CARDINAL HILL REHABILITATION HOSPITA
1. Target Overview & Investment Thesis
CARDINAL HILL REHABILITATION HOSPITA is a 158-bed suburban community hospital in FAYETTE, KY with $79.9M in net patient revenue and a 0.7% operating margin. The hospital serves a payer mix of 44.0% Medicare, 1.6% Medicaid, and 54.3% commercial.
Thesis: Undervalued. Our ML models identify $5.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 0.7% to 8.0% (+736bps).
| Net Revenue HCRIS | $79.9M |
| Current EBITDA COMPUTED | $520K |
| Operating Margin COMPUTED | 0.7% |
| Occupancy HCRIS | 81.7% |
| Revenue / Bed COMPUTED | $506K |
| Net-to-Gross HCRIS | 45.9% |
| Distress Probability ML | 43.9% |
2. Market Context & Competitive Position
KY has 114 Medicare-certified hospitals with a median operating margin of -0.6%. The target's margin of 0.7% places it above the state median. Among 36 size-comparable peers (79-316 beds), the median margin is -0.2%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (79-316), prioritizing same-state peers. 36 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| CARDINAL HILL REHABILITATION H (Target) | KY | 158 | $79.9M | 0.7% |
| OWENSBORO HEALTH REGIONAL HOSP | KY | 302 | $678.6M | 11.1% |
| BAPTIST HEALTH HARDIN | KY | 259 | $459.5M | -1.5% |
| THE MEDICAL CENTER | KY | 310 | $451.0M | 4.2% |
| BAPTIST HEALTH PADUCAH | KY | 190 | $391.7M | -0.5% |
| SAINT JOSEPH HOSPITAL | KY | 252 | $322.8M | -17.3% |
| MERCY HEALTH LOURDES HOSPITAL | KY | 178 | $288.1M | 7.7% |
| BAPTIST HEALTH CORBIN | KY | 197 | $285.4M | 1.4% |
| LAKE CUMBERLAND REGIONAL HOSP | KY | 179 | $278.7M | 5.6% |
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: $5.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.7M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $1.6M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $1.6M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $973K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $51K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $520K |
| + RCM Uplift | +$5.9M |
| Pro Forma EBITDA | $6.4M |
| Current Margin | 0.7% |
| Pro Forma Margin | 8.0% |
| WC Released (1x) | $3.1M |
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 | $800K | $62.3M | 77.83x | 138.9% |
| Base (11x exit) | 10.0x | 11.0x | $800K | $68.8M | 85.94x | 143.7% |
| Bull Case | 9.0x | 11.0x | $720K | $88.4M | 122.82x | 161.7% |
| Bull (12x exit) | 9.0x | 12.0x | $720K | $96.7M | 134.28x | 166.4% |
| Bear Case | 11.0x | 10.0x | $880K | $32.6M | 37.03x | 105.9% |
| Bear (11x exit) | 11.0x | 11.0x | $880K | $36.1M | 41.06x | 110.2% |
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
- 36 hospitals with 79-316 beds
- Same-state prioritization (n=37)
- Comp margins: P25=-9.8% / P50=-0.2% / P75=9.4%
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.