ENCOMPASS HEALTH REHABILITATION OF P
1. Target Overview & Investment Thesis
ENCOMPASS HEALTH REHABILITATION OF P is a 40-bed rural/critical access in ESCAMBIA, FL with $17.2M in net patient revenue and a 3.4% operating margin. The hospital serves a payer mix of 68.6% Medicare, 0.9% Medicaid, and 30.5% commercial.
Thesis: Turnaround. Our ML models identify $1.3M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 3.4% to 10.7% (+736bps).
| Net Revenue HCRIS | $17.2M |
| Current EBITDA COMPUTED | $578K |
| Operating Margin COMPUTED | 3.4% |
| Occupancy HCRIS | 73.6% |
| Revenue / Bed COMPUTED | $430K |
| Net-to-Gross HCRIS | 61.4% |
| Distress Probability ML | 48.0% |
2. Market Context & Competitive Position
FL has 261 Medicare-certified hospitals with a median operating margin of 3.2%. The target's margin of 3.4% places it above the state median. Among 78 size-comparable peers (20-80 beds), the median margin is 1.6%. 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. 78 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ENCOMPASS HEALTH REHABILITATIO (Target) | FL | 40 | $17.2M | 3.4% |
| ASCENSION SACRED HEART EMERALD | FL | 80 | $187.9M | 16.1% |
| GULF BREEZE HOSPITAL | FL | 65 | $121.8M | 12.8% |
| OVIEDO MEDICAL CENTER | FL | 64 | $110.9M | 7.4% |
| BARTOW REGIONAL MEDICAL CENTER | FL | 72 | $90.9M | 11.3% |
| BAPTIST MEDICAL CTR-NASSAU | FL | 54 | $85.1M | 2.1% |
| UCF LAKE NONA HOSPITAL | FL | 64 | $80.3M | 1.8% |
| JACKSON HOSPITAL MARIANNA | FL | 66 | $75.3M | -9.7% |
| TWIN CITIES HOSPITAL | FL | 65 | $73.6M | 39.7% |
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: $1.3M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $361K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $344K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $340K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $209K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $11K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $578K |
| + RCM Uplift | +$1.3M |
| Pro Forma EBITDA | $1.8M |
| Current Margin | 3.4% |
| Pro Forma Margin | 10.7% |
| WC Released (1x) | $659K |
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 | $890K | $16.5M | 18.51x | 79.2% |
| Base (11x exit) | 10.0x | 11.0x | $890K | $18.4M | 20.68x | 83.3% |
| Bull Case | 9.0x | 11.0x | $801K | $22.9M | 28.55x | 95.5% |
| Bull (12x exit) | 9.0x | 12.0x | $801K | $25.2M | 31.45x | 99.3% |
| Bear Case | 11.0x | 10.0x | $979K | $9.8M | 10.07x | 58.7% |
| Bear (11x exit) | 11.0x | 11.0x | $979K | $11.2M | 11.40x | 62.7% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 68.6% 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
- 78 hospitals with 20-80 beds
- Same-state prioritization (n=79)
- Comp margins: P25=-19.2% / P50=1.6% / P75=11.8%
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.