VAN MATRE ENCOMPASS HEALTH REHABILIT
1. Target Overview & Investment Thesis
VAN MATRE ENCOMPASS HEALTH REHABILIT is a 65-bed suburban community hospital in WINNEBAGO, IL with $32.0M in net patient revenue and a 8.3% operating margin. The hospital serves a payer mix of 51.6% Medicare, 2.2% Medicaid, and 46.2% commercial.
Thesis: Turnaround. Our ML models identify $2.4M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 8.3% to 15.7% (+736bps).
| Net Revenue HCRIS | $32.0M |
| Current EBITDA COMPUTED | $2.7M |
| Operating Margin COMPUTED | 8.3% |
| Occupancy HCRIS | 84.5% |
| Revenue / Bed COMPUTED | $493K |
| Net-to-Gross HCRIS | 68.4% |
| Distress Probability ML | 45.9% |
2. Market Context & Competitive Position
IL has 208 Medicare-certified hospitals with a median operating margin of -5.3%. The target's margin of 8.3% places it above the state median. Among 58 size-comparable peers (32-130 beds), the median margin is -7.8%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (32-130), prioritizing same-state peers. 58 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| VAN MATRE ENCOMPASS HEALTH REH (Target) | IL | 65 | $32.0M | 8.3% |
| MIDWESTERN REGIONAL MEDICAL CE | IL | 73 | $1.38B | 80.5% |
| NORTHWESTERN LAKE FOREST HOSPI | IL | 124 | $494.3M | -13.8% |
| SARAH BUSH LINCOLN HEALTH CENT | IL | 100 | $448.6M | -18.1% |
| KISHWAUKEE COMMUNITY HOSPITAL | IL | 98 | $355.3M | 25.5% |
| CGH MEDICAL CENTER | IL | 95 | $247.1M | -7.6% |
| SSM HEALTH GOOD SAMARITAN HOSP | IL | 111 | $214.8M | 1.5% |
| MORRIS HOSPITAL | IL | 89 | $210.8M | 1.7% |
| ADVENTIST BOLINGBROOK HOSPITAL | IL | 110 | $199.3M | -5.4% |
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: $2.4M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $673K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $641K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $634K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $390K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $20K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $2.7M |
| + RCM Uplift | +$2.4M |
| Pro Forma EBITDA | $5.0M |
| Current Margin | 8.3% |
| Pro Forma Margin | 15.7% |
| WC Released (1x) | $1.2M |
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 | $4.1M | $41.2M | 10.02x | 58.6% |
| Base (11x exit) | 10.0x | 11.0x | $4.1M | $46.7M | 11.35x | 62.5% |
| Bull Case | 9.0x | 11.0x | $3.7M | $55.8M | 15.08x | 72.0% |
| Bull (12x exit) | 9.0x | 12.0x | $3.7M | $62.0M | 16.74x | 75.7% |
| Bear Case | 11.0x | 10.0x | $4.5M | $28.1M | 6.21x | 44.1% |
| Bear (11x exit) | 11.0x | 11.0x | $4.5M | $32.4M | 7.16x | 48.2% |
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
- 58 hospitals with 32-130 beds
- Same-state prioritization (n=59)
- Comp margins: P25=-19.9% / P50=-7.8% / P75=3.6%
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.