INSTITUTE FOR ORTHOPAEDIC SURGERY
1. Target Overview & Investment Thesis
INSTITUTE FOR ORTHOPAEDIC SURGERY is a 12-bed suburban community hospital in ALLEN, OH with $55.6M in net patient revenue and a 39.5% operating margin. The hospital serves a payer mix of 50.6% Medicare, 1.7% Medicaid, and 47.7% commercial.
Thesis: Turnaround. Our ML models identify $4.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 39.5% to 46.9% (+736bps).
| Net Revenue HCRIS | $55.6M |
| Current EBITDA COMPUTED | $22.0M |
| Operating Margin COMPUTED | 39.5% |
| Occupancy HCRIS | 24.1% |
| Revenue / Bed COMPUTED | $4.6M |
| Net-to-Gross HCRIS | 27.2% |
| Distress Probability ML | 48.9% |
2. Market Context & Competitive Position
OH has 235 Medicare-certified hospitals with a median operating margin of -0.3%. The target's margin of 39.5% places it above the state median. Among 23 size-comparable peers (6-24 beds), the median margin is -3.4%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (6-24), prioritizing same-state peers. 23 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| INSTITUTE FOR ORTHOPAEDIC SURG (Target) | OH | 12 | $55.6M | 39.5% |
| THE SURGICAL HOSPITAL AT SOUTH | OH | 24 | $166.6M | -3.1% |
| WYANDOT MEMORIAL HOSPITAL | OH | 24 | $74.7M | 7.4% |
| MERCY HOSPITAL OF DEFIANCE LL | OH | 23 | $50.4M | -15.3% |
| OHIO VALLEY MEDICAL CENTER | OH | 24 | $49.6M | -6.3% |
| LAKE HEALTH BEACHWOOD MEDICAL | OH | 24 | $49.2M | -16.2% |
| SHELBY MEMORIAL HOSPITAL | OH | 20 | $40.2M | 13.0% |
| FOSTORIA COMMUNITY HOSPITAL | OH | 19 | $40.0M | -3.4% |
| KINGS DAUGHTERS MED CENTER OHI | OH | 10 | $36.1M | 31.8% |
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: $4.1M (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% | $1.1M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.1M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $677K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $36K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $22.0M |
| + RCM Uplift | +$4.1M |
| Pro Forma EBITDA | $26.1M |
| Current Margin | 39.5% |
| Pro Forma Margin | 46.9% |
| WC Released (1x) | $2.1M |
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 | $33.8M | $185.8M | 5.50x | 40.6% |
| Base (11x exit) | 10.0x | 11.0x | $33.8M | $215.4M | 6.37x | 44.8% |
| Bull Case | 9.0x | 11.0x | $30.4M | $239.9M | 7.89x | 51.1% |
| Bull (12x exit) | 9.0x | 12.0x | $30.4M | $270.7M | 8.90x | 54.8% |
| Bear Case | 11.0x | 10.0x | $37.2M | $154.4M | 4.15x | 33.0% |
| Bear (11x exit) | 11.0x | 11.0x | $37.2M | $181.9M | 4.89x | 37.4% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Low occupancy | At 24.1%, fixed costs are spread over fewer patient days. Mitigant: volume growth is an additional upside lever not modeled in base case |
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
- 23 hospitals with 6-24 beds
- Same-state prioritization (n=25)
- Comp margins: P25=-15.8% / P50=-3.4% / P75=15.8%
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.