COMMUNITY HOSPITAL SOUTH
1. Target Overview & Investment Thesis
COMMUNITY HOSPITAL SOUTH is a 169-bed suburban community hospital in MARION, IN with $315.7M in net patient revenue and a 14.4% operating margin. The hospital serves a payer mix of 25.7% Medicare, 6.9% Medicaid, and 67.4% commercial.
Thesis: Turnaround. Our ML models identify $23.2M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 14.4% to 21.8% (+736bps).
| Net Revenue HCRIS | $315.7M |
| Current EBITDA COMPUTED | $45.5M |
| Operating Margin COMPUTED | 14.4% |
| Occupancy HCRIS | 65.4% |
| Revenue / Bed COMPUTED | $1.9M |
| Net-to-Gross HCRIS | 28.3% |
| Distress Probability ML | 44.3% |
2. Market Context & Competitive Position
IN has 171 Medicare-certified hospitals with a median operating margin of -1.1%. The target's margin of 14.4% places it above the state median. Among 45 size-comparable peers (84-338 beds), the median margin is 3.8%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (84-338), prioritizing same-state peers. 45 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| COMMUNITY HOSPITAL SOUTH (Target) | IN | 169 | $315.7M | 14.4% |
| UNION HOSPITAL INC. | IN | 258 | $581.9M | 3.8% |
| LUTHERAN HOSPITAL OF INDIANA | IN | 335 | $580.1M | 3.8% |
| ESKENAZI HEALTH | IN | 314 | $562.3M | -50.0% |
| IU HEALTH BLOOMINGTON HOSPITAL | IN | 210 | $529.4M | 6.2% |
| BALL MEMORIAL HOSPITAL | IN | 316 | $524.9M | 0.9% |
| REID HOSPITAL & HEALTH CARE SE | IN | 183 | $487.2M | 26.1% |
| IU HEALTH ARNETT HOSPITAL | IN | 194 | $426.2M | 16.1% |
| HENDRICKS REGIONAL HEALTH | IN | 130 | $423.4M | -3.6% |
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: $23.2M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $6.6M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $6.3M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $6.3M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.8M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $202K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $45.5M |
| + RCM Uplift | +$23.2M |
| Pro Forma EBITDA | $68.7M |
| Current Margin | 14.4% |
| Pro Forma Margin | 21.8% |
| WC Released (1x) | $12.1M |
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 | $70.0M | $532.5M | 7.61x | 50.1% |
| Base (11x exit) | 10.0x | 11.0x | $70.0M | $608.5M | 8.69x | 54.1% |
| Bull Case | 9.0x | 11.0x | $63.0M | $708.0M | 11.24x | 62.2% |
| Bull (12x exit) | 9.0x | 12.0x | $63.0M | $790.9M | 12.55x | 65.9% |
| Bear Case | 11.0x | 10.0x | $77.0M | $393.6M | 5.11x | 38.6% |
| Bear (11x exit) | 11.0x | 11.0x | $77.0M | $458.0M | 5.95x | 42.9% |
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
- 45 hospitals with 84-338 beds
- Same-state prioritization (n=46)
- Comp margins: P25=-12.9% / P50=3.8% / P75=14.1%
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.