SPALDING REHAB HOSPITAL
1. Target Overview & Investment Thesis
SPALDING REHAB HOSPITAL is a 42-bed safety-net/medicaid heavy in ARAPAHOE, CO with $22.4M in net patient revenue and a 4.6% operating margin. The hospital serves a payer mix of 30.7% Medicare, 25.6% Medicaid, and 43.7% commercial.
Thesis: Turnaround. Our ML models identify $1.7M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 4.6% to 12.0% (+736bps).
| Net Revenue HCRIS | $22.4M |
| Current EBITDA COMPUTED | $1.0M |
| Operating Margin COMPUTED | 4.6% |
| Occupancy HCRIS | 61.9% |
| Revenue / Bed COMPUTED | $534K |
| Net-to-Gross HCRIS | 12.8% |
| Distress Probability ML | 49.8% |
2. Market Context & Competitive Position
CO has 108 Medicare-certified hospitals with a median operating margin of -3.6%. The target's margin of 4.6% places it above the state median. Among 44 size-comparable peers (21-84 beds), the median margin is -4.1%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (21-84), prioritizing same-state peers. 44 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SPALDING REHAB HOSPITAL (Target) | CO | 42 | $22.4M | 4.6% |
| VALLEY VIEW HOSPITAL | CO | 31 | $285.3M | -3.1% |
| CENTURA MERCY HOSPITAL | CO | 73 | $270.4M | 10.0% |
| COMMUNITY HOSPITAL | CO | 44 | $216.5M | -5.5% |
| VAIL VALLEY MEDICAL CENTER | CO | 54 | $214.4M | -28.1% |
| UCHEALTH LONGS PEAK HOSPITAL | CO | 83 | $181.8M | -1.7% |
| UCHEALTH GREELEY HOSPITAL | CO | 79 | $163.6M | -9.7% |
| MONTROSE MEMORIAL HOSPITAL | CO | 47 | $147.2M | -0.7% |
| ASPEN VALLEY HOSPITAL DISTRICT | CO | 25 | $130.1M | 0.4% |
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: $1.7M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $471K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $449K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $444K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $273K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $14K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.0M |
| + RCM Uplift | +$1.7M |
| Pro Forma EBITDA | $2.7M |
| Current Margin | 4.6% |
| Pro Forma Margin | 12.0% |
| WC Released (1x) | $861K |
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 | $1.6M | $23.4M | 14.62x | 71.0% |
| Base (11x exit) | 10.0x | 11.0x | $1.6M | $26.2M | 16.40x | 75.0% |
| Bull Case | 9.0x | 11.0x | $1.4M | $32.2M | 22.37x | 86.2% |
| Bull (12x exit) | 9.0x | 12.0x | $1.4M | $35.6M | 24.70x | 89.9% |
| Bear Case | 11.0x | 10.0x | $1.8M | $14.6M | 8.30x | 52.7% |
| Bear (11x exit) | 11.0x | 11.0x | $1.8M | $16.6M | 9.45x | 56.7% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Elevated Medicaid exposure (25.6%) | Medicaid reimburses below cost in most states. Mitigant: denial reduction lever has highest impact on Medicaid claims |
| Low | Low net-to-gross ratio | Large contractual allowances suggest pricing discipline issues. Mitigant: payer renegotiation is an additional upside lever |
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 21-84 beds
- Same-state prioritization (n=45)
- Comp margins: P25=-9.7% / P50=-4.1% / P75=2.2%
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.