MERCYONE DUBUQUE MEDICAL CENTER
1. Target Overview & Investment Thesis
MERCYONE DUBUQUE MEDICAL CENTER is a 142-bed rural/critical access in DUBUQUE, IA with $152.7M in net patient revenue and a -25.8% operating margin. The hospital serves a payer mix of 56.0% Medicare, 3.2% Medicaid, and 40.7% commercial.
Thesis: Undervalued. Our ML models identify $11.2M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -25.8% to -18.4% (+736bps).
| Net Revenue HCRIS | $152.7M |
| Current EBITDA COMPUTED | $-39.4M |
| Operating Margin COMPUTED | -25.8% |
| Occupancy HCRIS | 56.3% |
| Revenue / Bed COMPUTED | $1.1M |
| Net-to-Gross HCRIS | 29.8% |
| Distress Probability ML | 48.0% |
2. Market Context & Competitive Position
IA has 124 Medicare-certified hospitals with a median operating margin of -8.2%. The target's margin of -25.8% places it below the state median. Among 18 size-comparable peers (71-284 beds), the median margin is -17.1%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (71-284), prioritizing same-state peers. 18 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| MERCYONE DUBUQUE MEDICAL CENTE (Target) | IA | 142 | $152.7M | -25.8% |
| MERCY MEDICAL CENTER | IA | 216 | $401.1M | -12.8% |
| MERCYONE NORTH IOWA MEDICAL CE | IA | 199 | $390.3M | -30.9% |
| ST. LUKES METHODIST HOSPITAL | IA | 281 | $374.8M | 23.6% |
| SOUTHEAST IOWA REGIONAL MEDICA | IA | 174 | $302.1M | -24.2% |
| MERCYONE WATERLOO MEDICAL CENT | IA | 134 | $283.3M | -5.1% |
| ALLEN MEMORIAL HOSPITAL | IA | 189 | $271.3M | 1.8% |
| MARY GREELEY MEDICAL CENTER | IA | 150 | $220.4M | -3.6% |
| ST. LUKES REGL MEDICAL CENTER | IA | 173 | $181.1M | 0.1% |
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: $11.2M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $3.2M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $3.1M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $3.0M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $1.9M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $98K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-39.4M |
| + RCM Uplift | +$11.2M |
| Pro Forma EBITDA | $-28.2M |
| Current Margin | -25.8% |
| Pro Forma Margin | -18.4% |
| WC Released (1x) | $5.9M |
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 | $-60.7M | $-147.6M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-60.7M | $-182.1M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-54.6M | $-164.7M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-54.6M | $-195.8M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-66.7M | $-184.1M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-66.7M | $-224.2M | 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 | Heavy Medicare dependence | Medicare comprises 56.0% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
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
- 18 hospitals with 71-284 beds
- Same-state prioritization (n=19)
- Comp margins: P25=-26.6% / P50=-17.1% / P75=-4.0%
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.