COBALT REHAB HOSPITAL SURPRISE
1. Target Overview & Investment Thesis
COBALT REHAB HOSPITAL SURPRISE is a 40-bed community hospital in nan, AZ with $14.9M in net patient revenue and a 6.1% operating margin. The hospital serves a payer mix of 49.3% Medicare, 0.0% Medicaid, and 50.7% commercial.
Thesis: Turnaround. Our ML models identify $1.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 6.1% to 13.4% (+736bps).
| Net Revenue HCRIS | $14.9M |
| Current EBITDA COMPUTED | $901K |
| Operating Margin COMPUTED | 6.1% |
| Occupancy HCRIS | 59.7% |
| Revenue / Bed COMPUTED | $371K |
| Net-to-Gross HCRIS | 47.5% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
AZ has 124 Medicare-certified hospitals with a median operating margin of -0.8%. The target's margin of 6.1% places it above the state median. Among 53 size-comparable peers (20-80 beds), the median margin is -1.1%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (20-80), prioritizing same-state peers. 53 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| COBALT REHAB HOSPITAL SURPRISE (Target) | AZ | 40 | $14.9M | 6.1% |
| CANYON VISTA MEDICAL CENTER | AZ | 74 | $132.6M | 1.9% |
| ARIZONA GENERAL HOSPITAL | AZ | 50 | $116.2M | -6.6% |
| HONORHEALTH SONORAN CROSSING M | AZ | 70 | $94.4M | -6.6% |
| THE CORE INSTITUTE SPECIALTY H | AZ | 28 | $91.2M | 9.2% |
| TEMPE ST. LUKES HOSPITAL | AZ | 74 | $75.8M | 3.6% |
| MT. GRAHAM REGIONAL MEDICAL CE | AZ | 25 | $75.2M | -2.8% |
| COBRE VALLEY REG. MEDICAL CENT | AZ | 25 | $74.9M | -10.3% |
| OASIS HOSPITAL | AZ | 64 | $66.1M | 3.3% |
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: $1.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $312K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $297K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $294K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $181K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $901K |
| + RCM Uplift | +$1.1M |
| Pro Forma EBITDA | $2.0M |
| Current Margin | 6.1% |
| Pro Forma Margin | 13.4% |
| WC Released (1x) | $570K |
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 | $1.4M | $16.9M | 12.18x | 64.9% |
| Base (11x exit) | 10.0x | 11.0x | $1.4M | $19.0M | 13.72x | 68.8% |
| Bull Case | 9.0x | 11.0x | $1.2M | $23.1M | 18.50x | 79.2% |
| Bull (12x exit) | 9.0x | 12.0x | $1.2M | $25.5M | 20.48x | 82.9% |
| Bear Case | 11.0x | 10.0x | $1.5M | $11.0M | 7.19x | 48.4% |
| Bear (11x exit) | 11.0x | 11.0x | $1.5M | $12.5M | 8.23x | 52.4% |
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
- 53 hospitals with 20-80 beds
- Same-state prioritization (n=54)
- Comp margins: P25=-10.2% / P50=-1.1% / P75=4.3%
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.