REHABILITATION HOSPITAL OF THE PACIF
1. Target Overview & Investment Thesis
REHABILITATION HOSPITAL OF THE PACIF is a 82-bed under-performing / distressed in nan, HI with $41.9M in net patient revenue and a -15.6% operating margin. The hospital serves a payer mix of 25.4% Medicare, 20.9% Medicaid, and 53.7% commercial.
Thesis: Turnaround. Our ML models identify $3.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -15.6% to -8.3% (+736bps).
| Net Revenue HCRIS | $41.9M |
| Current EBITDA COMPUTED | $-6.6M |
| Operating Margin COMPUTED | -15.6% |
| Occupancy HCRIS | 64.3% |
| Revenue / Bed COMPUTED | $511K |
| Net-to-Gross HCRIS | 56.4% |
| Distress Probability ML | 52.8% |
2. Market Context & Competitive Position
HI has 26 Medicare-certified hospitals with a median operating margin of -14.7%. The target's margin of -15.6% places it below the state median. Among 2166 size-comparable peers (41-164 beds), the median margin is -3.4%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (41-164), prioritizing same-state peers. 2166 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| REHABILITATION HOSPITAL OF THE (Target) | HI | 82 | $41.9M | -15.6% |
| MIDWESTERN REGIONAL MEDICAL CE | IL | 73 | $1.38B | 80.5% |
| ROSWELL PARK CANCER INSTITUTE | NY | 142 | $772.3M | -40.1% |
| CHILDRENS HOSP & RES CNTR OAKL | CA | 155 | $687.9M | -7.1% |
| CONTRA COSTA REGIONAL MEDICAL | CA | 124 | $595.0M | -29.2% |
| JOHN DEMPSEY HOSPITAL | CT | 141 | $590.3M | -24.8% |
| INNOVIS HEALTH | ND | 142 | $537.9M | -5.3% |
| STRAUB CLINIC & HOSPITAL | HI | 159 | $537.5M | 4.1% |
| MARY IMOGENE BASSETT HOSPITAL | NY | 160 | $529.1M | -31.6% |
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: $3.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $880K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $838K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $830K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $510K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $27K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-6.6M |
| + RCM Uplift | +$3.1M |
| Pro Forma EBITDA | $-3.5M |
| Current Margin | -15.6% |
| Pro Forma Margin | -8.3% |
| WC Released (1x) | $1.6M |
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 | $-10.1M | $-12.4M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-10.1M | $-16.9M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-9.1M | $-10.0M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-9.1M | $-13.6M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-11.1M | $-24.5M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-11.1M | $-30.6M | 0.00x | -100.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| High | Negative operating margin | RCM uplift bridge shows clear path to profitability; working capital release provides near-term cash cushion |
| High | Elevated distress probability | Model estimates 52.8% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
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
- 2166 hospitals with 41-164 beds
- Same-state prioritization (n=7)
- Comp margins: P25=-15.5% / P50=-3.4% / P75=8.0%
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.