MERCY ST. ANNE HOSPITAL
1. Target Overview & Investment Thesis
MERCY ST. ANNE HOSPITAL is a 128-bed suburban community hospital in LUCAS, OH with $23.4M in net patient revenue and a 2.3% operating margin. The hospital serves a payer mix of 29.7% Medicare, 2.0% Medicaid, and 68.3% commercial.
Thesis: Undervalued. Our ML models identify $1.7M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 2.3% to 9.6% (+736bps).
| Net Revenue HCRIS | $23.4M |
| Current EBITDA COMPUTED | $536K |
| Operating Margin COMPUTED | 2.3% |
| Occupancy HCRIS | 52.8% |
| Revenue / Bed COMPUTED | $183K |
| Net-to-Gross HCRIS | 14.2% |
| Distress Probability ML | 46.9% |
2. Market Context & Competitive Position
OH has 235 Medicare-certified hospitals with a median operating margin of -0.3%. The target's margin of 2.3% places it above the state median. Among 96 size-comparable peers (64-256 beds), the median margin is 0.2%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (64-256), prioritizing same-state peers. 96 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| MERCY ST. ANNE HOSPITAL (Target) | OH | 128 | $23.4M | 2.3% |
| RAINBOW BABIES & CHILDRENS HOS | OH | 231 | $2.22B | -5.0% |
| DAYTON CHILDRENS HOSPITAL | OH | 181 | $569.1M | 7.9% |
| MARIETTA MEMORIAL HOSPITAL | OH | 188 | $475.8M | -12.4% |
| ADENA REGIONAL MEDICAL CENTER | OH | 209 | $470.7M | 3.5% |
| SOUTHERN OHIO MEDICAL CENTER | OH | 192 | $424.3M | -4.9% |
| SOUTHWEST GENERAL HEALTH CENTE | OH | 191 | $406.9M | 2.5% |
| MEDCENTRAL HEALTH SYSTEM | OH | 240 | $382.6M | 0.2% |
| MARION GENERAL HOSPITAL | OH | 177 | $365.7M | 35.5% |
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: $1.7M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $492K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $469K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $464K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $285K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $15K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $536K |
| + RCM Uplift | +$1.7M |
| Pro Forma EBITDA | $2.3M |
| Current Margin | 2.3% |
| Pro Forma Margin | 9.6% |
| WC Released (1x) | $899K |
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 | $825K | $20.8M | 25.19x | 90.6% |
| Base (11x exit) | 10.0x | 11.0x | $825K | $23.1M | 28.03x | 94.8% |
| Bull Case | 9.0x | 11.0x | $743K | $29.1M | 39.17x | 108.2% |
| Bull (12x exit) | 9.0x | 12.0x | $743K | $31.9M | 43.03x | 112.2% |
| Bear Case | 11.0x | 10.0x | $908K | $11.9M | 13.10x | 67.3% |
| Bear (11x exit) | 11.0x | 11.0x | $908K | $13.4M | 14.74x | 71.3% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Low | Low net-to-gross ratio | Large contractual allowances suggest pricing discipline issues. Mitigant: payer renegotiation is an additional upside lever |
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
- 96 hospitals with 64-256 beds
- Same-state prioritization (n=97)
- Comp margins: P25=-12.7% / P50=0.2% / P75=7.5%
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.