MIDWESTERN REGIONAL MEDICAL CENTER
1. Target Overview & Investment Thesis
MIDWESTERN REGIONAL MEDICAL CENTER is a 73-bed suburban community hospital in LAKE, IL with $1.38B in net patient revenue and a 80.5% operating margin. The hospital serves a payer mix of 30.0% Medicare, 1.4% Medicaid, and 68.6% commercial.
Thesis: Turnaround. Our ML models identify $101.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 80.5% to 87.8% (+736bps).
| Net Revenue HCRIS | $1.38B |
| Current EBITDA COMPUTED | $1.11B |
| Operating Margin COMPUTED | 80.5% |
| Occupancy HCRIS | 15.8% |
| Revenue / Bed COMPUTED | $19.0M |
| Net-to-Gross HCRIS | 63.4% |
| Distress Probability ML | 33.6% |
2. Market Context & Competitive Position
IL has 208 Medicare-certified hospitals with a median operating margin of -5.3%. The target's margin of 80.5% places it above the state median. Among 69 size-comparable peers (36-146 beds), the median margin is -9.5%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (36-146), prioritizing same-state peers. 69 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| MIDWESTERN REGIONAL MEDICAL CE (Target) | 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% |
| ST. ELIZABETH HOSPITAL | IL | 144 | $296.2M | -3.2% |
| 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: $101.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $29.1M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $27.7M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $27.4M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $16.8M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $886K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.11B |
| + RCM Uplift | +$101.9M |
| Pro Forma EBITDA | $1.22B |
| Current Margin | 80.5% |
| Pro Forma Margin | 87.8% |
| WC Released (1x) | $53.1M |
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 | $1.71B | $8.36B | 4.88x | 37.3% |
| Base (11x exit) | 10.0x | 11.0x | $1.71B | $9.76B | 5.70x | 41.6% |
| Bull Case | 9.0x | 11.0x | $1.54B | $10.65B | 6.91x | 47.2% |
| Bull (12x exit) | 9.0x | 12.0x | $1.54B | $12.07B | 7.83x | 50.9% |
| Bear Case | 11.0x | 10.0x | $1.88B | $7.30B | 3.87x | 31.1% |
| Bear (11x exit) | 11.0x | 11.0x | $1.88B | $8.64B | 4.58x | 35.6% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Low occupancy | At 15.8%, 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
- 69 hospitals with 36-146 beds
- Same-state prioritization (n=70)
- Comp margins: P25=-22.3% / P50=-9.5% / P75=1.6%
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.