HERITAGE PARK SURGICAL HOSPITAL
1. Target Overview & Investment Thesis
HERITAGE PARK SURGICAL HOSPITAL is a 12-bed community hospital in GRAYSON, TX with $52.5M in net patient revenue and a 19.2% operating margin. The hospital serves a payer mix of 37.8% Medicare, 0.0% Medicaid, and 62.2% commercial.
Thesis: Turnaround. Our ML models identify $3.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 19.2% to 26.5% (+736bps).
| Net Revenue HCRIS | $52.5M |
| Current EBITDA COMPUTED | $10.1M |
| Operating Margin COMPUTED | 19.2% |
| Occupancy HCRIS | 24.4% |
| Revenue / Bed COMPUTED | $4.4M |
| Net-to-Gross HCRIS | 24.3% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
TX has 583 Medicare-certified hospitals with a median operating margin of -0.7%. The target's margin of 19.2% places it above the state median. Among 97 size-comparable peers (6-24 beds), the median margin is -18.5%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (6-24), prioritizing same-state peers. 97 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| HERITAGE PARK SURGICAL HOSPITA (Target) | TX | 12 | $52.5M | 19.2% |
| TEXAS SPINE AND JOINT HOSPITAL | TX | 20 | $147.3M | 30.3% |
| NORTH CENTRAL SURGICAL HOSPITA | TX | 24 | $143.6M | 32.0% |
| BAYLOR ORTHOPEDIC AND SPINE HO | TX | 24 | $133.8M | 39.8% |
| UVALDE MEMORIAL HOSPITAL | TX | 21 | $89.9M | 30.1% |
| BAYLOR MEDICAL CENTER AT TROPH | TX | 21 | $89.7M | 31.5% |
| WEBSTER SURGICAL SPECIALTY HOS | TX | 20 | $85.0M | -2.8% |
| PRESBYTERIAN PLANO CENTER DIAG | TX | 18 | $81.9M | 28.4% |
| CHRISTUS MFH - JACKSONVILLE | TX | 23 | $81.8M | 8.9% |
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: $3.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.1M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.1M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.0M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $639K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $34K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $10.1M |
| + RCM Uplift | +$3.9M |
| Pro Forma EBITDA | $13.9M |
| Current Margin | 19.2% |
| Pro Forma Margin | 26.5% |
| WC Released (1x) | $2.0M |
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 | $15.5M | $105.1M | 6.78x | 46.7% |
| Base (11x exit) | 10.0x | 11.0x | $15.5M | $120.7M | 7.79x | 50.8% |
| Bull Case | 9.0x | 11.0x | $13.9M | $138.5M | 9.93x | 58.3% |
| Bull (12x exit) | 9.0x | 12.0x | $13.9M | $155.2M | 11.13x | 61.9% |
| Bear Case | 11.0x | 10.0x | $17.0M | $80.7M | 4.74x | 36.5% |
| Bear (11x exit) | 11.0x | 11.0x | $17.0M | $94.4M | 5.54x | 40.8% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Low occupancy | At 24.4%, 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
- 97 hospitals with 6-24 beds
- Same-state prioritization (n=107)
- Comp margins: P25=-44.9% / P50=-18.5% / P75=8.9%
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.