STAR VALLEY HOSPITAL
1. Target Overview & Investment Thesis
STAR VALLEY HOSPITAL is a 22-bed rural/critical access in LINCOLN, WY with $82.0M in net patient revenue and a -0.5% operating margin. The hospital serves a payer mix of 53.0% Medicare, 6.2% Medicaid, and 40.8% commercial.
Thesis: Turnaround. Our ML models identify $6.0M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -0.5% to 6.9% (+736bps).
| Net Revenue HCRIS | $82.0M |
| Current EBITDA COMPUTED | $-385K |
| Operating Margin COMPUTED | -0.5% |
| Occupancy HCRIS | 28.7% |
| Revenue / Bed COMPUTED | $3.7M |
| Net-to-Gross HCRIS | 66.7% |
| Distress Probability ML | 54.8% |
2. Market Context & Competitive Position
WY has 29 Medicare-certified hospitals with a median operating margin of -7.5%. The target's margin of -0.5% places it above the state median. Among 17 size-comparable peers (11-44 beds), the median margin is -12.4%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (11-44), prioritizing same-state peers. 17 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| STAR VALLEY HOSPITAL (Target) | WY | 22 | $82.0M | -0.5% |
| CODY REGIONAL HEALTH | WY | 25 | $122.8M | -0.9% |
| MEMORIAL HOSPITAL OF CONVERSE | WY | 25 | $92.7M | -1.9% |
| POWELL VALLEY HEALTH CARE | WY | 25 | $69.6M | -2.6% |
| COMMUNITY HOSPITAL | WY | 25 | $35.7M | -7.5% |
| EVANSTON REGIONAL | WY | 32 | $35.3M | 17.6% |
| HOT SPRINGS COUNTY MEMORIAL | WY | 15 | $31.6M | -15.0% |
| MEMORIAL HOSPITAL OF CARBON CO | WY | 25 | $30.5M | -27.8% |
| WASHAKIE MEDICAL CENTER | WY | 18 | $28.1M | -1.7% |
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: $6.0M (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% | $998K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $52K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-385K |
| + RCM Uplift | +$6.0M |
| Pro Forma EBITDA | $5.7M |
| Current Margin | -0.5% |
| Pro Forma Margin | 6.9% |
| WC Released (1x) | $3.1M |
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 | $-592K | $57.8M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-592K | $63.4M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-533K | $83.1M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-533K | $90.5M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-651K | $27.8M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-651K | $30.4M | 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 | Low occupancy | At 28.7%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
| High | Elevated distress probability | Model estimates 54.8% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
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
- 17 hospitals with 11-44 beds
- Same-state prioritization (n=18)
- Comp margins: P25=-21.3% / P50=-12.4% / P75=-1.9%
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.