ST.FRANCIS HEALTH CENTER
1. Target Overview & Investment Thesis
ST.FRANCIS HEALTH CENTER is a 228-bed under-performing / distressed in SHAWNEE, KS with $276.6M in net patient revenue and a -13.7% operating margin. The hospital serves a payer mix of 35.5% Medicare, 0.5% Medicaid, and 64.0% commercial.
Thesis: Undervalued. Our ML models identify $20.4M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -13.7% to -6.3% (+736bps).
| Net Revenue HCRIS | $276.6M |
| Current EBITDA COMPUTED | $-37.9M |
| Operating Margin COMPUTED | -13.7% |
| Occupancy HCRIS | 36.6% |
| Revenue / Bed COMPUTED | $1.2M |
| Net-to-Gross HCRIS | 22.5% |
| Distress Probability ML | 50.3% |
2. Market Context & Competitive Position
KS has 152 Medicare-certified hospitals with a median operating margin of -17.7%. The target's margin of -13.7% places it above the state median. Among 9 size-comparable peers (114-456 beds), the median margin is -6.5%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (114-456), prioritizing same-state peers. 9 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ST.FRANCIS HEALTH CENTER (Target) | KS | 228 | $276.6M | -13.7% |
| STORMONT-VAIL REGIONAL HEALTH | KS | 438 | $825.0M | -2.0% |
| ADVENTHEALTH SHAWNEE MISSION | KS | 317 | $555.8M | 0.1% |
| OVERLAND PARK REGIONAL MED CTR | KS | 271 | $452.2M | 35.9% |
| AM 1 MENORAH MEDICAL CENTER | KS | 137 | $289.4M | 8.5% |
| OLATHE MEDICAL CENTER | KS | 237 | $272.8M | -6.5% |
| SALINA REGIONAL HEALTH CENTER | KS | 177 | $226.7M | -39.5% |
| HAYS MEDICAL CENTER INC. | KS | 136 | $215.1M | -12.3% |
| HUTCHINSON REGIONAL MEDICAL CE | KS | 147 | $132.3M | -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: $20.4M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $5.8M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $5.5M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $5.5M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.4M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $177K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-37.9M |
| + RCM Uplift | +$20.4M |
| Pro Forma EBITDA | $-17.6M |
| Current Margin | -13.7% |
| Pro Forma Margin | -6.3% |
| WC Released (1x) | $10.6M |
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 | $-58.3M | $-46.5M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-58.3M | $-70.1M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-52.5M | $-21.9M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-52.5M | $-39.4M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-64.2M | $-129.4M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-64.2M | $-163.1M | 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 |
| High | Elevated distress probability | Model estimates 50.3% 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
- 9 hospitals with 114-456 beds
- Same-state prioritization (n=10)
- Comp margins: P25=-15.3% / P50=-6.5% / P75=0.1%
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.