UNION HOSPITAL INC.
1. Target Overview & Investment Thesis
UNION HOSPITAL INC. is a 258-bed suburban community hospital in VIGO, IN with $581.9M in net patient revenue and a 3.8% operating margin. The hospital serves a payer mix of 33.9% Medicare, 1.3% Medicaid, and 64.8% commercial.
Thesis: Undervalued. Our ML models identify $42.8M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 3.8% to 11.2% (+736bps).
| Net Revenue HCRIS | $581.9M |
| Current EBITDA COMPUTED | $22.1M |
| Operating Margin COMPUTED | 3.8% |
| Occupancy HCRIS | 70.5% |
| Revenue / Bed COMPUTED | $2.3M |
| Net-to-Gross HCRIS | 30.0% |
| Distress Probability ML | 42.0% |
2. Market Context & Competitive Position
IN has 171 Medicare-certified hospitals with a median operating margin of -1.1%. The target's margin of 3.8% places it above the state median. Among 33 size-comparable peers (129-516 beds), the median margin is 4.9%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (129-516), prioritizing same-state peers. 33 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| UNION HOSPITAL INC. (Target) | IN | 258 | $581.9M | 3.8% |
| COMMUNITY HEALTH NETWORK INC. | IN | 387 | $1.24B | 16.4% |
| FRANCISCAN HEALTH INDIANAPOLIS | IN | 401 | $891.4M | -0.3% |
| ASCENSION ST. VINCENT EVANSVIL | IN | 346 | $671.8M | 11.4% |
| MEMORIAL HOSPITAL OF SOUTH BEN | IN | 429 | $631.5M | 9.7% |
| COMMUNITY HOSPITAL | IN | 405 | $615.1M | 6.0% |
| LUTHERAN HOSPITAL OF INDIANA | IN | 335 | $580.1M | 3.8% |
| COMMUNITY HOSPITAL OF INDIANA | IN | 340 | $565.2M | 12.0% |
| ESKENAZI HEALTH | IN | 314 | $562.3M | -50.0% |
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: $42.8M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $12.2M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $11.6M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $11.5M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $7.1M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $372K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $22.1M |
| + RCM Uplift | +$42.8M |
| Pro Forma EBITDA | $65.0M |
| Current Margin | 3.8% |
| Pro Forma Margin | 11.2% |
| WC Released (1x) | $22.3M |
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 | $34.1M | $574.4M | 16.86x | 75.9% |
| Base (11x exit) | 10.0x | 11.0x | $34.1M | $642.9M | 18.87x | 80.0% |
| Bull Case | 9.0x | 11.0x | $30.7M | $795.3M | 25.94x | 91.8% |
| Bull (12x exit) | 9.0x | 12.0x | $30.7M | $876.6M | 28.59x | 95.5% |
| Bear Case | 11.0x | 10.0x | $37.5M | $349.1M | 9.32x | 56.3% |
| Bear (11x exit) | 11.0x | 11.0x | $37.5M | $396.2M | 10.57x | 60.3% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Standard execution risk | RCM improvement requires management buy-in and 12-18 month implementation timeline |
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
- 33 hospitals with 129-516 beds
- Same-state prioritization (n=34)
- Comp margins: P25=-7.1% / P50=4.9% / P75=12.0%
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.