AURORA MEDICAL CENTER GRAFTON
1. Target Overview & Investment Thesis
AURORA MEDICAL CENTER GRAFTON is a 132-bed suburban community hospital in OZAUKEE, WI with $300.4M in net patient revenue and a 16.7% operating margin. The hospital serves a payer mix of 23.8% Medicare, 2.9% Medicaid, and 73.3% commercial.
Thesis: Turnaround. Our ML models identify $22.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 16.7% to 24.0% (+736bps).
| Net Revenue HCRIS | $300.4M |
| Current EBITDA COMPUTED | $50.1M |
| Operating Margin COMPUTED | 16.7% |
| Occupancy HCRIS | 71.8% |
| Revenue / Bed COMPUTED | $2.3M |
| Net-to-Gross HCRIS | 27.1% |
| Distress Probability ML | 40.9% |
2. Market Context & Competitive Position
WI has 150 Medicare-certified hospitals with a median operating margin of 0.4%. The target's margin of 16.7% places it above the state median. Among 35 size-comparable peers (66-264 beds), the median margin is 0.1%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (66-264), prioritizing same-state peers. 35 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| AURORA MEDICAL CENTER GRAFTON (Target) | WI | 132 | $300.4M | 16.7% |
| 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% |
| ST. JOSEPHS COMM. HOSPT. | WI | 70 | $436.8M | 66.1% |
| MCHS FRANCISCAN HEALTHCARE IN | WI | 103 | $413.8M | -7.2% |
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: $22.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $6.3M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $6.0M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $5.9M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $3.7M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $192K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $50.1M |
| + RCM Uplift | +$22.1M |
| Pro Forma EBITDA | $72.2M |
| Current Margin | 16.7% |
| Pro Forma Margin | 24.0% |
| WC Released (1x) | $11.5M |
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 | $77.1M | $551.6M | 7.16x | 48.2% |
| Base (11x exit) | 10.0x | 11.0x | $77.1M | $631.8M | 8.20x | 52.3% |
| Bull Case | 9.0x | 11.0x | $69.4M | $729.8M | 10.52x | 60.1% |
| Bull (12x exit) | 9.0x | 12.0x | $69.4M | $816.6M | 11.77x | 63.7% |
| Bear Case | 11.0x | 10.0x | $84.8M | $416.0M | 4.91x | 37.5% |
| Bear (11x exit) | 11.0x | 11.0x | $84.8M | $485.1M | 5.72x | 41.8% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Standard execution risk | RCM improvement requires management buy-in and 12-18 month implementation timeline |
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
- 35 hospitals with 66-264 beds
- Same-state prioritization (n=36)
- Comp margins: P25=-12.2% / P50=0.1% / P75=13.7%
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.