LITTLE COMPANY OF MARY
1. Target Overview & Investment Thesis
LITTLE COMPANY OF MARY is a 227-bed suburban community hospital in COOK, IL with $244.9M in net patient revenue and a -24.9% operating margin. The hospital serves a payer mix of 30.7% Medicare, 2.9% Medicaid, and 66.4% commercial.
Thesis: Undervalued. Our ML models identify $18.0M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -24.9% to -17.5% (+736bps).
| Net Revenue HCRIS | $244.9M |
| Current EBITDA COMPUTED | $-61.0M |
| Operating Margin COMPUTED | -24.9% |
| Occupancy HCRIS | 68.1% |
| Revenue / Bed COMPUTED | $1.1M |
| Net-to-Gross HCRIS | 20.6% |
| Distress Probability ML | 43.4% |
2. Market Context & Competitive Position
IL has 208 Medicare-certified hospitals with a median operating margin of -5.3%. The target's margin of -24.9% places it below the state median. Among 90 size-comparable peers (114-454 beds), the median margin is -8.7%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (114-454), prioritizing same-state peers. 90 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| LITTLE COMPANY OF MARY (Target) | IL | 227 | $244.9M | -24.9% |
| CENTRAL DUPAGE HOSPITAL | IL | 347 | $1.30B | 16.4% |
| CARLE FOUNDATION HOSPITAL | IL | 433 | $1.22B | 11.8% |
| ANN & ROBERT H. LURIE CHILDREN | IL | 364 | $1.17B | -12.8% |
| BOARD OF TRUSTEES OF THE UNIVE | IL | 395 | $1.14B | -12.3% |
| JOHN H. STROGER JR. HOSP OF CO | IL | 429 | $945.3M | -22.4% |
| SWEDISHAMERICAN HOSPITAL | IL | 324 | $752.0M | -2.8% |
| SPRINGFIELD MEMORIAL HOSPITAL | IL | 389 | $732.9M | -14.5% |
| ADVOCATE NORTHSIDE HEALTH SYST | IL | 233 | $713.2M | 18.5% |
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: $18.0M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $5.1M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $4.9M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $4.8M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.0M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $157K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-61.0M |
| + RCM Uplift | +$18.0M |
| Pro Forma EBITDA | $-43.0M |
| Current Margin | -24.9% |
| Pro Forma Margin | -17.5% |
| WC Released (1x) | $9.4M |
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 | $-93.8M | $-222.1M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-93.8M | $-274.7M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-84.5M | $-245.7M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-84.5M | $-293.0M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-103.2M | $-281.7M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-103.2M | $-343.4M | 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
- 90 hospitals with 114-454 beds
- Same-state prioritization (n=91)
- Comp margins: P25=-20.8% / P50=-8.7% / P75=0.8%
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.