HEARTLAND REGIONAL MEDICAL CENTER
1. Target Overview & Investment Thesis
HEARTLAND REGIONAL MEDICAL CENTER is a 94-bed suburban community hospital in WILLIAMSON, IL with $67.8M in net patient revenue and a 100.0% operating margin. The hospital serves a payer mix of 43.0% Medicare, 1.9% Medicaid, and 55.1% commercial.
Thesis: Turnaround. Our ML models identify $5.0M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 100.0% to 142.0% (+736bps).
| Net Revenue HCRIS | $67.8M |
| Current EBITDA COMPUTED | $91.2M |
| Operating Margin COMPUTED | 100.0% |
| Occupancy HCRIS | 17.9% |
| Revenue / Bed COMPUTED | $721K |
| Net-to-Gross HCRIS | 17.5% |
| Distress Probability ML | 55.0% |
2. Market Context & Competitive Position
IL has 208 Medicare-certified hospitals with a median operating margin of -5.3%. The target's margin of 100.0% places it above the state median. Among 78 size-comparable peers (47-188 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 (47-188), prioritizing same-state peers. 78 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| HEARTLAND REGIONAL MEDICAL CEN (Target) | IL | 94 | $67.8M | 100.0% |
| 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% |
| GOOD SHEPHERD HOSPITAL | IL | 176 | $375.2M | 20.0% |
| SWEDISH COVENANT HEALTH | IL | 173 | $363.5M | -3.8% |
| MEMORIAL HOSPITAL OF CARBONDAL | IL | 175 | $357.2M | 14.6% |
| KISHWAUKEE COMMUNITY HOSPITAL | IL | 98 | $355.3M | 25.5% |
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: $5.0M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.4M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.4M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.3M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $824K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $43K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $91.2M |
| + RCM Uplift | +$5.0M |
| Pro Forma EBITDA | $96.2M |
| Current Margin | 100.0% |
| Pro Forma Margin | 142.0% |
| WC Released (1x) | $2.6M |
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 | $140.3M | $651.6M | 4.64x | 35.9% |
| Base (11x exit) | 10.0x | 11.0x | $140.3M | $762.4M | 5.43x | 40.3% |
| Bull Case | 9.0x | 11.0x | $126.3M | $824.4M | 6.53x | 45.5% |
| Bull (12x exit) | 9.0x | 12.0x | $126.3M | $936.6M | 7.42x | 49.3% |
| Bear Case | 11.0x | 10.0x | $154.4M | $581.1M | 3.76x | 30.4% |
| Bear (11x exit) | 11.0x | 11.0x | $154.4M | $689.3M | 4.47x | 34.9% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Low occupancy | At 17.9%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
| High | Elevated distress probability | Model estimates 55.0% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
| Low | Low net-to-gross ratio | Large contractual allowances suggest pricing discipline issues. Mitigant: payer renegotiation is an additional upside lever |
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
- 78 hospitals with 47-188 beds
- Same-state prioritization (n=79)
- Comp margins: P25=-23.4% / P50=-8.7% / P75=3.9%
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.