Project Southmoor — Healthcare LBO with a Reimbursement Downside
A 3-hour Operating-Case LBO with Returns Attribution case study with a complete model answer
The Situation
Southmoor Ambulatory Partners, Inc. operates 30 ambulatory surgery centers across Georgia, Tennessee, Alabama and South Carolina, performing orthopedic, gastroenterology, ophthalmology and pain management procedures.
Southmoor Ambulatory Partners
- Sector
- Healthcare services — ambulatory surgery centers, physician-syndicated, across four southeastern states
- Size
- Geography
- United States; headquartered in Chattanooga, Tennessee
- Ownership
- Situation
The Prompt
You are on the deal team at Brookvale Partners.
Supporting Materials
What you are handed at the start of the case, in the format a real process would use.
Blank model template
XLSXUnlock
What You Have to Produce
The deliverables, in the order the committee will read them. The exercise runs 180 minutes.
PART 1
Build revenue from volume, rate and payor mix
PART 2
Reconcile the earnings base, and say what it is struck on
PART 3
Build the downside from its causes
PART 4
Does the capital structure survive it
PART 5
Rent, EBITDAR and liquidity
PART 6
Recovery, the exit and the returns
PART 7
The price, and what would make you walk away
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished Excel model and memo are in the solution set below.
- 01
Read the payor file before you read the plan (25 minutes)
- 02
Build the volume, then the mix, then the rate
- 03
Do FY2025A twice
- 04
Run both cases forward on inflating unit costs
- 05
Build the schedule with three instruments, not one (110 minutes for the workbook)
- 06
Test both covenants every period, then read the cure provisions again
- 07
Solve the price rather than searching for it
- 08
Write the recommendation (45 minutes)
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Same-facility volume
Cases performed at centers open for the whole of both comparison periods, which strips out the effect of opening or acquiring centers. It is the cleanest read on whether the underlying business is growing, and in a platform that adds five centers a year it is the only line that answers that question.
Payor mix
The share of cases by who pays for them. Because commercial plans reimburse a multiple of what Medicare and Medicaid pay, a mix shift moves revenue without a single case being lost — which is why a volume-only forecast in this sector is not a forecast.
Site-neutral payment
A reimbursement policy that pays the same rate for the same procedure regardless of where it is performed. For an ambulatory operator the direction matters as much as the rule: site-neutrality can lift rates toward the hospital level or cut them toward the office level, and which one it is depends on the category and the year.
EBITDAR and fixed charge coverage
Earnings before interest, tax, depreciation, amortization and rent, measured against rent plus cash interest plus mandatory amortization. In a business where rent is contractual and per site, rent does not fall when volume does — so a leverage test on EBITDA and a coverage test on EBITDAR do not bind at the same time, and which breaks first is a fact about the structure rather than about the forecast.
Noncontrolling interests in a syndicated platform
The physician partners own a share of each center, so the platform consolidates all of the revenue and keeps only its share of the earnings. Distributions to those interests are a deduction in every period, and they cut both ways: the partners fund their share of new centers and absorb their share of a downside.
Delayed draw term loan
Debt committed at close but drawn later, and only against defined uses — here construction and permitted acquisitions. It is how a platform funds a development program without paying interest on money it has not spent, and it is emphatically not liquidity: it cannot pay an interest bill, and its undrawn commitments are canceled on a default.
Equity cure
A right to fix a covenant breach by injecting equity that counts toward covenant earnings. What decides whether it helps is rarely its size: cure packages are capped in number and usually forbid curing consecutive periods, so a shock that lasts three years can disarm a cure right that looks generous on paper.
Downside floor
A stated minimum return in the downside case, below which a transaction is not recommended whatever the base case says. It turns the price question into a solve against the case nobody wants rather than the case everybody presents, and where the two cases support different prices the floor is what decides which one governs.
What Makes It Hard
The specific traps in this case — the places candidates lose the assessment without noticing.
Check Your Answer
Type the figures you produced and find out how many are right before you open the worked answer. You get a verdict and, where you are off, a pointer to the part of the build to re-check — never the number itself. Everything you type stays on this device.
How to type a figure. Digits, with an optional unit: 1,234.5, $1,234.5, 2.6x, 21.4%. For a negative use (20.0) or -20.0. Enter as many decimals as you carried — precision is never penalised.
What the Case Asked For
The arithmetic is only half of it. Tick off what you actually produced — this half is yours to score, because nothing can grade a written recommendation from a checkbox.
The Model Answer
The worked answer in full: Excel model and memo, built the way a banker would actually build them. It is a reference, not a submission — a strong answer under the clock is far shorter.
What the Solution Covers
- —Same-facility volume and payor mix build
- —Reimbursement rate downside case
- —De novo and add-on capital allocation
- —EBITDAR and rent coverage
- —Returns attribution with a negative case
- —Downside floor against a stated minimum
Memo
The written recommendation and how it was reached
Upgrade to Diamond
Sign up and upgrade to Diamond to unlock the Excel model, the memo and the audio walkthrough.
Get StartedThe Excel Model
The model is linked and tied out end to end — every schedule, every formula and every check, in the file itself.
Downloads are available to Diamond members
Excel Model and Memo (PDF) — yours to open, edit and rebuild
Walkthrough
A conversational walkthrough of how to approach the case under time pressure — where to start, what to cut, and how the recommendation gets defended.
Audio Walkthrough
How to approach Project Southmoor — Healthcare LBO with a Reimbursement Downside
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
Why is there no discounted cash flow in this case?
Because the committee is not being asked what Southmoor is worth in the abstract. It is being asked whether its own required return clears and whether its own downside floor holds. That is a price solve against a stated test, not a valuation, and a terminal value would be answering a question nobody asked.
How do I build a downside that is not just a smaller plan?
Name the events. A reimbursement rule with a date, a contract renewal with a counterparty, a mix migration with a size, a referral source with a name, and a cost line with a market behind it. Then decompose the result so each one has its own line, and check that the lines sum to the answer rather than approximately to it — a bridge with a large unexplained interaction term is a bridge nobody can argue with.
Which covenant should I expect to break first?
Work it out rather than assuming. A leverage test is a ratio to earnings and moves fast when earnings fall; a coverage test has rent and cash interest in its denominator and those do not move at all. Whether the fast one or the rigid one breaks first depends on how much of the cost base is contractual, which is exactly what the exercise is testing.
Do I need a goal seek to find the maximum price?
Almost certainly not, and noticing why is part of the answer. If the financing quantum is a fixed multiple of a historical figure, it does not flex with the price — so nothing about the business, the schedule or the exit equity depends on what you pay, the money multiple becomes equity to the holders over total equity, and the price falls out of one rearrangement.
How much of the three hours should go on the model?
About 25 minutes reading, 110 on the workbook and 45 on the recommendation. The workbook leaves 2,126 cells across 391 authored rows, which collapse to 456 formulas you actually type — roughly 14 seconds each. That is comfortable if you build one case block and copy it, and impossible if you rebuild the downside from scratch.
What separates a strong answer from an average one?
Three things: building revenue from cases, rate and mix instead of a growth rate; reading the cure provisions in full before deciding the cure right helps; and saying that the plan and the downside support different prices, rather than presenting one number as though the analysis produced only one.
What does the podcast cover that the recommendation does not?
How to read the prompt under time pressure, the order to build in so the covenant work is not the thing you run out of time for, and the failure modes that sink otherwise competent answers — haircutting EBITDA, testing one covenant, treating a delayed draw as liquidity, and exiting the downside at the entry multiple.
About This Operating-Case LBO with Returns Attribution Case Study
Operating-Case LBO with Returns Attribution case study for private equity interviews. 180-minute format covering same-facility volume and payor mix build, reimbursement rate downside case, de novo and add-on capital allocation. Includes the full prompt, a tied-out Excel model, a written memo and an audio walkthrough.
This case study sits in Private Equity, under LBO Modeling Tests. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
180-Minute Format
The time limit a real assessment would give you
Excel Model
Included in the model answer
Memo
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
200K+ students have used IB Vine to help land offers at top firms.
Moelis & Co.
“I loved IB Vine. I’m going into Private Capital Advisory (PCA); you have the lessons on there for PCA and that was actually a game changer. I went into those interviews and knew about the core PCA concepts like net asset value, primary fundraising vs. secondary advisory, etc. I swear I was on IB Vine like a few hours a day. The opportunity to have that learning section and go through the questions people submit and everything — there’s no better tool out there. I loved the guides/lessons. The user interface is amazing. The way you’ve simplified it is so spectacular — it’s just so much easier to digest. It’s fun to use too; I’d rather use IB Vine than scroll through a guide. To be honest, I think the product is perfect. I genuinely owe you a big thanks.”
Moelis & Co.
“IB Vine is a tool we really love to use in the club I’m a part of, and there’s really no other resource like it. You guys do a phenomenal job with the question bank. I recruited specifically for Energy banking, and IB Vine was my most used resource for generalist questions (which were about 50% of my interview questions; the rest being Energy-specific); the majority of such questions I saw in interviews were at least similar (if not the same) to the ones on IB Vine.”
Perella Weinberg
“Once I read through the BIWS learning guides, I really didn’t refer to them again. I didn’t even really run through the 400 question guide once I found IB Vine, which I heard about through one of my classmates. We even get a free subscription (like most business schools) to Wall Street Prep, and if I’m being completely honest, I never even logged in to WSP. IB Vine is pretty much the only tool I used (along with our club question bank & mock interviews with peers) and it was invaluable for recruiting.”
Cantor Fitzgerald
“What a platform, made such a huge difference. I did superdays at Evercore, PJT, M. Klein and Barclays among others from a non-target school and did not miss a single technical in any interview process through prepping with IB Vine.”
Barclays
“Very accurate questions and all of the solutions are easy to follow. At least 10 of the questions I studied through this platform appeared in my Round 1 or Superday interviews.”
TD Securities
“THANK YOU SO MUCH IB VINE, I COULD NOT HAVE DONE THIS WITHOUT YOU, SERIOUSLY!!! IB Vine was the best website ever. I spent at least two hours on this daily (seriously) from October through I get my offer in February.”
Citadel
“I’m doing public equities this summer and next. I know the name is “IB Vine” but at the undergrad level a lot of the technicals across public equities are the same as investment banking. I recommend your software to all my friends!”
Piper Sandler
“I loved this site! 1000% this is the best resource I used in the process.”
Lazard
“This was the greatest tool ever. I genuinely enjoyed running through the technicals/behaviorals and it was very helpful!”
Houlihan Lokey
“IB Vine was the most helpful resource I had during recruiting. I will continue to promote it to other students at WashU and elsewhere.”
Jefferies
“Awesome product, helped me crush my technicals in my interviews and land a great role. Thank you, seriously was a huge help.”
Morgan Stanley
“Very helpful to get real-life questions unlike the 400 guide, especially for merger math. Built deeper understanding of key concepts.”
Houlihan Lokey
“Extremely helpful study tool that carried me through the recruitment process from start to end.”
Evercore
“You guys are doing great work over there with IB Vine. Absolute staple for interview prep.”
Rothschild
“IB Vine was incredibly helpful and I am forever thankful for all the help.”
RBC
“IB Mock was amazing - I used it for multiple hours. Also the flashcards and the lessons features on IB Vine were fantastic. Thank you!”
Dragoneer
“IB Vine is such a great platform, really impressive. There is so much value in this. The audio podcasts / mock interview library are pretty incredible.”
Case Study Preparation
Explore All Case Studies
100+ case studies, each with the full prompt, supporting materials and an audio walkthrough; most also ship a model answer deck and a tied-out Excel model.
Every case has a public page like this one. The member library is the signed-in index members work through.