ASCENSION SETON HAYS
1. Target Overview & Investment Thesis
ASCENSION SETON HAYS is a 158-bed suburban community hospital in HAYS, TX with $231.1M in net patient revenue and a 2.2% operating margin. The hospital serves a payer mix of 20.7% Medicare, 3.2% Medicaid, and 76.1% commercial.
Thesis: Undervalued. Our ML models identify $17.0M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 2.2% to 9.6% (+736bps).
| Net Revenue HCRIS | $231.1M |
| Current EBITDA COMPUTED | $5.2M |
| Operating Margin COMPUTED | 2.2% |
| Occupancy HCRIS | 72.7% |
| Revenue / Bed COMPUTED | $1.5M |
| Net-to-Gross HCRIS | 13.8% |
| Distress Probability ML | 40.5% |
2. Market Context & Competitive Position
TX has 583 Medicare-certified hospitals with a median operating margin of -0.7%. The target's margin of 2.2% places it above the state median. Among 164 size-comparable peers (79-316 beds), the median margin is 2.9%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (79-316), prioritizing same-state peers. 164 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ASCENSION SETON HAYS (Target) | TX | 158 | $231.1M | 2.2% |
| DELL CHILDRENS MEDICAL CENTER | TX | 262 | $901.9M | 25.5% |
| DRISCOLL CHILDRENS HOSPITAL | TX | 215 | $694.3M | 29.4% |
| ROUND ROCK HOSPITAL | TX | 165 | $681.4M | 8.7% |
| GOOD SHEPHERD MEDICAL CENTER | TX | 314 | $557.4M | 0.7% |
| HOUSTON METHODIST THE WOODLAND | TX | 292 | $535.9M | 13.9% |
| METHODIST WEST HOUSTON HOSPITA | TX | 270 | $529.7M | 15.5% |
| TEXAS HEALTH PRESBYTERIAN HOSP | TX | 305 | $499.6M | 14.7% |
| HILLCREST BAPTIST MEDICAL CENT | TX | 236 | $464.8M | -6.7% |
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: $17.0M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $4.9M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $4.6M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $4.6M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $2.8M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $148K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $5.2M |
| + RCM Uplift | +$17.0M |
| Pro Forma EBITDA | $22.2M |
| Current Margin | 2.2% |
| Pro Forma Margin | 9.6% |
| WC Released (1x) | $8.9M |
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 | $8.0M | $204.3M | 25.58x | 91.2% |
| Base (11x exit) | 10.0x | 11.0x | $8.0M | $227.4M | 28.46x | 95.4% |
| Bull Case | 9.0x | 11.0x | $7.2M | $286.1M | 39.79x | 108.9% |
| Bull (12x exit) | 9.0x | 12.0x | $7.2M | $314.2M | 43.70x | 112.9% |
| Bear Case | 11.0x | 10.0x | $8.8M | $116.7M | 13.28x | 67.7% |
| Bear (11x exit) | 11.0x | 11.0x | $8.8M | $131.2M | 14.93x | 71.7% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Low | Low net-to-gross ratio | Large contractual allowances suggest pricing discipline issues. Mitigant: payer renegotiation is an additional upside lever |
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
- 164 hospitals with 79-316 beds
- Same-state prioritization (n=165)
- Comp margins: P25=-8.5% / P50=2.9% / P75=14.3%
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.