OCHSNER ST. MARY
1. Target Overview & Investment Thesis
OCHSNER ST. MARY is a 129-bed under-performing / distressed in nan, LA with $35.9M in net patient revenue and a -34.8% operating margin. The hospital serves a payer mix of 27.9% Medicare, 2.4% Medicaid, and 69.7% commercial.
Thesis: Undervalued. Our ML models identify $2.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -34.8% to -27.4% (+736bps).
| Net Revenue HCRIS | $35.9M |
| Current EBITDA COMPUTED | $-12.5M |
| Operating Margin COMPUTED | -34.8% |
| Occupancy HCRIS | 12.2% |
| Revenue / Bed COMPUTED | $278K |
| Net-to-Gross HCRIS | 13.2% |
| Distress Probability ML | 56.0% |
2. Market Context & Competitive Position
LA has 212 Medicare-certified hospitals with a median operating margin of -3.5%. The target's margin of -34.8% places it below the state median. Among 40 size-comparable peers (64-258 beds), the median margin is -4.1%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (64-258), prioritizing same-state peers. 40 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| OCHSNER ST. MARY (Target) | LA | 129 | $35.9M | -34.8% |
| CHILDRENS HOSPITAL | LA | 189 | $523.4M | 6.7% |
| BATON ROUGE GENERAL | LA | 251 | $445.5M | -6.7% |
| ST. TAMMANY PARISH HOSPITAL | LA | 213 | $434.6M | 4.5% |
| OCHSNER MEDICAL CENTER - BATON | LA | 171 | $371.4M | -11.5% |
| WOMANS HOSPITAL | LA | 228 | $345.8M | -8.8% |
| WEST JEFFERSON MEDICAL CENTER | LA | 199 | $329.9M | -11.9% |
| LAKE CHARLES MEMORIAL HOSPITAL | LA | 254 | $324.1M | -2.7% |
| EAST JEFFERSON GENERAL HOSPITA | LA | 250 | $302.6M | -27.0% |
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: $2.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $754K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $718K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $711K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $437K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $23K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-12.5M |
| + RCM Uplift | +$2.6M |
| Pro Forma EBITDA | $-9.8M |
| Current Margin | -34.8% |
| Pro Forma Margin | -27.4% |
| WC Released (1x) | $1.4M |
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 | $-19.2M | $-55.9M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-19.2M | $-67.8M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-17.3M | $-65.3M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-17.3M | $-76.3M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-21.1M | $-62.9M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-21.1M | $-76.1M | 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 |
| Medium | Low occupancy | At 12.2%, 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 56.0% 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
- 40 hospitals with 64-258 beds
- Same-state prioritization (n=41)
- Comp margins: P25=-11.8% / P50=-4.1% / P75=4.3%
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.