REAGAN MEMORIAL HOSPITAL
1. Target Overview & Investment Thesis
REAGAN MEMORIAL HOSPITAL is a 7-bed community hospital in REAGAN, TX with $7.1M in net patient revenue and a -100.0% operating margin. The hospital serves a payer mix of 82.7% Medicare, 0.0% Medicaid, and 17.3% commercial.
Thesis: Turnaround. Our ML models identify $531K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -100.0% to -110.8% (+749bps).
| Net Revenue HCRIS | $7.1M |
| Current EBITDA COMPUTED | $-8.4M |
| Operating Margin COMPUTED | -100.0% |
| Occupancy HCRIS | 5.0% |
| Revenue / Bed COMPUTED | $1.0M |
| Net-to-Gross HCRIS | 98.1% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
TX has 583 Medicare-certified hospitals with a median operating margin of -0.7%. The target's margin of -100.0% places it below the state median. Among 23 size-comparable peers (4-14 beds), the median margin is -40.3%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (4-14), prioritizing same-state peers. 23 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| REAGAN MEMORIAL HOSPITAL (Target) | TX | 7 | $7.1M | -100.0% |
| HERITAGE PARK SURGICAL HOSPITA | TX | 12 | $52.5M | 19.2% |
| BAYTOWN MEDICAL CENTER LP | TX | 14 | $51.1M | -28.5% |
| FAITH COMMUNITY HOSPITAL | TX | 13 | $40.2M | 9.0% |
| MEMORIAL HERMANN KINGWOOD | TX | 10 | $34.1M | 14.5% |
| CORNERSTONE REGIONAL HOSPITAL | TX | 14 | $26.3M | 3.3% |
| CHRISTUS MFH WINNSBORO | TX | 14 | $24.3M | 15.1% |
| ALTUS HOUSTON HOSPITAL LP | TX | 10 | $18.3M | -45.7% |
| HANSFORD COUNTY HOSPITAL DISTR | TX | 14 | $16.0M | -50.0% |
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: $531K (749bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $149K | +210bp | 18mo |
| Denial Rate Reduction | 12.0% | 6.5% | $145K | +204bp | 12mo |
| Cost to Collect | 4.5% | 2.5% | $142K | +200bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $86K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +14bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-8.4M |
| + RCM Uplift | +$531K |
| Pro Forma EBITDA | $-7.9M |
| Current Margin | -100.0% |
| Pro Forma Margin | -110.8% |
| WC Released (1x) | $272K |
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 | $-12.9M | $-50.0M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-12.9M | $-59.2M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-11.6M | $-61.6M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-11.6M | $-70.6M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-14.2M | $-48.4M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-14.2M | $-57.9M | 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 |
| Medium | Heavy Medicare dependence | Medicare comprises 82.7% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
| Medium | Low occupancy | At 5.0%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
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
- 23 hospitals with 4-14 beds
- Same-state prioritization (n=36)
- Comp margins: P25=-50.0% / P50=-40.3% / P75=-8.8%
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.