SPECIALTY REHABILITATION HOSPITAL
1. Target Overview & Investment Thesis
SPECIALTY REHABILITATION HOSPITAL is a 12-bed rural/critical access in RED RIVER PARISH, LA with $5.5M in net patient revenue and a 11.8% operating margin. The hospital serves a payer mix of 75.9% Medicare, 14.8% Medicaid, and 9.3% commercial.
Thesis: Turnaround. Our ML models identify $418K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 11.8% to 19.4% (+757bps).
| Net Revenue HCRIS | $5.5M |
| Current EBITDA COMPUTED | $653K |
| Operating Margin COMPUTED | 11.8% |
| Occupancy HCRIS | 81.8% |
| Revenue / Bed COMPUTED | $460K |
| Net-to-Gross HCRIS | 83.0% |
| Distress Probability ML | 52.2% |
2. Market Context & Competitive Position
LA has 212 Medicare-certified hospitals with a median operating margin of -3.5%. The target's margin of 11.8% places it above the state median. Among 55 size-comparable peers (6-24 beds), the median margin is 2.6%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (6-24), prioritizing same-state peers. 55 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SPECIALTY REHABILITATION HOSPI (Target) | LA | 12 | $5.5M | 11.8% |
| SPECIALISTS HOSPITAL OF SHREVE | LA | 15 | $79.1M | 21.3% |
| CENTRAL LOUISIANA SURGICAL HOS | LA | 24 | $69.1M | 7.7% |
| AVALA | LA | 21 | $64.0M | 7.4% |
| THE SPINE HOSPITAL OF LOUISIAN | LA | 23 | $57.4M | 35.4% |
| PARK PLACE SURGERY CENTER | LA | 10 | $51.6M | 15.4% |
| SURGICAL SPECIALTY CENTER BATO | LA | 16 | $49.8M | 16.9% |
| LAFAYETTE SURGICAL SPECIALTY H | LA | 20 | $48.9M | 9.1% |
| REEVES MEMORIAL MEDICAL CENTER | LA | 15 | $34.0M | 64.5% |
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: $418K (757bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $116K | +210bp | 18mo |
| Denial Rate Reduction | 12.0% | 6.5% | $114K | +207bp | 12mo |
| Cost to Collect | 4.5% | 2.5% | $110K | +200bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $67K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +17bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $653K |
| + RCM Uplift | +$418K |
| Pro Forma EBITDA | $1.1M |
| Current Margin | 11.8% |
| Pro Forma Margin | 19.4% |
| WC Released (1x) | $212K |
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 | $1.0M | $8.5M | 8.44x | 53.2% |
| Base (11x exit) | 10.0x | 11.0x | $1.0M | $9.7M | 9.61x | 57.2% |
| Bull Case | 9.0x | 11.0x | $905K | $11.4M | 12.56x | 65.9% |
| Bull (12x exit) | 9.0x | 12.0x | $905K | $12.7M | 14.00x | 69.5% |
| Bear Case | 11.0x | 10.0x | $1.1M | $6.1M | 5.49x | 40.6% |
| Bear (11x exit) | 11.0x | 11.0x | $1.1M | $7.0M | 6.36x | 44.8% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 75.9% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
| High | Elevated distress probability | Model estimates 52.2% probability of financial distress. Mitigant: distressed entry pricing (7-9x) compensates for risk |
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
- 55 hospitals with 6-24 beds
- Same-state prioritization (n=57)
- Comp margins: P25=-8.3% / P50=2.6% / 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.