BHSM REHABILITATION
1. Target Overview & Investment Thesis
BHSM REHABILITATION is a 168-bed suburban community hospital in MARICOPA, AZ with $89.1M in net patient revenue and a 15.3% operating margin. The hospital serves a payer mix of 36.7% Medicare, 0.2% Medicaid, and 63.2% commercial.
Thesis: Turnaround. Our ML models identify $6.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 15.3% to 22.7% (+736bps).
| Net Revenue HCRIS | $89.1M |
| Current EBITDA COMPUTED | $13.7M |
| Operating Margin COMPUTED | 15.3% |
| Occupancy HCRIS | 77.0% |
| Revenue / Bed COMPUTED | $530K |
| Net-to-Gross HCRIS | 36.9% |
| Distress Probability ML | 43.3% |
2. Market Context & Competitive Position
AZ has 124 Medicare-certified hospitals with a median operating margin of -0.8%. The target's margin of 15.3% places it above the state median. Among 44 size-comparable peers (84-336 beds), the median margin is -0.3%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (84-336), prioritizing same-state peers. 44 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| BHSM REHABILITATION (Target) | AZ | 168 | $89.1M | 15.3% |
| MAYO CLINIC HOSPITAL | AZ | 315 | $2.25B | 1.4% |
| BANNER ESTRELLA MEDICAL CENTER | AZ | 317 | $1.84B | 79.2% |
| BANNER BAYWOOD MEDICAL CENTER | AZ | 323 | $1.39B | 79.1% |
| HONORHEALTH JOHN C. LINCOLN ME | AZ | 258 | $618.4M | -7.9% |
| BANNER GATEWAY MEDICAL CENTER | AZ | 185 | $573.8M | 5.2% |
| VALLEYWISE HEALTH MEDICAL CENT | AZ | 301 | $509.4M | -50.0% |
| FLAGSTAFF MEDICAL CENTER | AZ | 242 | $477.9M | -0.8% |
| YAVAPAI REGIONAL MEDICAL CENTE | AZ | 218 | $456.9M | -2.2% |
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: $6.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.9M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.8M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.8M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $1.1M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $57K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $13.7M |
| + RCM Uplift | +$6.6M |
| Pro Forma EBITDA | $20.2M |
| Current Margin | 15.3% |
| Pro Forma Margin | 22.7% |
| WC Released (1x) | $3.4M |
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 | $21.0M | $155.7M | 7.41x | 49.3% |
| Base (11x exit) | 10.0x | 11.0x | $21.0M | $178.0M | 8.47x | 53.3% |
| Bull Case | 9.0x | 11.0x | $18.9M | $206.5M | 10.92x | 61.3% |
| Bull (12x exit) | 9.0x | 12.0x | $18.9M | $230.9M | 12.21x | 64.9% |
| Bear Case | 11.0x | 10.0x | $23.1M | $116.0M | 5.02x | 38.1% |
| Bear (11x exit) | 11.0x | 11.0x | $23.1M | $135.2M | 5.85x | 42.4% |
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
- 44 hospitals with 84-336 beds
- Same-state prioritization (n=45)
- Comp margins: P25=-7.5% / P50=-0.3% / P75=12.8%
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.