OAKLAWN HOSPITAL
1. Target Overview & Investment Thesis
OAKLAWN HOSPITAL is a 78-bed under-performing / distressed in CALHOUN, MI with $156.6M in net patient revenue and a -12.4% operating margin. The hospital serves a payer mix of 23.2% Medicare, 2.6% Medicaid, and 74.3% commercial.
Thesis: Turnaround. Our ML models identify $11.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -12.4% to -5.0% (+736bps).
| Net Revenue HCRIS | $156.6M |
| Current EBITDA COMPUTED | $-19.4M |
| Operating Margin COMPUTED | -12.4% |
| Occupancy HCRIS | 36.4% |
| Revenue / Bed COMPUTED | $2.0M |
| Net-to-Gross HCRIS | 27.7% |
| Distress Probability ML | 49.2% |
2. Market Context & Competitive Position
MI has 163 Medicare-certified hospitals with a median operating margin of -5.2%. The target's margin of -12.4% places it below the state median. Among 53 size-comparable peers (39-156 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 (39-156), prioritizing same-state peers. 53 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| OAKLAWN HOSPITAL (Target) | MI | 78 | $156.6M | -12.4% |
| KARMANOS CANCER HOSPITAL | MI | 106 | $284.8M | -27.8% |
| BRONSON BATTLE CREEK | MI | 144 | $251.8M | -27.7% |
| ASCENSION PROVIDENCE ROCHESTER | MI | 153 | $249.9M | -4.6% |
| MYMICHIGAN MEDICAL CENTER ALPE | MI | 128 | $237.2M | 6.0% |
| MEMORIAL HEALTHCARE | MI | 113 | $226.4M | -13.4% |
| MCLAREN OAKLAND | MI | 107 | $214.4M | 1.6% |
| TRINITY HEALTH LIVINGSTON | MI | 42 | $200.4M | 15.2% |
| CHELSEA HOSPITAL | MI | 79 | $187.8M | -1.1% |
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: $11.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $3.3M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $3.1M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $3.1M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $1.9M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $100K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-19.4M |
| + RCM Uplift | +$11.5M |
| Pro Forma EBITDA | $-7.9M |
| Current Margin | -12.4% |
| Pro Forma Margin | -5.0% |
| WC Released (1x) | $6.0M |
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 | $-29.9M | $-12.9M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-29.9M | $-23.9M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-26.9M | $4.4M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-26.9M | $-3.1M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-32.9M | $-60.8M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-32.9M | $-77.6M | 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 |
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
- 53 hospitals with 39-156 beds
- Same-state prioritization (n=54)
- Comp margins: P25=-13.7% / P50=-4.1% / P75=5.4%
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 27, 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.