WAYNE HOSPITAL COMPANY
1. Target Overview & Investment Thesis
WAYNE HOSPITAL COMPANY is a 43-bed under-performing / distressed in DARKE, OH with $59.1M in net patient revenue and a -23.0% operating margin. The hospital serves a payer mix of 33.5% Medicare, 3.7% Medicaid, and 62.9% commercial.
Thesis: Turnaround. Our ML models identify $4.4M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -23.0% to -15.6% (+736bps).
| Net Revenue HCRIS | $59.1M |
| Current EBITDA COMPUTED | $-13.6M |
| Operating Margin COMPUTED | -23.0% |
| Occupancy HCRIS | 23.7% |
| Revenue / Bed COMPUTED | $1.4M |
| Net-to-Gross HCRIS | 33.5% |
| Distress Probability ML | 54.3% |
2. Market Context & Competitive Position
OH has 235 Medicare-certified hospitals with a median operating margin of -0.3%. The target's margin of -23.0% places it below the state median. Among 114 size-comparable peers (22-86 beds), the median margin is -1.6%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (22-86), prioritizing same-state peers. 114 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| WAYNE HOSPITAL COMPANY (Target) | OH | 43 | $59.1M | -23.0% |
| KNOX COMMUNITY HOSPITAL | OH | 64 | $196.0M | -16.7% |
| CRYSTAL CLINIC ORTHOPAEDIC CEN | OH | 59 | $173.3M | -14.9% |
| THE SURGICAL HOSPITAL AT SOUTH | OH | 24 | $166.6M | -3.1% |
| OBLENESS MEMORIAL HOSPITAL | OH | 67 | $160.9M | 29.9% |
| MEMORIAL HOSPITAL OF UNION COU | OH | 51 | $151.0M | 8.0% |
| FISHER-TITUS MEDICAL CENTER | OH | 78 | $148.3M | -6.9% |
| WESTERN RESERVE HOSPITAL | OH | 83 | $147.6M | -9.3% |
| GRADY MEMORIAL HOSPITAL | OH | 60 | $146.7M | 16.5% |
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: $4.4M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.2M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.2M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.2M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $720K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $38K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-13.6M |
| + RCM Uplift | +$4.4M |
| Pro Forma EBITDA | $-9.3M |
| Current Margin | -23.0% |
| Pro Forma Margin | -15.6% |
| WC Released (1x) | $2.3M |
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 | $-20.9M | $-46.2M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-20.9M | $-57.6M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-18.8M | $-50.1M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-18.8M | $-60.2M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-23.0M | $-61.2M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-23.0M | $-74.8M | 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 23.7%, 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 54.3% 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
- 114 hospitals with 22-86 beds
- Same-state prioritization (n=115)
- Comp margins: P25=-11.5% / P50=-1.6% / P75=10.6%
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.