CASCADE MEDICAL CENTER
1. Target Overview & Investment Thesis
CASCADE MEDICAL CENTER is a 9-bed community hospital in CHELAN, WA with $20.7M in net patient revenue and a -24.9% operating margin. The hospital serves a payer mix of 74.3% Medicare, 0.0% Medicaid, and 25.7% commercial.
Thesis: Turnaround. Our ML models identify $1.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -24.9% to -17.6% (+736bps).
| Net Revenue HCRIS | $20.7M |
| Current EBITDA COMPUTED | $-5.2M |
| Operating Margin COMPUTED | -24.9% |
| Occupancy HCRIS | 39.3% |
| Revenue / Bed COMPUTED | $2.3M |
| Net-to-Gross HCRIS | 65.2% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
WA has 104 Medicare-certified hospitals with a median operating margin of -10.3%. The target's margin of -24.9% places it below the state median. Among 11 size-comparable peers (4-18 beds), the median margin is -6.2%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (4-18), prioritizing same-state peers. 11 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CASCADE MEDICAL CENTER (Target) | WA | 9 | $20.7M | -24.9% |
| WENATCHEE VALLEY HOSPITAL | WA | 11 | $277.5M | -4.9% |
| SUMMIT PACIFIC MEDICAL CENTER | WA | 10 | $73.6M | 9.1% |
| KLICKITAT VALLEY HEALTH | WA | 16 | $32.3M | -11.7% |
| FORKS COMMUNITY HOSPITAL | WA | 17 | $31.9M | -23.5% |
| WILLAPA HARBOR HOSPITAL | WA | 10 | $26.5M | -1.1% |
| PEACE ISLAND MEDICAL CENTER | WA | 10 | $26.1M | -4.5% |
| NORTH VALLEY HOSPITAL | WA | 18 | $25.9M | -6.2% |
| SKYLINE HOSPITAL | WA | 14 | $21.1M | -13.0% |
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: $1.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $435K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $414K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $410K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $252K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $13K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-5.2M |
| + RCM Uplift | +$1.5M |
| Pro Forma EBITDA | $-3.6M |
| Current Margin | -24.9% |
| Pro Forma Margin | -17.6% |
| WC Released (1x) | $794K |
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 | $-7.9M | $-18.8M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-7.9M | $-23.3M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-7.1M | $-20.8M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-7.1M | $-24.8M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-8.7M | $-23.9M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-8.7M | $-29.1M | 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 |
| Medium | Heavy Medicare dependence | Medicare comprises 74.3% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
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
- 11 hospitals with 4-18 beds
- Same-state prioritization (n=13)
- Comp margins: P25=-18.2% / P50=-6.2% / P75=-2.8%
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 27, 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.