KATHERINE SHAW BETHEA HOSPITAL
1. Target Overview & Investment Thesis
KATHERINE SHAW BETHEA HOSPITAL is a 66-bed suburban community hospital in LEE, IL with $136.9M in net patient revenue and a -12.8% operating margin. The hospital serves a payer mix of 38.4% Medicare, 1.9% Medicaid, and 59.7% commercial.
Thesis: Turnaround. Our ML models identify $10.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -12.8% to -5.5% (+736bps).
| Net Revenue HCRIS | $136.9M |
| Current EBITDA COMPUTED | $-17.6M |
| Operating Margin COMPUTED | -12.8% |
| Occupancy HCRIS | 35.2% |
| Revenue / Bed COMPUTED | $2.1M |
| Net-to-Gross HCRIS | 29.2% |
| Distress Probability ML | 50.0% |
2. Market Context & Competitive Position
IL has 208 Medicare-certified hospitals with a median operating margin of -5.3%. The target's margin of -12.8% places it below the state median. Among 59 size-comparable peers (33-132 beds), the median margin is -7.7%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (33-132), prioritizing same-state peers. 59 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| KATHERINE SHAW BETHEA HOSPITAL (Target) | IL | 66 | $136.9M | -12.8% |
| 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% |
| KISHWAUKEE COMMUNITY HOSPITAL | IL | 98 | $355.3M | 25.5% |
| CGH MEDICAL CENTER | IL | 95 | $247.1M | -7.6% |
| SSM HEALTH GOOD SAMARITAN HOSP | IL | 111 | $214.8M | 1.5% |
| MORRIS HOSPITAL | IL | 89 | $210.8M | 1.7% |
| ADVENTIST BOLINGBROOK HOSPITAL | IL | 110 | $199.3M | -5.4% |
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: $10.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $2.9M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $2.7M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $2.7M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $1.7M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $88K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-17.6M |
| + RCM Uplift | +$10.1M |
| Pro Forma EBITDA | $-7.5M |
| Current Margin | -12.8% |
| Pro Forma Margin | -5.5% |
| WC Released (1x) | $5.2M |
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 | $-27.1M | $-15.3M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-27.1M | $-25.6M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-24.3M | $-1.1M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-24.3M | $-8.4M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-29.8M | $-56.8M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-29.8M | $-72.2M | 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 |
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
- 59 hospitals with 33-132 beds
- Same-state prioritization (n=60)
- Comp margins: P25=-21.2% / P50=-7.7% / P75=4.1%
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.