COMMUNITY HEALTH NETWORK INC.
1. Target Overview & Investment Thesis
COMMUNITY HEALTH NETWORK INC. is a 387-bed suburban community hospital in MARION, IN with $1.24B in net patient revenue and a 16.4% operating margin. The hospital serves a payer mix of 16.2% Medicare, 8.1% Medicaid, and 75.6% commercial.
Thesis: Platform Growth. Our ML models identify $91.0M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 16.4% to 23.7% (+736bps).
| Net Revenue HCRIS | $1.24B |
| Current EBITDA COMPUTED | $202.2M |
| Operating Margin COMPUTED | 16.4% |
| Occupancy HCRIS | 72.4% |
| Revenue / Bed COMPUTED | $3.2M |
| Net-to-Gross HCRIS | 31.6% |
| Distress Probability ML | 41.7% |
2. Market Context & Competitive Position
IN has 171 Medicare-certified hospitals with a median operating margin of -1.1%. The target's margin of 16.4% places it above the state median. Among 21 size-comparable peers (194-774 beds), the median margin is 0.9%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (194-774), prioritizing same-state peers. 21 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| COMMUNITY HEALTH NETWORK INC. (Target) | IN | 387 | $1.24B | 16.4% |
| PARKVIEW HOSPITAL | IN | 761 | $1.66B | -6.6% |
| ASCENSION ST. VINCENT HOSPITAL | IN | 756 | $1.41B | 4.8% |
| DEACONESS HOSPITAL | IN | 545 | $1.14B | 0.7% |
| 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% |
| UNION HOSPITAL INC. | IN | 258 | $581.9M | 3.8% |
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: $91.0M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $26.0M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $24.7M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $24.5M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $15.0M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $791K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $202.2M |
| + RCM Uplift | +$91.0M |
| Pro Forma EBITDA | $293.2M |
| Current Margin | 16.4% |
| Pro Forma Margin | 23.7% |
| WC Released (1x) | $47.4M |
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 | $311.1M | $2.24B | 7.21x | 48.5% |
| Base (11x exit) | 10.0x | 11.0x | $311.1M | $2.57B | 8.26x | 52.5% |
| Bull Case | 9.0x | 11.0x | $280.0M | $2.97B | 10.61x | 60.4% |
| Bull (12x exit) | 9.0x | 12.0x | $280.0M | $3.32B | 11.87x | 64.0% |
| Bear Case | 11.0x | 10.0x | $342.2M | $1.69B | 4.93x | 37.6% |
| Bear (11x exit) | 11.0x | 11.0x | $342.2M | $1.97B | 5.75x | 41.9% |
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
- 21 hospitals with 194-774 beds
- Same-state prioritization (n=22)
- Comp margins: P25=-6.6% / P50=0.9% / P75=6.2%
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.