WARNER HOSPITAL AND HEALTH SERVICES
1. Target Overview & Investment Thesis
WARNER HOSPITAL AND HEALTH SERVICES is a 15-bed community hospital in DEWITT, IL with $22.4M in net patient revenue and a 2.2% operating margin. The hospital serves a payer mix of 56.0% Medicare, 0.0% Medicaid, and 44.0% commercial.
Thesis: Turnaround. Our ML models identify $1.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 2.2% to 9.6% (+736bps).
| Net Revenue HCRIS | $22.4M |
| Current EBITDA COMPUTED | $501K |
| Operating Margin COMPUTED | 2.2% |
| Occupancy HCRIS | 3.8% |
| Revenue / Bed COMPUTED | $1.5M |
| Net-to-Gross HCRIS | 61.4% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
IL has 208 Medicare-certified hospitals with a median operating margin of -5.3%. The target's margin of 2.2% places it above the state median. Among 56 size-comparable peers (8-30 beds), the median margin is -0.8%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (8-30), prioritizing same-state peers. 56 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| WARNER HOSPITAL AND HEALTH SER (Target) | IL | 15 | $22.4M | 2.2% |
| GIBSON AREA HOSPITAL AND HEALT | IL | 25 | $125.0M | -6.7% |
| PARIS COMMUNITY HOSPITAL | IL | 25 | $100.7M | -4.2% |
| SAINT JOSEPH MEMORIAL HOSPITAL | IL | 25 | $86.0M | 33.9% |
| WABASH GENERAL HOSPITAL | IL | 25 | $71.8M | 4.5% |
| HOOPESTON COMMUNITY MEMORIAL H | IL | 22 | $71.5M | -5.2% |
| CRAWFORD MEMORIAL HOSPITAL | IL | 25 | $67.7M | 2.9% |
| ST. FRANCIS HOSPITAL | IL | 25 | $61.6M | 17.4% |
| LINCOLN MEMORIAL HOSPITAL | IL | 25 | $61.5M | 14.8% |
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: $1.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $470K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $448K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $443K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $272K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $14K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $501K |
| + RCM Uplift | +$1.6M |
| Pro Forma EBITDA | $2.1M |
| Current Margin | 2.2% |
| Pro Forma Margin | 9.6% |
| WC Released (1x) | $858K |
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 | $771K | $19.8M | 25.64x | 91.3% |
| Base (11x exit) | 10.0x | 11.0x | $771K | $22.0M | 28.53x | 95.5% |
| Bull Case | 9.0x | 11.0x | $694K | $27.7M | 39.89x | 109.0% |
| Bull (12x exit) | 9.0x | 12.0x | $694K | $30.4M | 43.81x | 113.0% |
| Bear Case | 11.0x | 10.0x | $848K | $11.3M | 13.31x | 67.8% |
| Bear (11x exit) | 11.0x | 11.0x | $848K | $12.7M | 14.96x | 71.8% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 56.0% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
| Medium | Low occupancy | At 3.8%, 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
- 56 hospitals with 8-30 beds
- Same-state prioritization (n=57)
- Comp margins: P25=-6.1% / P50=-0.8% / P75=10.3%
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.