ASPIRUS ONTONAGON HOSPITAL
1. Target Overview & Investment Thesis
ASPIRUS ONTONAGON HOSPITAL is a 18-bed rural/critical access in ONTONAGON, MI with $9.9M in net patient revenue and a -30.6% operating margin. The hospital serves a payer mix of 51.8% Medicare, 0.6% Medicaid, and 47.6% commercial.
Thesis: Turnaround. Our ML models identify $733K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -30.6% to -23.2% (+742bps).
| Net Revenue HCRIS | $9.9M |
| Current EBITDA COMPUTED | $-3.0M |
| Operating Margin COMPUTED | -30.6% |
| Occupancy HCRIS | 10.3% |
| Revenue / Bed COMPUTED | $548K |
| Net-to-Gross HCRIS | 44.6% |
| Distress Probability ML | 59.7% |
2. Market Context & Competitive Position
MI has 163 Medicare-certified hospitals with a median operating margin of -5.2%. The target's margin of -30.6% places it below the state median. Among 52 size-comparable peers (9-36 beds), the median margin is 0.6%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (9-36), prioritizing same-state peers. 52 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ASPIRUS ONTONAGON HOSPITAL (Target) | MI | 18 | $9.9M | -30.6% |
| SPECTRUM HEALTH GERBER | MI | 25 | $116.2M | 16.0% |
| ST. FRANCIS HOSPITAL | MI | 25 | $106.2M | 7.8% |
| SPECTRUM HEALTH PENNOCK HOSPIT | MI | 25 | $96.5M | 11.1% |
| SPECTRUM HEALTH REED CITY | MI | 25 | $77.1M | 21.2% |
| SPARROW EATON | MI | 25 | $76.1M | 11.5% |
| MUNSON HEALTHCARE CHARLEVOIX H | MI | 25 | $73.6M | 1.9% |
| PORTAGE HEALTH SYSTEM | MI | 36 | $69.3M | -16.3% |
| BRONSON LAKEVIEW HOSPITAL | MI | 16 | $67.9M | 14.6% |
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: $733K (742bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $207K | +210bp | 18mo |
| Denial Rate Reduction | 12.0% | 6.5% | $198K | +201bp | 12mo |
| Cost to Collect | 4.5% | 2.5% | $197K | +200bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $120K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +10bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-3.0M |
| + RCM Uplift | +$733K |
| Pro Forma EBITDA | $-2.3M |
| Current Margin | -30.6% |
| Pro Forma Margin | -23.2% |
| WC Released (1x) | $379K |
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 | $-4.6M | $-12.6M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-4.6M | $-15.4M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-4.2M | $-14.5M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-4.2M | $-17.0M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-5.1M | $-14.8M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-5.1M | $-17.9M | 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 10.3%, 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 59.7% 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
- 52 hospitals with 9-36 beds
- Same-state prioritization (n=53)
- Comp margins: P25=-10.8% / P50=0.6% / P75=9.2%
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 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.