THE HEART HOSPITAL BAYLOR DENTON
1. Target Overview & Investment Thesis
THE HEART HOSPITAL BAYLOR DENTON is a 22-bed suburban community hospital in nan, TX with $79.5M in net patient revenue and a 28.2% operating margin. The hospital serves a payer mix of 41.4% Medicare, 0.0% Medicaid, and 58.6% commercial.
Thesis: Turnaround. Our ML models identify $5.8M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 28.2% to 35.6% (+736bps).
| Net Revenue HCRIS | $79.5M |
| Current EBITDA COMPUTED | $22.4M |
| Operating Margin COMPUTED | 28.2% |
| Occupancy HCRIS | 53.6% |
| Revenue / Bed COMPUTED | $3.6M |
| Net-to-Gross HCRIS | 29.3% |
| Distress Probability ML | 43.0% |
2. Market Context & Competitive Position
TX has 583 Medicare-certified hospitals with a median operating margin of -0.7%. The target's margin of 28.2% places it above the state median. Among 234 size-comparable peers (11-44 beds), the median margin is -8.9%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (11-44), prioritizing same-state peers. 234 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| THE HEART HOSPITAL BAYLOR DENT (Target) | TX | 22 | $79.5M | 28.2% |
| WISE HEALTH SYSTEM - PARKWAY | TX | 36 | $361.0M | -15.5% |
| CORYELL MEMORIAL HOSPITAL | TX | 25 | $305.9M | -1.5% |
| TEXAS ORTHOPEDIC HOSPITA | TX | 42 | $237.8M | 46.3% |
| METHODIST HOSPITAL FOR SURGERY | TX | 32 | $178.4M | 22.8% |
| TEXAS SPINE AND JOINT HOSPITAL | TX | 20 | $147.3M | 30.3% |
| NORTH CENTRAL SURGICAL HOSPITA | TX | 24 | $143.6M | 32.0% |
| SCOTT AND WHITE HOSPITAL TAYLO | TX | 25 | $139.7M | -47.5% |
| BAYLOR SURGICAL HOSPITAL AT FO | TX | 30 | $136.0M | 14.8% |
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: $5.8M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.7M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.6M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.6M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $967K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $51K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $22.4M |
| + RCM Uplift | +$5.8M |
| Pro Forma EBITDA | $28.3M |
| Current Margin | 28.2% |
| Pro Forma Margin | 35.6% |
| WC Released (1x) | $3.0M |
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 | $34.5M | $206.3M | 5.98x | 43.0% |
| Base (11x exit) | 10.0x | 11.0x | $34.5M | $238.1M | 6.91x | 47.2% |
| Bull Case | 9.0x | 11.0x | $31.0M | $268.6M | 8.66x | 54.0% |
| Bull (12x exit) | 9.0x | 12.0x | $31.0M | $302.2M | 9.74x | 57.7% |
| Bear Case | 11.0x | 10.0x | $37.9M | $165.9M | 4.37x | 34.3% |
| Bear (11x exit) | 11.0x | 11.0x | $37.9M | $194.8M | 5.14x | 38.7% |
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
- 234 hospitals with 11-44 beds
- Same-state prioritization (n=235)
- Comp margins: P25=-38.7% / P50=-8.9% / P75=8.9%
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 27, 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.