CHI HEALTH ST. FRANCIS
1. Target Overview & Investment Thesis
CHI HEALTH ST. FRANCIS is a 101-bed under-performing / distressed in HALL, NE with $116.5M in net patient revenue and a -24.8% operating margin. The hospital serves a payer mix of 40.0% Medicare, 2.3% Medicaid, and 57.7% commercial.
Thesis: Undervalued. Our ML models identify $8.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -24.8% to -17.4% (+736bps).
| Net Revenue HCRIS | $116.5M |
| Current EBITDA COMPUTED | $-28.9M |
| Operating Margin COMPUTED | -24.8% |
| Occupancy HCRIS | 45.5% |
| Revenue / Bed COMPUTED | $1.2M |
| Net-to-Gross HCRIS | 28.9% |
| Distress Probability ML | 49.2% |
2. Market Context & Competitive Position
NE has 98 Medicare-certified hospitals with a median operating margin of -6.3%. The target's margin of -24.8% places it below the state median. Among 19 size-comparable peers (50-202 beds), the median margin is -8.8%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (50-202), prioritizing same-state peers. 19 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CHI HEALTH ST. FRANCIS (Target) | NE | 101 | $116.5M | -24.8% |
| CHILDRENS HOSPITAL & MEDICAL C | NE | 186 | $501.1M | -10.3% |
| GREAT PLAINS HEALTH | NE | 96 | $268.8M | 3.9% |
| REGIONAL WEST MEDICAL CENTER | NE | 122 | $218.4M | -12.9% |
| CHI HEALTH LAKESIDE | NE | 125 | $200.3M | 15.3% |
| MARY LANNING MEMORIAL HOSPITAL | NE | 97 | $200.0M | -8.9% |
| FAITH REGIONAL HEALTH SERVICES | NE | 122 | $198.1M | 10.1% |
| CHI HEALTH IMMANUEL | NE | 177 | $187.9M | -8.8% |
| MADONNA REHABILITATION LTC HOS | NE | 77 | $177.1M | -8.8% |
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: $8.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $2.4M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $2.3M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $2.3M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $1.4M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $75K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-28.9M |
| + RCM Uplift | +$8.6M |
| Pro Forma EBITDA | $-20.3M |
| Current Margin | -24.8% |
| Pro Forma Margin | -17.4% |
| WC Released (1x) | $4.5M |
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 | $-44.4M | $-104.7M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-44.4M | $-129.6M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-40.0M | $-115.8M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-40.0M | $-138.1M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-48.9M | $-133.2M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-48.9M | $-162.4M | 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
- 19 hospitals with 50-202 beds
- Same-state prioritization (n=20)
- Comp margins: P25=-10.4% / P50=-8.8% / P75=0.9%
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.