLLTON REGIONAL MEDICAL CENTER is a 89-bed under-performing / distressed in DENTON, TX with $73.0M in net patient revenue and a -14.0% operating margin. The hospital serves a payer mix of 24.7% Medicare, 0.0% Medicaid, and 75.2% commercial.
Thesis: Turnaround. Our ML models identify $5.4M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -14.0% to -6.6% (+736bps).
| Net Revenue HCRIS | $73.0M |
| Current EBITDA COMPUTED | $-10.2M |
| Operating Margin COMPUTED | -14.0% |
| Occupancy HCRIS | 35.5% |
| Revenue / Bed COMPUTED | $820K |
| Net-to-Gross HCRIS | 24.4% |
| Distress Probability ML | 50.3% |
2. Market Context & Competitive Position
TX has 583 Medicare-certified hospitals with a median operating margin of -0.7%. The target's margin of -14.0% places it below the state median. Among 195 size-comparable peers (44-178 beds), the median margin is 2.4%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (44-178), prioritizing same-state peers. 195 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CARROLLTON REGIONAL MEDICAL CE (Target) | TX | 89 | $73.0M | -14.0% |
| ROUND ROCK HOSPITAL | TX | 165 | $681.4M | 8.7% |
| THE HEART HOSPITAL BAYLOR PLAN | TX | 109 | $464.6M | 25.7% |
| COLLEGE STATION HOSPITAL | TX | 135 | $397.7M | -0.9% |
| CHILDRENS HOSPITAL OF SAN ANTO | TX | 174 | $376.5M | -2.8% |
| DECATUR COMMUNITY HOSPITAL | TX | 81 | $361.0M | -15.5% |
| CHILDRENS MEDICAL CENTER OF PL | TX | 72 | $336.7M | 20.9% |
| MEDICAL CITY MCKINNEY | TX | 166 | $302.5M | -0.4% |
| ROUND ROCK MEDICAL CENTER | TX | 161 | $296.7M | 25.7% |
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: $5.4M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.5M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.5M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.4M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $888K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $47K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-10.2M |
| + RCM Uplift | +$5.4M |
| Pro Forma EBITDA | $-4.8M |
| Current Margin | -14.0% |
| Pro Forma Margin | -6.6% |
| WC Released (1x) | $2.8M |
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 | $-15.7M | $-13.5M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-15.7M | $-19.9M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-14.1M | $-7.3M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-14.1M | $-12.1M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-17.2M | $-35.2M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-17.2M | $-44.4M | 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 |
| High | Elevated distress probability | Model estimates 50.3% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
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
- 195 hospitals with 44-178 beds
- Same-state prioritization (n=196)
- Comp margins: P25=-10.7% / P50=2.4% / 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.