FRANCISCAN BEACON HOSPITAL
1. Target Overview & Investment Thesis
FRANCISCAN BEACON HOSPITAL is a 8-bed under-performing / distressed in LA PORTE, IN with $7.7M in net patient revenue and a -43.4% operating margin. The hospital serves a payer mix of 44.7% Medicare, 8.8% Medicaid, and 46.5% commercial.
Thesis: Turnaround. Our ML models identify $578K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -43.4% to -35.9% (+747bps).
| Net Revenue HCRIS | $7.7M |
| Current EBITDA COMPUTED | $-3.4M |
| Operating Margin COMPUTED | -43.4% |
| Occupancy HCRIS | 3.9% |
| Revenue / Bed COMPUTED | $968K |
| Net-to-Gross HCRIS | 22.5% |
| Distress Probability ML | 59.8% |
2. Market Context & Competitive Position
IN has 171 Medicare-certified hospitals with a median operating margin of -1.1%. The target's margin of -43.4% places it below the state median. Among 16 size-comparable peers (4-16 beds), the median margin is -50.0%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (4-16), prioritizing same-state peers. 16 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| FRANCISCAN BEACON HOSPITAL (Target) | IN | 8 | $7.7M | -43.4% |
| FRANCISCAN HEALTH HAMMOND | IN | 10 | $117.7M | -4.3% |
| PHYSICIANS MEDICAL CENTER | IN | 10 | $60.0M | 24.9% |
| OAKLAWN PSYCHIATRIC CENTER IN | IN | 16 | $37.1M | -50.0% |
| HAMILTON CENTER INC. | IN | 16 | $30.8M | -50.0% |
| IU HEALTH FRANKFORT HOSPITAL | IN | 12 | $29.3M | 3.0% |
| 4C HEALTH | IN | 16 | $27.8M | -6.3% |
| IU HEALTH BLACKFORD HOSPITAL | IN | 15 | $23.9M | -15.9% |
| REGIONAL MENTAL HEALTH CENTER | IN | 16 | $23.8M | -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: $578K (747bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $163K | +210bp | 18mo |
| Denial Rate Reduction | 12.0% | 6.5% | $157K | +203bp | 12mo |
| Cost to Collect | 4.5% | 2.5% | $155K | +200bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $94K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +12bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-3.4M |
| + RCM Uplift | +$578K |
| Pro Forma EBITDA | $-2.8M |
| Current Margin | -43.4% |
| Pro Forma Margin | -35.9% |
| WC Released (1x) | $297K |
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 | $-5.2M | $-16.4M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-5.2M | $-19.7M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-4.7M | $-19.5M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-4.7M | $-22.6M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-5.7M | $-17.6M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-5.7M | $-21.2M | 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 |
| Medium | Low occupancy | At 3.9%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
| High | Elevated distress probability | Model estimates 59.8% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
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
- 16 hospitals with 4-16 beds
- Same-state prioritization (n=17)
- Comp margins: P25=-50.0% / P50=-50.0% / P75=-5.3%
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.