PROV ST MARY MEDICAL CENTER
1. Target Overview & Investment Thesis
PROV ST MARY MEDICAL CENTER is a 95-bed suburban community hospital in WALLA WALLA, WA with $211.5M in net patient revenue and a -11.7% operating margin. The hospital serves a payer mix of 47.9% Medicare, 1.2% Medicaid, and 50.9% commercial.
Thesis: Turnaround. Our ML models identify $15.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -11.7% to -4.4% (+736bps).
| Net Revenue HCRIS | $211.5M |
| Current EBITDA COMPUTED | $-24.8M |
| Operating Margin COMPUTED | -11.7% |
| Occupancy HCRIS | 64.7% |
| Revenue / Bed COMPUTED | $2.2M |
| Net-to-Gross HCRIS | 30.0% |
| Distress Probability ML | 43.4% |
2. Market Context & Competitive Position
WA has 104 Medicare-certified hospitals with a median operating margin of -10.3%. The target's margin of -11.7% places it below the state median. Among 30 size-comparable peers (48-190 beds), the median margin is -7.6%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (48-190), prioritizing same-state peers. 30 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| PROV ST MARY MEDICAL CENTER (Target) | WA | 95 | $211.5M | -11.7% |
| CENTRAL WASHINGTON HOSPITAL | WA | 176 | $550.9M | -2.0% |
| LEGACY SALMON CREEK HOSPITAL | WA | 178 | $479.7M | -5.2% |
| SWEDISH MEDICAL CENTER CHERRY | WA | 181 | $463.4M | -15.0% |
| PHD#1 DBA SKAGIT VALLEY HOSPI | WA | 137 | $414.3M | -17.9% |
| ST. JOHN MEDICAL CENTER | WA | 122 | $335.0M | -4.4% |
| SWEDISH ISSAQUAH | WA | 157 | $282.7M | -6.1% |
| ST FRANCIS HOSPITAL | WA | 118 | $274.2M | -0.5% |
| SWEDISH EDMONDS | WA | 188 | $244.6M | -31.3% |
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: $15.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $4.4M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $4.2M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $4.2M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $2.6M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $135K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-24.8M |
| + RCM Uplift | +$15.6M |
| Pro Forma EBITDA | $-9.2M |
| Current Margin | -11.7% |
| Pro Forma Margin | -4.4% |
| WC Released (1x) | $8.1M |
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 | $-38.2M | $-7.9M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-38.2M | $-21.1M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-34.3M | $17.9M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-34.3M | $9.4M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-42.0M | $-73.4M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-42.0M | $-94.3M | 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
- 30 hospitals with 48-190 beds
- Same-state prioritization (n=31)
- Comp margins: P25=-20.4% / P50=-7.6% / P75=-2.1%
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.