KINDRED HOSPITAL CLEAR LAKE
1. Target Overview & Investment Thesis
KINDRED HOSPITAL CLEAR LAKE is a 110-bed community hospital in HARRIS, TX with $37.8M in net patient revenue and a 0.9% operating margin. The hospital serves a payer mix of 35.1% Medicare, 0.0% Medicaid, and 64.9% commercial.
Thesis: Undervalued. Our ML models identify $2.8M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 0.9% to 8.3% (+736bps).
| Net Revenue HCRIS | $37.8M |
| Current EBITDA COMPUTED | $355K |
| Operating Margin COMPUTED | 0.9% |
| Occupancy HCRIS | 43.3% |
| Revenue / Bed COMPUTED | $343K |
| Net-to-Gross HCRIS | 13.2% |
| 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 0.9% places it above the state median. Among 189 size-comparable peers (55-220 beds), the median margin is 2.5%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (55-220), prioritizing same-state peers. 189 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| KINDRED HOSPITAL CLEAR LAKE (Target) | TX | 110 | $37.8M | 0.9% |
| DRISCOLL CHILDRENS HOSPITAL | TX | 215 | $694.3M | 29.4% |
| ROUND ROCK HOSPITAL | TX | 165 | $681.4M | 8.7% |
| THE HEART HOSPITAL BAYLOR PLAN | TX | 109 | $464.6M | 25.7% |
| COVENANT CHILDRENS HOSPITAL | TX | 181 | $410.3M | 15.5% |
| COLLEGE STATION HOSPITAL | TX | 135 | $397.7M | -0.9% |
| MEMORIAL HERMANN KATY | TX | 196 | $381.4M | 13.3% |
| CHILDRENS HOSPITAL OF SAN ANTO | TX | 174 | $376.5M | -2.8% |
| MEDICAL CITY FORT WORTH | TX | 209 | $375.9M | 22.9% |
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: $2.8M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $793K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $755K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $748K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $460K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $24K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $355K |
| + RCM Uplift | +$2.8M |
| Pro Forma EBITDA | $3.1M |
| Current Margin | 0.9% |
| Pro Forma Margin | 8.3% |
| WC Released (1x) | $1.4M |
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 | $546K | $30.1M | 55.20x | 123.0% |
| Base (11x exit) | 10.0x | 11.0x | $546K | $33.3M | 61.04x | 127.6% |
| Bull Case | 9.0x | 11.0x | $492K | $42.7M | 86.86x | 144.2% |
| Bull (12x exit) | 9.0x | 12.0x | $492K | $46.7M | 95.05x | 148.7% |
| Bear Case | 11.0x | 10.0x | $601K | $16.1M | 26.74x | 93.0% |
| Bear (11x exit) | 11.0x | 11.0x | $601K | $17.9M | 29.74x | 97.1% |
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
- 189 hospitals with 55-220 beds
- Same-state prioritization (n=190)
- Comp margins: P25=-9.5% / P50=2.5% / P75=11.8%
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.