CHARLESTON SURGICAL HOSPITAL
1. Target Overview & Investment Thesis
CHARLESTON SURGICAL HOSPITAL is a 7-bed community hospital in KANAWHA, WV with $35.7M in net patient revenue and a 17.7% operating margin. The hospital serves a payer mix of 26.8% Medicare, 0.0% Medicaid, and 73.2% commercial.
Thesis: Turnaround. Our ML models identify $2.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 17.7% to 25.0% (+736bps).
| Net Revenue HCRIS | $35.7M |
| Current EBITDA COMPUTED | $6.3M |
| Operating Margin COMPUTED | 17.7% |
| Occupancy HCRIS | 12.3% |
| Revenue / Bed COMPUTED | $5.1M |
| Net-to-Gross HCRIS | 49.4% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
WV has 62 Medicare-certified hospitals with a median operating margin of -0.3%. The target's margin of 17.7% places it above the state median. Among 193 size-comparable peers (4-14 beds), the median margin is -11.0%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (4-14), prioritizing same-state peers. 193 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CHARLESTON SURGICAL HOSPITAL (Target) | WV | 7 | $35.7M | 17.7% |
| WENATCHEE VALLEY HOSPITAL | WA | 11 | $277.5M | -4.9% |
| NATIONAL JEWISH HEALTH | CO | 13 | $150.4M | -50.0% |
| FRANCISCAN HEALTH HAMMOND | IN | 10 | $117.7M | -4.3% |
| OAK LEAF SURGICAL HOSPITAL LLC | WI | 13 | $109.8M | 34.1% |
| JEWISH HOME FOR THE AGED | CA | 13 | $88.0M | -48.0% |
| OCONTO HOSPITAL & MEDICAL CENT | WI | 10 | $80.4M | 1.1% |
| SUMMIT PACIFIC MEDICAL CENTER | WA | 10 | $73.6M | 9.1% |
| MEE MEMORIAL HOSPITAL | CA | 13 | $67.6M | 3.3% |
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: $2.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $749K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $714K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $706K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $434K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $23K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $6.3M |
| + RCM Uplift | +$2.6M |
| Pro Forma EBITDA | $8.9M |
| Current Margin | 17.7% |
| Pro Forma Margin | 25.0% |
| WC Released (1x) | $1.4M |
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 | $9.7M | $67.9M | 6.99x | 47.5% |
| Base (11x exit) | 10.0x | 11.0x | $9.7M | $77.8M | 8.02x | 51.6% |
| Bull Case | 9.0x | 11.0x | $8.7M | $89.6M | 10.26x | 59.3% |
| Bull (12x exit) | 9.0x | 12.0x | $8.7M | $100.4M | 11.49x | 62.9% |
| Bear Case | 11.0x | 10.0x | $10.7M | $51.6M | 4.83x | 37.0% |
| Bear (11x exit) | 11.0x | 11.0x | $10.7M | $60.2M | 5.64x | 41.3% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Low occupancy | At 12.3%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
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
- 193 hospitals with 4-14 beds
- Same-state prioritization (n=5)
- Comp margins: P25=-24.3% / P50=-11.0% / P75=2.6%
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.