PROVIDENCE HOLY FAMILY HOSPITAL
1. Target Overview & Investment Thesis
PROVIDENCE HOLY FAMILY HOSPITAL is a 194-bed suburban community hospital in SPOKANE, WA with $244.0M in net patient revenue and a -11.0% operating margin. The hospital serves a payer mix of 27.5% Medicare, 1.8% Medicaid, and 70.7% commercial.
Thesis: Undervalued. Our ML models identify $18.0M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -11.0% to -3.6% (+736bps).
| Net Revenue HCRIS | $244.0M |
| Current EBITDA COMPUTED | $-26.8M |
| Operating Margin COMPUTED | -11.0% |
| Occupancy HCRIS | 57.1% |
| Revenue / Bed COMPUTED | $1.3M |
| Net-to-Gross HCRIS | 24.7% |
| Distress Probability ML | 45.6% |
2. Market Context & Competitive Position
WA has 104 Medicare-certified hospitals with a median operating margin of -10.3%. The target's margin of -11.0% places it below the state median. Among 35 size-comparable peers (97-388 beds), the median margin is -7.4%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (97-388), prioritizing same-state peers. 35 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| PROVIDENCE HOLY FAMILY HOSPITA (Target) | WA | 194 | $244.0M | -11.0% |
| SEATTLE CHILDRENS HOSPITAL | WA | 350 | $1.70B | 5.7% |
| TACOMA GENERAL ALLENMORE HOSPI | WA | 374 | $1.33B | 5.1% |
| VIRGINIA MASON MEDICAL CENTER | WA | 222 | $1.11B | -23.2% |
| VALLEY MEDICAL CENTER | WA | 329 | $802.5M | -14.9% |
| EVERGREEN HEALTHCARE | WA | 304 | $789.3M | -18.9% |
| ST. JOSEPH MEDICAL CENTER | WA | 208 | $750.0M | 1.9% |
| KADLEC REGIONAL MEDICAL CENTER | WA | 278 | $737.7M | -7.4% |
| ST JOSEPH MEDICAL CENTER | WA | 337 | $690.6M | -12.2% |
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: $18.0M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $5.1M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $4.9M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $4.8M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.0M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $156K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-26.8M |
| + RCM Uplift | +$18.0M |
| Pro Forma EBITDA | $-8.9M |
| Current Margin | -11.0% |
| Pro Forma Margin | -3.6% |
| WC Released (1x) | $9.4M |
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 | $-41.3M | $2.7M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-41.3M | $-10.5M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-37.1M | $35.4M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-37.1M | $27.6M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-45.4M | $-73.7M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-45.4M | $-95.8M | 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
- 35 hospitals with 97-388 beds
- Same-state prioritization (n=36)
- Comp margins: P25=-15.0% / P50=-7.4% / P75=-1.0%
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.