MCHS FRANCISCAN HEALTHCARE INC
1. Target Overview & Investment Thesis
MCHS FRANCISCAN HEALTHCARE INC is a 103-bed suburban community hospital in LA CROSSE, WI with $413.8M in net patient revenue and a -7.2% operating margin. The hospital serves a payer mix of 39.3% Medicare, 5.6% Medicaid, and 55.1% commercial.
Thesis: Undervalued. Our ML models identify $30.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -7.2% to 0.1% (+736bps).
| Net Revenue HCRIS | $413.8M |
| Current EBITDA COMPUTED | $-29.9M |
| Operating Margin COMPUTED | -7.2% |
| Occupancy HCRIS | 47.2% |
| Revenue / Bed COMPUTED | $4.0M |
| Net-to-Gross HCRIS | 37.6% |
| Distress Probability ML | 46.4% |
2. Market Context & Competitive Position
WI has 150 Medicare-certified hospitals with a median operating margin of 0.4%. The target's margin of -7.2% places it below the state median. Among 40 size-comparable peers (52-206 beds), the median margin is -2.6%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (52-206), prioritizing same-state peers. 40 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| MCHS FRANCISCAN HEALTHCARE IN (Target) | WI | 103 | $413.8M | -7.2% |
| MARSHFIELD MEDICAL CENTER | WI | 194 | $765.7M | -13.0% |
| MCHS EAU CLAIRE HOSPITAL | WI | 186 | $676.4M | -5.5% |
| BELLIN MEMORIAL HOSPITAL | WI | 175 | $652.3M | 13.7% |
| AURORA BAYCARE MEDICAL CENTER | WI | 190 | $558.0M | 17.6% |
| ST. JOSEPHS COMM. HOSPT. | WI | 70 | $436.8M | 66.1% |
| FROEDTERT SOUTH | WI | 173 | $372.2M | 3.9% |
| THEDACARE REGIONAL MEDICAL CEN | WI | 172 | $352.3M | 7.0% |
| AURORA MEDICAL CENTER KENOSHA | WI | 151 | $304.2M | 13.8% |
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: $30.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $8.7M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $8.3M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $8.2M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $5.0M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $265K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-29.9M |
| + RCM Uplift | +$30.5M |
| Pro Forma EBITDA | $586K |
| Current Margin | -7.2% |
| Pro Forma Margin | 0.1% |
| WC Released (1x) | $15.9M |
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 | $-46.0M | $107.5M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-46.0M | $103.4M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-41.4M | $189.0M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-41.4M | $193.9M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-50.6M | $-29.8M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-50.6M | $-49.2M | 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
- 40 hospitals with 52-206 beds
- Same-state prioritization (n=41)
- Comp margins: P25=-12.9% / P50=-2.6% / P75=12.1%
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.