COMMUNITY HEALTH REHAB HOSPITAL SOUT
1. Target Overview & Investment Thesis
COMMUNITY HEALTH REHAB HOSPITAL SOUT is a 44-bed suburban community hospital in JOHNSON, IN with $23.9M in net patient revenue and a 24.8% operating margin. The hospital serves a payer mix of 46.9% Medicare, 0.4% Medicaid, and 52.7% commercial.
Thesis: Turnaround. Our ML models identify $1.8M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 24.8% to 32.2% (+736bps).
| Net Revenue HCRIS | $23.9M |
| Current EBITDA COMPUTED | $5.9M |
| Operating Margin COMPUTED | 24.8% |
| Occupancy HCRIS | 71.9% |
| Revenue / Bed COMPUTED | $544K |
| Net-to-Gross HCRIS | 54.4% |
| Distress Probability ML | 46.5% |
2. Market Context & Competitive Position
IN has 171 Medicare-certified hospitals with a median operating margin of -1.1%. The target's margin of 24.8% places it above the state median. Among 89 size-comparable peers (22-88 beds), the median margin is -1.8%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (22-88), prioritizing same-state peers. 89 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| COMMUNITY HEALTH REHAB HOSPITA (Target) | IN | 44 | $23.9M | 24.8% |
| INDIANA ORTHOPAEDIC HOSPITAL L | IN | 38 | $196.8M | 31.2% |
| LAPORTE HOSPITAL | IN | 74 | $192.4M | 19.3% |
| SCHNECK MEDICAL CENTER | IN | 60 | $184.2M | -0.8% |
| ORTHOPAEDIC HOSPT.AT PARKVIEW | IN | 37 | $175.7M | 36.8% |
| LUTHERAN MUSCULOSKELETAL CENTE | IN | 39 | $168.9M | 25.0% |
| WITHAM MEMORIAL HOSPITAL | IN | 50 | $158.5M | -11.6% |
| FRANCISCAN HEALTH MOORESVILLE | IN | 80 | $157.3M | 26.2% |
| MAJOR HOSPITAL | IN | 46 | $156.9M | -9.2% |
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: $1.8M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $502K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $478K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $474K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $291K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $15K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $5.9M |
| + RCM Uplift | +$1.8M |
| Pro Forma EBITDA | $7.7M |
| Current Margin | 24.8% |
| Pro Forma Margin | 32.2% |
| WC Released (1x) | $918K |
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 | $9.1M | $56.8M | 6.22x | 44.1% |
| Base (11x exit) | 10.0x | 11.0x | $9.1M | $65.4M | 7.16x | 48.3% |
| Bull Case | 9.0x | 11.0x | $8.2M | $74.2M | 9.03x | 55.3% |
| Bull (12x exit) | 9.0x | 12.0x | $8.2M | $83.3M | 10.14x | 58.9% |
| Bear Case | 11.0x | 10.0x | $10.0M | $45.0M | 4.48x | 35.0% |
| Bear (11x exit) | 11.0x | 11.0x | $10.0M | $52.8M | 5.25x | 39.3% |
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
- 89 hospitals with 22-88 beds
- Same-state prioritization (n=90)
- Comp margins: P25=-11.9% / P50=-1.8% / P75=8.3%
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.