UOFL HEALTH-SHELBYVILLE
1. Target Overview & Investment Thesis
UOFL HEALTH-SHELBYVILLE is a 32-bed under-performing / distressed in nan, KY with $33.5M in net patient revenue and a -12.8% operating margin. The hospital serves a payer mix of 33.0% Medicare, 0.4% Medicaid, and 66.6% commercial.
Thesis: Turnaround. Our ML models identify $2.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -12.8% to -5.5% (+736bps).
| Net Revenue HCRIS | $33.5M |
| Current EBITDA COMPUTED | $-4.3M |
| Operating Margin COMPUTED | -12.8% |
| Occupancy HCRIS | 22.5% |
| Revenue / Bed COMPUTED | $1.0M |
| Net-to-Gross HCRIS | 19.1% |
| Distress Probability ML | 52.6% |
2. Market Context & Competitive Position
KY has 114 Medicare-certified hospitals with a median operating margin of -0.6%. The target's margin of -12.8% places it below the state median. Among 59 size-comparable peers (16-64 beds), the median margin is -2.3%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (16-64), prioritizing same-state peers. 59 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| UOFL HEALTH-SHELBYVILLE (Target) | KY | 32 | $33.5M | -12.8% |
| BAPTIST HEALTH LAGRANGE | KY | 42 | $236.9M | 2.7% |
| CLARK REGIONAL MEDICAL CENTER | KY | 54 | $156.4M | 16.5% |
| BAPTIST HEALTH RICHMOND | KY | 53 | $145.6M | -3.7% |
| HIGHLANDS REGIONAL MEDICAL CEN | KY | 63 | $96.5M | -32.6% |
| FLAGET MEMORIAL HOSPITAL | KY | 40 | $86.2M | -0.6% |
| ROCKCASTLE HOSPT. & RESPIR CAR | KY | 30 | $79.1M | 2.2% |
| ADVENTHEALTH MANCHESTER | KY | 49 | $73.0M | -11.0% |
| HARLAN ARH | KY | 56 | $69.9M | -24.1% |
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: $2.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $705K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $671K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $664K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $408K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $21K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-4.3M |
| + RCM Uplift | +$2.5M |
| Pro Forma EBITDA | $-1.8M |
| Current Margin | -12.8% |
| Pro Forma Margin | -5.5% |
| WC Released (1x) | $1.3M |
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 | $-6.6M | $-3.7M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-6.6M | $-6.2M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-6.0M | $-170K | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-6.0M | $-1.9M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-7.3M | $-13.9M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-7.3M | $-17.6M | 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 22.5%, 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 52.6% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
| Low | Low net-to-gross ratio | Large contractual allowances suggest pricing discipline issues. Mitigant: payer renegotiation is an additional upside lever |
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
- 59 hospitals with 16-64 beds
- Same-state prioritization (n=60)
- Comp margins: P25=-11.0% / P50=-2.3% / P75=6.7%
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.