WHEATON FRANCISCAN HEALTHCARE - ALL
1. Target Overview & Investment Thesis
WHEATON FRANCISCAN HEALTHCARE - ALL is a 285-bed under-performing / distressed in RACINE, WI with $267.5M in net patient revenue and a -17.6% operating margin. The hospital serves a payer mix of 18.1% Medicare, 7.7% Medicaid, and 74.2% commercial.
Thesis: Undervalued. Our ML models identify $19.7M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -17.6% to -10.3% (+736bps).
| Net Revenue HCRIS | $267.5M |
| Current EBITDA COMPUTED | $-47.2M |
| Operating Margin COMPUTED | -17.6% |
| Occupancy HCRIS | 39.7% |
| Revenue / Bed COMPUTED | $939K |
| Net-to-Gross HCRIS | 30.3% |
| Distress Probability ML | 52.0% |
2. Market Context & Competitive Position
WI has 150 Medicare-certified hospitals with a median operating margin of 0.4%. The target's margin of -17.6% places it below the state median. Among 24 size-comparable peers (142-570 beds), the median margin is 1.4%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (142-570), prioritizing same-state peers. 24 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| WHEATON FRANCISCAN HEALTHCARE (Target) | WI | 285 | $267.5M | -17.6% |
| CHILDRENS HOSPITAL OF WISCONSI | WI | 298 | $795.1M | 5.0% |
| 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% |
| ST. VINCENT HOSPITAL | WI | 237 | $649.4M | 1.9% |
| ASPIRUS WAUSAU HOSPITAL | WI | 239 | $645.7M | 3.1% |
| AURORA BAYCARE MEDICAL CENTER | WI | 190 | $558.0M | 17.6% |
| WAUKESHA MEMORIAL HOSPITAL | WI | 270 | $545.6M | 3.2% |
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: $19.7M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $5.6M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $5.4M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $5.3M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.3M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $171K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-47.2M |
| + RCM Uplift | +$19.7M |
| Pro Forma EBITDA | $-27.5M |
| Current Margin | -17.6% |
| Pro Forma Margin | -10.3% |
| WC Released (1x) | $10.3M |
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 | $-72.6M | $-114.4M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-72.6M | $-149.4M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-65.3M | $-108.0M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-65.3M | $-137.1M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-79.9M | $-189.2M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-79.9M | $-234.1M | 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 |
| High | Elevated distress probability | Model estimates 52.0% 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
- 24 hospitals with 142-570 beds
- Same-state prioritization (n=25)
- Comp margins: P25=-11.8% / P50=1.4% / P75=6.5%
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.