LEWISGALEHOSPITAL - ALLEGHANY
1. Target Overview & Investment Thesis
LEWISGALEHOSPITAL - ALLEGHANY is a 95-bed suburban community hospital in ALLEGHANY, VA with $42.4M in net patient revenue and a 13.1% operating margin. The hospital serves a payer mix of 39.8% Medicare, 2.3% Medicaid, and 57.9% commercial.
Thesis: Turnaround. Our ML models identify $3.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 13.1% to 20.5% (+736bps).
| Net Revenue HCRIS | $42.4M |
| Current EBITDA COMPUTED | $5.6M |
| Operating Margin COMPUTED | 13.1% |
| Occupancy HCRIS | 14.4% |
| Revenue / Bed COMPUTED | $447K |
| Net-to-Gross HCRIS | 16.0% |
| Distress Probability ML | 56.0% |
2. Market Context & Competitive Position
VA has 111 Medicare-certified hospitals with a median operating margin of 4.4%. The target's margin of 13.1% places it above the state median. Among 54 size-comparable peers (48-190 beds), the median margin is 6.7%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (48-190), prioritizing same-state peers. 54 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| LEWISGALEHOSPITAL - ALLEGHANY (Target) | VA | 95 | $42.4M | 13.1% |
| INOVA LOUDOUN HOSPITAL CENTER | VA | 189 | $510.3M | 22.9% |
| INOVA FAIR OAKS HOSPITAL | VA | 174 | $382.5M | 28.5% |
| SENTARA MARTHA JEFFERSON HOSPI | VA | 150 | $362.0M | -6.4% |
| SENTARA PRINCESS ANNE HOSPITAL | VA | 174 | $361.5M | 10.3% |
| MARYVIEW HOSPITAL | VA | 160 | $348.0M | -2.5% |
| ST. FRANCIS MEDICAL CENTER | VA | 128 | $339.6M | 8.6% |
| SENTARA OBICI HOSPITAL | VA | 186 | $329.1M | 15.1% |
| SENTARA CAREPLEX HOSPITAL | VA | 169 | $302.5M | 9.3% |
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: $3.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $891K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $849K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $840K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $516K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $27K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $5.6M |
| + RCM Uplift | +$3.1M |
| Pro Forma EBITDA | $8.7M |
| Current Margin | 13.1% |
| Pro Forma Margin | 20.5% |
| WC Released (1x) | $1.6M |
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 | $8.6M | $67.9M | 7.94x | 51.3% |
| Base (11x exit) | 10.0x | 11.0x | $8.6M | $77.5M | 9.06x | 55.4% |
| Bull Case | 9.0x | 11.0x | $7.7M | $90.6M | 11.76x | 63.7% |
| Bull (12x exit) | 9.0x | 12.0x | $7.7M | $101.1M | 13.13x | 67.3% |
| Bear Case | 11.0x | 10.0x | $9.4M | $49.5M | 5.26x | 39.4% |
| Bear (11x exit) | 11.0x | 11.0x | $9.4M | $57.6M | 6.11x | 43.6% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Low occupancy | At 14.4%, 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 56.0% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
| 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
- 54 hospitals with 48-190 beds
- Same-state prioritization (n=55)
- Comp margins: P25=-6.0% / P50=6.7% / P75=16.7%
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.