OSF HEALTHCARE TRANSITIONAL CARE HOS
1. Target Overview & Investment Thesis
OSF HEALTHCARE TRANSITIONAL CARE HOS is a 18-bed under-performing / distressed in PEORIA, IL with $22.9M in net patient revenue and a -38.6% operating margin. The hospital serves a payer mix of 30.0% Medicare, 0.2% Medicaid, and 69.8% commercial.
Thesis: Turnaround. Our ML models identify $1.7M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -38.6% to -31.3% (+736bps).
| Net Revenue HCRIS | $22.9M |
| Current EBITDA COMPUTED | $-8.8M |
| Operating Margin COMPUTED | -38.6% |
| Occupancy HCRIS | 80.3% |
| Revenue / Bed COMPUTED | $1.3M |
| Net-to-Gross HCRIS | 31.1% |
| Distress Probability ML | 40.1% |
2. Market Context & Competitive Position
IL has 208 Medicare-certified hospitals with a median operating margin of -5.3%. The target's margin of -38.6% places it below 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 |
|---|---|---|---|---|
| OSF HEALTHCARE TRANSITIONAL CA (Target) | IL | 18 | $22.9M | -38.6% |
| 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: $1.7M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $480K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $457K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $453K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $278K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $15K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-8.8M |
| + RCM Uplift | +$1.7M |
| Pro Forma EBITDA | $-7.1M |
| Current Margin | -38.6% |
| Pro Forma Margin | -31.3% |
| WC Released (1x) | $877K |
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 | $-13.6M | $-41.4M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-13.6M | $-50.0M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-12.2M | $-48.8M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-12.2M | $-56.9M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-14.9M | $-45.4M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-14.9M | $-54.8M | 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
- 59 hospitals with 9-36 beds
- Same-state prioritization (n=60)
- Comp margins: P25=-6.0% / 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.