MEMORIAL HOSPITAL ASSOCIATION
1. Target Overview & Investment Thesis
MEMORIAL HOSPITAL ASSOCIATION is a 18-bed rural/critical access in HANCOCK, IL with $43.2M in net patient revenue and a -1.3% operating margin. The hospital serves a payer mix of 60.4% Medicare, 10.4% Medicaid, and 29.1% commercial.
Thesis: Turnaround. Our ML models identify $3.2M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -1.3% to 6.1% (+736bps).
| Net Revenue HCRIS | $43.2M |
| Current EBITDA COMPUTED | $-555K |
| Operating Margin COMPUTED | -1.3% |
| Occupancy HCRIS | 43.1% |
| Revenue / Bed COMPUTED | $2.4M |
| Net-to-Gross HCRIS | 44.6% |
| Distress Probability ML | 52.3% |
2. Market Context & Competitive Position
IL has 208 Medicare-certified hospitals with a median operating margin of -5.3%. The target's margin of -1.3% places it above the state median. Among 59 size-comparable peers (9-36 beds), the median margin is -0.8%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (9-36), prioritizing same-state peers. 59 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| MEMORIAL HOSPITAL ASSOCIATION (Target) | IL | 18 | $43.2M | -1.3% |
| 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: $3.2M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $907K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $864K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $855K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $526K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $28K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-555K |
| + RCM Uplift | +$3.2M |
| Pro Forma EBITDA | $2.6M |
| Current Margin | -1.3% |
| Pro Forma Margin | 6.1% |
| WC Released (1x) | $1.7M |
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 | $-854K | $28.1M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-854K | $30.7M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-769K | $40.9M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-769K | $44.4M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-940K | $12.5M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-940K | $13.5M | 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 |
| Medium | Heavy Medicare dependence | Medicare comprises 60.4% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
| High | Elevated distress probability | Model estimates 52.3% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
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 9-36 beds
- Same-state prioritization (n=60)
- Comp margins: P25=-6.1% / P50=-0.8% / P75=7.8%
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.