HERRIN HOSPITAL
1. Target Overview & Investment Thesis
HERRIN HOSPITAL is a 85-bed suburban community hospital in nan, IL with $198.4M in net patient revenue and a 20.2% operating margin. The hospital serves a payer mix of 50.5% Medicare, 1.8% Medicaid, and 47.7% commercial.
Thesis: Turnaround. Our ML models identify $14.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 20.2% to 27.5% (+736bps).
| Net Revenue HCRIS | $198.4M |
| Current EBITDA COMPUTED | $40.0M |
| Operating Margin COMPUTED | 20.2% |
| Occupancy HCRIS | 83.3% |
| Revenue / Bed COMPUTED | $2.3M |
| Net-to-Gross HCRIS | 24.8% |
| Distress Probability ML | 38.7% |
2. Market Context & Competitive Position
IL has 208 Medicare-certified hospitals with a median operating margin of -5.3%. The target's margin of 20.2% places it above the state median. Among 73 size-comparable peers (42-170 beds), the median margin is -8.7%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (42-170), prioritizing same-state peers. 73 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| HERRIN HOSPITAL (Target) | IL | 85 | $198.4M | 20.2% |
| MIDWESTERN REGIONAL MEDICAL CE | IL | 73 | $1.38B | 80.5% |
| NORTHWESTERN LAKE FOREST HOSPI | IL | 124 | $494.3M | -13.8% |
| SARAH BUSH LINCOLN HEALTH CENT | IL | 100 | $448.6M | -18.1% |
| DELNOR-COMMUNITY HOSPITAL | IL | 149 | $441.4M | 6.4% |
| KISHWAUKEE COMMUNITY HOSPITAL | IL | 98 | $355.3M | 25.5% |
| ST. ELIZABETH HOSPITAL | IL | 144 | $296.2M | -3.2% |
| FRANCISCAN ST. JAMES HEALTH | IL | 154 | $252.2M | -32.1% |
| CGH MEDICAL CENTER | IL | 95 | $247.1M | -7.6% |
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: $14.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $4.2M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $4.0M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $3.9M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $2.4M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $127K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $40.0M |
| + RCM Uplift | +$14.6M |
| Pro Forma EBITDA | $54.6M |
| Current Margin | 20.2% |
| Pro Forma Margin | 27.5% |
| WC Released (1x) | $7.6M |
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 | $61.6M | $410.1M | 6.66x | 46.1% |
| Base (11x exit) | 10.0x | 11.0x | $61.6M | $471.1M | 7.65x | 50.2% |
| Bull Case | 9.0x | 11.0x | $55.4M | $539.3M | 9.73x | 57.6% |
| Bull (12x exit) | 9.0x | 12.0x | $55.4M | $604.7M | 10.91x | 61.3% |
| Bear Case | 11.0x | 10.0x | $67.7M | $317.0M | 4.68x | 36.2% |
| Bear (11x exit) | 11.0x | 11.0x | $67.7M | $370.8M | 5.47x | 40.5% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Standard execution risk | RCM improvement requires management buy-in and 12-18 month implementation timeline |
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
- 73 hospitals with 42-170 beds
- Same-state prioritization (n=74)
- Comp margins: P25=-22.3% / P50=-8.7% / P75=3.5%
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.