SOUTHERN KENTUCKY REHAB HOSPITAL
1. Target Overview & Investment Thesis
SOUTHERN KENTUCKY REHAB HOSPITAL is a 76-bed suburban community hospital in WARREN, KY with $26.3M in net patient revenue and a 4.8% operating margin. The hospital serves a payer mix of 49.8% Medicare, 1.9% Medicaid, and 48.3% commercial.
Thesis: Turnaround. Our ML models identify $1.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 4.8% to 12.1% (+736bps).
| Net Revenue HCRIS | $26.3M |
| Current EBITDA COMPUTED | $1.3M |
| Operating Margin COMPUTED | 4.8% |
| Occupancy HCRIS | 68.9% |
| Revenue / Bed COMPUTED | $346K |
| Net-to-Gross HCRIS | 41.6% |
| Distress Probability ML | 46.6% |
2. Market Context & Competitive Position
KY has 114 Medicare-certified hospitals with a median operating margin of -0.6%. The target's margin of 4.8% places it above the state median. Among 47 size-comparable peers (38-152 beds), the median margin is -0.6%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (38-152), prioritizing same-state peers. 47 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SOUTHERN KENTUCKY REHAB HOSPIT (Target) | KY | 76 | $26.3M | 4.8% |
| BAPTIST HEALTH LAGRANGE | KY | 42 | $236.9M | 2.7% |
| ST. ELIZABETH FLORENCE | KY | 134 | $212.6M | 8.8% |
| SAINT JOSEPH EAST | KY | 138 | $209.5M | 2.6% |
| ST. CLAIRE MEDICAL CENTER | KY | 100 | $204.5M | -8.5% |
| HAZARD ARH | KY | 109 | $200.8M | -32.3% |
| T.J. SAMSON COMMUNITY HOSPITAL | KY | 112 | $189.4M | -10.5% |
| SAINT JOSEPH LONDON | KY | 118 | $173.7M | -8.1% |
| JENNIE STUART MEDICAL CENTER | KY | 122 | $165.3M | -6.1% |
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: $1.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $553K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $526K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $521K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $320K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $17K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.3M |
| + RCM Uplift | +$1.9M |
| Pro Forma EBITDA | $3.2M |
| Current Margin | 4.8% |
| Pro Forma Margin | 12.1% |
| WC Released (1x) | $1.0M |
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 | $1.9M | $27.6M | 14.33x | 70.3% |
| Base (11x exit) | 10.0x | 11.0x | $1.9M | $31.0M | 16.09x | 74.3% |
| Bull Case | 9.0x | 11.0x | $1.7M | $38.1M | 21.92x | 85.4% |
| Bull (12x exit) | 9.0x | 12.0x | $1.7M | $42.0M | 24.21x | 89.1% |
| Bear Case | 11.0x | 10.0x | $2.1M | $17.3M | 8.17x | 52.2% |
| Bear (11x exit) | 11.0x | 11.0x | $2.1M | $19.8M | 9.31x | 56.2% |
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
- 47 hospitals with 38-152 beds
- Same-state prioritization (n=48)
- Comp margins: P25=-10.7% / P50=-0.6% / P75=10.3%
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.