INDIANA UNIVERSITY HEALTH
1. Target Overview & Investment Thesis
INDIANA UNIVERSITY HEALTH is a 1269-bed large academic medical center in MARION, IN with $3.58B in net patient revenue and a -38.4% operating margin. The hospital serves a payer mix of 16.4% Medicare, 8.8% Medicaid, and 74.8% commercial.
Thesis: Undervalued. Our ML models identify $263.3M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -38.4% to -31.1% (+736bps).
| Net Revenue HCRIS | $3.58B |
| Current EBITDA COMPUTED | $-1.37B |
| Operating Margin COMPUTED | -38.4% |
| Occupancy HCRIS | 74.7% |
| Revenue / Bed COMPUTED | $2.8M |
| Net-to-Gross HCRIS | 29.5% |
| Distress Probability ML | 44.6% |
2. Market Context & Competitive Position
IN has 171 Medicare-certified hospitals with a median operating margin of -1.1%. The target's margin of -38.4% places it below the state median. Among 152 size-comparable peers (634-2538 beds), the median margin is -5.0%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (634-2538), prioritizing same-state peers. 152 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| INDIANA UNIVERSITY HEALTH (Target) | IN | 1269 | $3.58B | -38.4% |
| NYU LANGONE HOSPITALS | NY | 1618 | $7.24B | -7.8% |
| STANFORD HEALTH CARE | CA | 657 | $6.76B | 3.7% |
| CLEVELAND CLINIC HOSPITAL | OH | 1326 | $6.38B | -17.7% |
| VANDERBILT UNIVERSITY MEDICAL | TN | 1084 | $5.44B | -15.9% |
| UCSF MEDICAL CENTER | CA | 834 | $5.44B | -5.4% |
| UT MD ANDERSON CANCER CENTER | TX | 721 | $4.90B | -0.8% |
| UNIV OF MI HOSPITALS & HLTH CT | MI | 951 | $4.62B | -1.4% |
| CEDARS-SINAI MEDICAL CENTER | CA | 908 | $3.92B | -5.5% |
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: $263.3M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $75.1M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $71.5M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $70.8M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $43.5M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $2.3M | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-1.37B |
| + RCM Uplift | +$263.3M |
| Pro Forma EBITDA | $-1.11B |
| Current Margin | -38.4% |
| Pro Forma Margin | -31.1% |
| WC Released (1x) | $137.2M |
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 | $-2.11B | $-6.43B | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-2.11B | $-7.76B | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-1.90B | $-7.58B | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-1.90B | $-8.83B | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-2.33B | $-7.06B | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-2.33B | $-8.53B | 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
- 152 hospitals with 634-2538 beds
- Same-state prioritization (n=3)
- Comp margins: P25=-15.8% / P50=-5.0% / P75=4.1%
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.