IU HEALTH FRANKFORT HOSPITAL
1. Target Overview & Investment Thesis
IU HEALTH FRANKFORT HOSPITAL is a 12-bed suburban community hospital in CLINTON, IN with $29.3M in net patient revenue and a 3.0% operating margin. The hospital serves a payer mix of 42.7% Medicare, 1.2% Medicaid, and 56.0% commercial.
Thesis: Turnaround. Our ML models identify $2.2M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 3.0% to 10.4% (+736bps).
| Net Revenue HCRIS | $29.3M |
| Current EBITDA COMPUTED | $883K |
| Operating Margin COMPUTED | 3.0% |
| Occupancy HCRIS | 35.1% |
| Revenue / Bed COMPUTED | $2.4M |
| Net-to-Gross HCRIS | 39.8% |
| Distress Probability ML | 50.5% |
2. Market Context & Competitive Position
IN has 171 Medicare-certified hospitals with a median operating margin of -1.1%. The target's margin of 3.0% places it above the state median. Among 25 size-comparable peers (6-24 beds), the median margin is -7.2%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (6-24), prioritizing same-state peers. 25 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| IU HEALTH FRANKFORT HOSPITAL (Target) | IN | 12 | $29.3M | 3.0% |
| FRANCISCAN HEALTH HAMMOND | IN | 10 | $117.7M | -4.3% |
| THE OTIS R. BOWEN CENTER | IN | 20 | $92.4M | -11.2% |
| PARKVIEW WABASH HOSPITAL INC. | IN | 18 | $61.2M | -1.1% |
| PHYSICIANS MEDICAL CENTER | IN | 10 | $60.0M | 24.9% |
| PINNACLE HOSPITAL | IN | 18 | $57.3M | 1.9% |
| IU HEALTH WHITE HOSPITAL | IN | 24 | $43.9M | 8.0% |
| IU HEALTH JAY HOSPITAL | IN | 21 | $38.8M | -5.6% |
| OAKLAWN PSYCHIATRIC CENTER IN | IN | 16 | $37.1M | -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: $2.2M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $615K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $586K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $580K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $356K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $19K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $883K |
| + RCM Uplift | +$2.2M |
| Pro Forma EBITDA | $3.0M |
| Current Margin | 3.0% |
| Pro Forma Margin | 10.4% |
| WC Released (1x) | $1.1M |
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 | $1.4M | $27.4M | 20.16x | 82.3% |
| Base (11x exit) | 10.0x | 11.0x | $1.4M | $30.6M | 22.50x | 86.4% |
| Bull Case | 9.0x | 11.0x | $1.2M | $38.1M | 31.18x | 99.0% |
| Bull (12x exit) | 9.0x | 12.0x | $1.2M | $41.9M | 34.30x | 102.8% |
| Bear Case | 11.0x | 10.0x | $1.5M | $16.2M | 10.82x | 61.0% |
| Bear (11x exit) | 11.0x | 11.0x | $1.5M | $18.3M | 12.22x | 65.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| High | Elevated distress probability | Model estimates 50.5% 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
- 25 hospitals with 6-24 beds
- Same-state prioritization (n=27)
- Comp margins: P25=-50.0% / P50=-7.2% / P75=-0.4%
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.