COMMUNITY STROKE AND REHABILITATION
1. Target Overview & Investment Thesis
COMMUNITY STROKE AND REHABILITATION is a 35-bed suburban community hospital in LAKE, IN with $29.0M in net patient revenue and a 6.7% operating margin. The hospital serves a payer mix of 63.6% Medicare, 0.4% Medicaid, and 36.0% commercial.
Thesis: Turnaround. Our ML models identify $2.1M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 6.7% to 14.1% (+736bps).
| Net Revenue HCRIS | $29.0M |
| Current EBITDA COMPUTED | $2.0M |
| Operating Margin COMPUTED | 6.7% |
| Occupancy HCRIS | 75.7% |
| Revenue / Bed COMPUTED | $830K |
| Net-to-Gross HCRIS | 33.7% |
| Distress Probability ML | 43.6% |
2. Market Context & Competitive Position
IN has 171 Medicare-certified hospitals with a median operating margin of -1.1%. The target's margin of 6.7% places it above the state median. Among 86 size-comparable peers (18-70 beds), the median margin is -2.9%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (18-70), prioritizing same-state peers. 86 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| COMMUNITY STROKE AND REHABILIT (Target) | IN | 35 | $29.0M | 6.7% |
| INDIANA ORTHOPAEDIC HOSPITAL L | IN | 38 | $196.8M | 31.2% |
| 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% |
| MAJOR HOSPITAL | IN | 46 | $156.9M | -9.2% |
| HENRY COUNTY MEMORIAL HOSPITAL | IN | 48 | $137.8M | -1.7% |
| MARGARET MARY COMMUNITY HOSPIT | IN | 25 | $124.5M | -3.6% |
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: $2.1M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $610K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $581K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $575K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $353K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $19K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $2.0M |
| + RCM Uplift | +$2.1M |
| Pro Forma EBITDA | $4.1M |
| Current Margin | 6.7% |
| Pro Forma Margin | 14.1% |
| WC Released (1x) | $1.1M |
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 | $3.0M | $34.3M | 11.39x | 62.7% |
| Base (11x exit) | 10.0x | 11.0x | $3.0M | $38.7M | 12.85x | 66.6% |
| Bull Case | 9.0x | 11.0x | $2.7M | $46.7M | 17.25x | 76.7% |
| Bull (12x exit) | 9.0x | 12.0x | $2.7M | $51.8M | 19.11x | 80.4% |
| Bear Case | 11.0x | 10.0x | $3.3M | $22.6M | 6.83x | 46.9% |
| Bear (11x exit) | 11.0x | 11.0x | $3.3M | $26.0M | 7.84x | 51.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 63.6% 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
- 86 hospitals with 18-70 beds
- Same-state prioritization (n=87)
- Comp margins: P25=-12.6% / P50=-2.9% / P75=6.9%
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.