OU MEDICAL CENTER
1. Target Overview & Investment Thesis
OU MEDICAL CENTER is a 819-bed large academic medical center in nan, OK with $1.65B in net patient revenue and a 4.6% operating margin. The hospital serves a payer mix of 15.9% Medicare, 46.4% Medicaid, and 37.6% commercial.
Thesis: Undervalued. Our ML models identify $121.2M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 4.6% to 12.0% (+736bps).
| Net Revenue HCRIS | $1.65B |
| Current EBITDA COMPUTED | $76.5M |
| Operating Margin COMPUTED | 4.6% |
| Occupancy HCRIS | 73.2% |
| Revenue / Bed COMPUTED | $2.0M |
| Net-to-Gross HCRIS | 16.5% |
| Distress Probability ML | 52.5% |
2. Market Context & Competitive Position
OK has 147 Medicare-certified hospitals with a median operating margin of -8.8%. The target's margin of 4.6% places it above the state median. Among 382 size-comparable peers (410-1638 beds), the median margin is -4.9%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (410-1638), prioritizing same-state peers. 382 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| OU MEDICAL CENTER (Target) | OK | 819 | $1.65B | 4.6% |
| ST. LUKES HOSPITAL | PA | 633 | $8.94B | 87.9% |
| NYU LANGONE HOSPITALS | NY | 1618 | $7.24B | -7.8% |
| STANFORD HEALTH CARE | CA | 657 | $6.76B | 3.7% |
| CLEVELAND CLINIC HOSPITAL | OH | 1326 | $6.38B | -17.7% |
| VANDERBILT UNIVERSITY MEDICAL | TN | 1084 | $5.44B | -15.9% |
| UCSF MEDICAL CENTER | CA | 834 | $5.44B | -5.4% |
| UT MD ANDERSON CANCER CENTER | TX | 721 | $4.90B | -0.8% |
| UNIV OF MI HOSPITALS & HLTH CT | MI | 951 | $4.62B | -1.4% |
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: $121.2M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $34.6M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $32.9M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $32.6M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $20.0M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $1.1M | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $76.5M |
| + RCM Uplift | +$121.2M |
| Pro Forma EBITDA | $197.7M |
| Current Margin | 4.6% |
| Pro Forma Margin | 12.0% |
| WC Released (1x) | $63.2M |
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 | $117.6M | $1.72B | 14.59x | 70.9% |
| Base (11x exit) | 10.0x | 11.0x | $117.6M | $1.93B | 16.38x | 74.9% |
| Bull Case | 9.0x | 11.0x | $105.9M | $2.36B | 22.33x | 86.1% |
| Bull (12x exit) | 9.0x | 12.0x | $105.9M | $2.61B | 24.66x | 89.8% |
| Bear Case | 11.0x | 10.0x | $129.4M | $1.07B | 8.29x | 52.6% |
| Bear (11x exit) | 11.0x | 11.0x | $129.4M | $1.22B | 9.44x | 56.7% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Elevated Medicaid exposure (46.4%) | Medicaid reimburses below cost in most states. Mitigant: denial reduction lever has highest impact on Medicaid claims |
| High | Elevated distress probability | Model estimates 52.5% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
| 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
- 382 hospitals with 410-1638 beds
- Same-state prioritization (n=6)
- Comp margins: P25=-15.1% / P50=-4.9% / P75=3.2%
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 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.