CASCADE VALLEY HOSPITAL
1. Target Overview & Investment Thesis
CASCADE VALLEY HOSPITAL is a 48-bed suburban community hospital in SNOHOMISH, WA with $79.2M in net patient revenue and a 21.3% operating margin. The hospital serves a payer mix of 26.5% Medicare, 1.6% Medicaid, and 71.9% commercial.
Thesis: Turnaround. Our ML models identify $5.8M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 21.3% to 28.7% (+736bps).
| Net Revenue HCRIS | $79.2M |
| Current EBITDA COMPUTED | $16.9M |
| Operating Margin COMPUTED | 21.3% |
| Occupancy HCRIS | 47.9% |
| Revenue / Bed COMPUTED | $1.7M |
| Net-to-Gross HCRIS | 29.1% |
| Distress Probability ML | 47.0% |
2. Market Context & Competitive Position
WA has 104 Medicare-certified hospitals with a median operating margin of -10.3%. The target's margin of 21.3% places it above the state median. Among 41 size-comparable peers (24-96 beds), the median margin is -9.3%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (24-96), prioritizing same-state peers. 41 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CASCADE VALLEY HOSPITAL (Target) | WA | 48 | $79.2M | 21.3% |
| OLYMPIC MEDICAL CENTER | WA | 78 | $237.9M | -12.2% |
| MULTICARE AUBURN MEDICAL CENTE | WA | 84 | $214.7M | -21.1% |
| PROV ST MARY MEDICAL CENTER | WA | 95 | $211.5M | -11.7% |
| JEFFERSON GENERAL HOSPITAL | WA | 25 | $148.0M | -3.0% |
| SAMARITAN HOSPITAL | WA | 48 | $137.4M | -4.1% |
| MASON GENERAL HOSPITAL | WA | 25 | $127.1M | -5.3% |
| KITTITAS VALLEY COMMUNITY HOSP | WA | 25 | $121.0M | 2.3% |
| TRI-STATE MEMORIAL HOSPITAL | WA | 25 | $107.0M | 0.8% |
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: $5.8M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.7M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.6M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.6M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $964K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $51K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $16.9M |
| + RCM Uplift | +$5.8M |
| Pro Forma EBITDA | $22.7M |
| Current Margin | 21.3% |
| Pro Forma Margin | 28.7% |
| WC Released (1x) | $3.0M |
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 | $26.0M | $169.8M | 6.53x | 45.5% |
| Base (11x exit) | 10.0x | 11.0x | $26.0M | $195.2M | 7.51x | 49.7% |
| Bull Case | 9.0x | 11.0x | $23.4M | $222.9M | 9.53x | 57.0% |
| Bull (12x exit) | 9.0x | 12.0x | $23.4M | $250.1M | 10.69x | 60.6% |
| Bear Case | 11.0x | 10.0x | $28.6M | $132.2M | 4.62x | 35.8% |
| Bear (11x exit) | 11.0x | 11.0x | $28.6M | $154.7M | 5.41x | 40.2% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Standard execution risk | RCM improvement requires management buy-in and 12-18 month implementation timeline |
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
- 41 hospitals with 24-96 beds
- Same-state prioritization (n=42)
- Comp margins: P25=-14.0% / P50=-9.3% / P75=-3.9%
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.