DELTA COMMUNITY HOSPITAL
1. Target Overview & Investment Thesis
DELTA COMMUNITY HOSPITAL is a 18-bed suburban community hospital in MILLARD, UT with $15.2M in net patient revenue and a 5.3% operating margin. The hospital serves a payer mix of 26.5% Medicare, 24.6% Medicaid, and 48.9% commercial.
Thesis: Turnaround. Our ML models identify $1.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 5.3% to 12.6% (+736bps).
| Net Revenue HCRIS | $15.2M |
| Current EBITDA COMPUTED | $796K |
| Operating Margin COMPUTED | 5.3% |
| Occupancy HCRIS | 10.0% |
| Revenue / Bed COMPUTED | $842K |
| Net-to-Gross HCRIS | 60.6% |
| Distress Probability ML | 65.6% |
2. Market Context & Competitive Position
UT has 59 Medicare-certified hospitals with a median operating margin of 8.0%. The target's margin of 5.3% places it below the state median. Among 20 size-comparable peers (9-36 beds), the median margin is -0.5%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (9-36), prioritizing same-state peers. 20 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| DELTA COMMUNITY HOSPITAL (Target) | UT | 18 | $15.2M | 5.3% |
| GUNNISON VALLEY HOSPITAL | UT | 25 | $130.4M | -6.4% |
| UINTAH BASIN MEDICAL CENTER | UT | 33 | $119.9M | 1.8% |
| MOUNTAIN WEST MEDICAL CENTER | UT | 36 | $96.1M | 38.5% |
| SPANISH FORK HOSPITAL | UT | 16 | $65.3M | 0.5% |
| CENTRAL VALLEY MEDICAL CENTER | UT | 25 | $60.7M | 4.3% |
| SEVIER VALLEY HOSPITAL | UT | 24 | $58.2M | 14.5% |
| HEBER VALLEY HOSPITAL | UT | 19 | $55.8M | 8.4% |
| MOAB REGIONAL HOSPITAL | UT | 17 | $44.2M | -3.4% |
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: $1.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $318K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $303K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $300K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $184K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $796K |
| + RCM Uplift | +$1.1M |
| Pro Forma EBITDA | $1.9M |
| Current Margin | 5.3% |
| Pro Forma Margin | 12.6% |
| WC Released (1x) | $581K |
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 | $1.2M | $16.4M | 13.39x | 68.0% |
| Base (11x exit) | 10.0x | 11.0x | $1.2M | $18.4M | 15.05x | 72.0% |
| Bull Case | 9.0x | 11.0x | $1.1M | $22.5M | 20.43x | 82.8% |
| Bull (12x exit) | 9.0x | 12.0x | $1.1M | $24.9M | 22.58x | 86.5% |
| Bear Case | 11.0x | 10.0x | $1.3M | $10.4M | 7.74x | 50.6% |
| Bear (11x exit) | 11.0x | 11.0x | $1.3M | $11.9M | 8.84x | 54.6% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Elevated Medicaid exposure (24.6%) | Medicaid reimburses below cost in most states. Mitigant: denial reduction lever has highest impact on Medicaid claims |
| Medium | Low occupancy | At 10.0%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
| High | Elevated distress probability | Model estimates 65.6% 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
- 20 hospitals with 9-36 beds
- Same-state prioritization (n=21)
- Comp margins: P25=-9.2% / P50=-0.5% / P75=5.8%
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.