ST. MARYS OF MICHIGAN
1. Target Overview & Investment Thesis
ST. MARYS OF MICHIGAN is a 166-bed under-performing / distressed in SAGINAW, MI with $264.2M in net patient revenue and a -32.0% operating margin. The hospital serves a payer mix of 25.0% Medicare, 2.5% Medicaid, and 72.5% commercial.
Thesis: Undervalued. Our ML models identify $19.4M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -32.0% to -24.6% (+736bps).
| Net Revenue HCRIS | $264.2M |
| Current EBITDA COMPUTED | $-84.6M |
| Operating Margin COMPUTED | -32.0% |
| Occupancy HCRIS | 64.7% |
| Revenue / Bed COMPUTED | $1.6M |
| Net-to-Gross HCRIS | 26.8% |
| Distress Probability ML | 43.5% |
2. Market Context & Competitive Position
MI has 163 Medicare-certified hospitals with a median operating margin of -5.2%. The target's margin of -32.0% places it below the state median. Among 54 size-comparable peers (83-332 beds), the median margin is -6.7%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (83-332), prioritizing same-state peers. 54 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ST. MARYS OF MICHIGAN (Target) | MI | 166 | $264.2M | -32.0% |
| W.A. FOOTE MEMORIAL HOSPITAL | MI | 331 | $681.8M | -9.0% |
| TRINITY HEALTH MUSKEGON | MI | 262 | $621.2M | -15.5% |
| TRINITY HEALTH GRAND RAPIDS | MI | 271 | $601.8M | -27.3% |
| HENRY FORD HEALTH MACOMB HOSPI | MI | 303 | $584.5M | -6.9% |
| MYMICHIGAN MEDICAL CENTER MIDL | MI | 195 | $537.8M | -9.6% |
| METROPOLITAN HOSPITAL | MI | 201 | $512.0M | -11.3% |
| LAKELAND MEDICAL CENTER ST. J | MI | 235 | $488.2M | -3.6% |
| HENRY FORD WEST BLOOMFIELD HOS | MI | 191 | $446.0M | 5.5% |
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: $19.4M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $5.5M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $5.3M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $5.2M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.2M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $169K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-84.6M |
| + RCM Uplift | +$19.4M |
| Pro Forma EBITDA | $-65.1M |
| Current Margin | -32.0% |
| Pro Forma Margin | -24.6% |
| WC Released (1x) | $10.1M |
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 | $-130.1M | $-363.2M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-130.1M | $-441.8M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-117.1M | $-419.9M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-117.1M | $-492.6M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-143.1M | $-418.2M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-143.1M | $-506.5M | 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 |
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
- 54 hospitals with 83-332 beds
- Same-state prioritization (n=55)
- Comp margins: P25=-13.1% / P50=-6.7% / P75=-0.2%
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.