COMMUNITY HEALTH NETWORK REHAB HOSP
1. Target Overview & Investment Thesis
COMMUNITY HEALTH NETWORK REHAB HOSP is a 60-bed suburban community hospital in MARION, IN with $39.3M in net patient revenue and a 33.9% operating margin. The hospital serves a payer mix of 42.9% Medicare, 0.6% Medicaid, and 56.5% commercial.
Thesis: Turnaround. Our ML models identify $2.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 33.9% to 41.3% (+736bps).
| Net Revenue HCRIS | $39.3M |
| Current EBITDA COMPUTED | $13.3M |
| Operating Margin COMPUTED | 33.9% |
| Occupancy HCRIS | 86.0% |
| Revenue / Bed COMPUTED | $656K |
| Net-to-Gross HCRIS | 54.2% |
| Distress Probability ML | 43.0% |
2. Market Context & Competitive Position
IN has 171 Medicare-certified hospitals with a median operating margin of -1.1%. The target's margin of 33.9% places it above the state median. Among 72 size-comparable peers (30-120 beds), the median margin is 1.1%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (30-120), prioritizing same-state peers. 72 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| COMMUNITY HEALTH NETWORK REHAB (Target) | IN | 60 | $39.3M | 33.9% |
| FRANCISCAN HEALTH MICHIGAN CIT | IN | 119 | $276.7M | 6.1% |
| MEMORIAL HOSP & HEALTH CARE CT | IN | 96 | $259.1M | 28.7% |
| GOSHEN HOSPITAL | IN | 103 | $248.4M | -22.8% |
| GOOD SAMARITAN HOSPITAL | IN | 99 | $233.1M | -12.9% |
| INDIANA ORTHOPAEDIC HOSPITAL L | IN | 38 | $196.8M | 31.2% |
| ST. VINCENT HEART CENTER | IN | 107 | $195.3M | 32.4% |
| LAPORTE HOSPITAL | IN | 74 | $192.4M | 19.3% |
| SCHNECK MEDICAL CENTER | IN | 60 | $184.2M | -0.8% |
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: $2.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $826K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $787K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $779K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $479K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $25K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $13.3M |
| + RCM Uplift | +$2.9M |
| Pro Forma EBITDA | $16.2M |
| Current Margin | 33.9% |
| Pro Forma Margin | 41.3% |
| WC Released (1x) | $1.5M |
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 | $20.5M | $116.9M | 5.70x | 41.6% |
| Base (11x exit) | 10.0x | 11.0x | $20.5M | $135.3M | 6.59x | 45.8% |
| Bull Case | 9.0x | 11.0x | $18.5M | $151.5M | 8.20x | 52.3% |
| Bull (12x exit) | 9.0x | 12.0x | $18.5M | $170.8M | 9.25x | 56.0% |
| Bear Case | 11.0x | 10.0x | $22.6M | $95.8M | 4.24x | 33.5% |
| Bear (11x exit) | 11.0x | 11.0x | $22.6M | $112.7M | 4.99x | 37.9% |
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
- 72 hospitals with 30-120 beds
- Same-state prioritization (n=73)
- Comp margins: P25=-11.7% / P50=1.1% / P75=14.1%
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.