ENCOMPASS HEALTH REHABILITATION HOS
1. Target Overview & Investment Thesis
ENCOMPASS HEALTH REHABILITATION HOS is a 126-bed suburban community hospital in BROWARD, FL with $48.2M in net patient revenue and a 11.7% operating margin. The hospital serves a payer mix of 58.2% Medicare, 0.9% Medicaid, and 41.0% commercial.
Thesis: Turnaround. Our ML models identify $3.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 11.7% to 19.1% (+736bps).
| Net Revenue HCRIS | $48.2M |
| Current EBITDA COMPUTED | $5.6M |
| Operating Margin COMPUTED | 11.7% |
| Occupancy HCRIS | 70.5% |
| Revenue / Bed COMPUTED | $382K |
| Net-to-Gross HCRIS | 62.3% |
| Distress Probability ML | 48.8% |
2. Market Context & Competitive Position
FL has 261 Medicare-certified hospitals with a median operating margin of 3.2%. The target's margin of 11.7% places it above the state median. Among 121 size-comparable peers (63-252 beds), the median margin is 5.0%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (63-252), prioritizing same-state peers. 121 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ENCOMPASS HEALTH REHABILITATIO (Target) | FL | 126 | $48.2M | 11.7% |
| MOFFITT CANCER CENTER | FL | 218 | $1.91B | 16.0% |
| LARGO MEDICAL CENTER | FL | 245 | $386.4M | 24.1% |
| WEST KENDALL BAPTIST HOSPITAL | FL | 127 | $361.6M | 18.5% |
| HCA FL FT WALTON-DESTIN HOSP | FL | 231 | $361.3M | 38.1% |
| ADVENTHEALTH WESLEY CHAPEL | FL | 169 | $360.1M | 17.0% |
| JUPITER MEDICAL CENTER | FL | 242 | $333.2M | -10.7% |
| ORLANDO HEALTH SOUTH LAKE HOSP | FL | 167 | $331.8M | 7.2% |
| HCA FLORIDA WESTSIDE HOSPITAL | FL | 250 | $317.3M | 34.8% |
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: $3.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.0M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $964K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $954K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $586K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $31K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $5.6M |
| + RCM Uplift | +$3.5M |
| Pro Forma EBITDA | $9.2M |
| Current Margin | 11.7% |
| Pro Forma Margin | 19.1% |
| WC Released (1x) | $1.8M |
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 | $8.7M | $72.6M | 8.38x | 53.0% |
| Base (11x exit) | 10.0x | 11.0x | $8.7M | $82.7M | 9.54x | 57.0% |
| Bull Case | 9.0x | 11.0x | $7.8M | $97.3M | 12.46x | 65.6% |
| Bull (12x exit) | 9.0x | 12.0x | $7.8M | $108.4M | 13.89x | 69.3% |
| Bear Case | 11.0x | 10.0x | $9.5M | $52.1M | 5.46x | 40.4% |
| Bear (11x exit) | 11.0x | 11.0x | $9.5M | $60.4M | 6.33x | 44.6% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 58.2% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
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
- 121 hospitals with 63-252 beds
- Same-state prioritization (n=122)
- Comp margins: P25=-5.8% / P50=5.0% / P75=16.0%
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.