CARILION FRANKLIN MEMORIAL HOSPITAL
1. Target Overview & Investment Thesis
CARILION FRANKLIN MEMORIAL HOSPITAL is a 37-bed suburban community hospital in nan, VA with $61.8M in net patient revenue and a -0.7% operating margin. The hospital serves a payer mix of 36.5% Medicare, 4.1% Medicaid, and 59.4% commercial.
Thesis: Turnaround. Our ML models identify $4.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -0.7% to 6.6% (+736bps).
| Net Revenue HCRIS | $61.8M |
| Current EBITDA COMPUTED | $-443K |
| Operating Margin COMPUTED | -0.7% |
| Occupancy HCRIS | 48.1% |
| Revenue / Bed COMPUTED | $1.7M |
| Net-to-Gross HCRIS | 28.5% |
| Distress Probability ML | 47.9% |
2. Market Context & Competitive Position
VA has 111 Medicare-certified hospitals with a median operating margin of 4.4%. The target's margin of -0.7% places it below the state median. Among 40 size-comparable peers (18-74 beds), the median margin is 4.8%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (18-74), prioritizing same-state peers. 40 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CARILION FRANKLIN MEMORIAL HOS (Target) | VA | 37 | $61.8M | -0.7% |
| LONESOME PINE HOSPITAL | VA | 56 | $175.6M | 17.2% |
| CULPEPER MEMORIAL HOSPITAL | VA | 70 | $153.9M | 9.3% |
| COMMUNITY MEMORIAL HOSPITAL | VA | 66 | $135.2M | -31.0% |
| STAFFORD HOSPITAL | VA | 61 | $127.9M | 5.7% |
| RIVERSIDE WALTER REED | VA | 67 | $108.2M | 12.5% |
| HALIFAX REGIONAL HOSPITAL | VA | 44 | $104.6M | -16.5% |
| SHORE MEMORIAL HOSPITAL | VA | 52 | $103.1M | 11.4% |
| WARREN MEMORIAL HOSPITAL | VA | 46 | $97.7M | -6.4% |
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: $4.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.3M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.2M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.2M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $752K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $40K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-443K |
| + RCM Uplift | +$4.5M |
| Pro Forma EBITDA | $4.1M |
| Current Margin | -0.7% |
| Pro Forma Margin | 6.6% |
| WC Released (1x) | $2.4M |
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 | $-681K | $42.6M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-681K | $46.6M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-613K | $61.4M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-613K | $66.8M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-749K | $20.0M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-749K | $21.8M | 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 |
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
- 40 hospitals with 18-74 beds
- Same-state prioritization (n=41)
- Comp margins: P25=-13.8% / P50=4.8% / P75=14.9%
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 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.