COBALT REHABILITATION HOSPITAL
1. Target Overview & Investment Thesis
COBALT REHABILITATION HOSPITAL is a 60-bed suburban community hospital in nan, LA with $12.5M in net patient revenue and a 41.6% operating margin. The hospital serves a payer mix of 46.3% Medicare, 3.9% Medicaid, and 49.8% commercial.
Thesis: Turnaround. Our ML models identify $924K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 41.6% to 49.0% (+738bps).
| Net Revenue HCRIS | $12.5M |
| Current EBITDA COMPUTED | $5.2M |
| Operating Margin COMPUTED | 41.6% |
| Occupancy HCRIS | 37.6% |
| Revenue / Bed COMPUTED | $209K |
| Net-to-Gross HCRIS | 41.5% |
| Distress Probability ML | 54.4% |
2. Market Context & Competitive Position
LA has 212 Medicare-certified hospitals with a median operating margin of -3.5%. The target's margin of 41.6% places it above the state median. Among 84 size-comparable peers (30-120 beds), the median margin is -4.9%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (30-120), prioritizing same-state peers. 84 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| COBALT REHABILITATION HOSPITAL (Target) | LA | 60 | $12.5M | 41.6% |
| OCHSNER MEDICAL CENTER - KENNE | LA | 115 | $193.8M | -2.9% |
| ST. PATRICK HOSPITAL | LA | 100 | $189.4M | -7.4% |
| UNIVERSITY HOSPITAL & CLINICS | LA | 52 | $158.9M | -33.4% |
| SOUTHERN REGIONAL MEDICAL CORP | LA | 64 | $97.3M | -50.0% |
| OLH-SHREVEPORT-ST. MARY MEDICA | LA | 118 | $91.1M | -50.0% |
| OCHSNER LSU HEALTH MONROE | LA | 84 | $85.1M | -50.0% |
| NATCHITOCHES REGIONAL MEDICAL | LA | 81 | $82.4M | -21.8% |
| LAKE AREA MEDICAL CENTER | LA | 88 | $81.6M | 2.2% |
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: $924K (738bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $263K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $250K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $249K | +199bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $152K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +8bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $5.2M |
| + RCM Uplift | +$924K |
| Pro Forma EBITDA | $6.1M |
| Current Margin | 41.6% |
| Pro Forma Margin | 49.0% |
| WC Released (1x) | $480K |
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 | $8.0M | $43.6M | 5.44x | 40.3% |
| Base (11x exit) | 10.0x | 11.0x | $8.0M | $50.6M | 6.31x | 44.5% |
| Bull Case | 9.0x | 11.0x | $7.2M | $56.2M | 7.79x | 50.8% |
| Bull (12x exit) | 9.0x | 12.0x | $7.2M | $63.5M | 8.80x | 54.5% |
| Bear Case | 11.0x | 10.0x | $8.8M | $36.4M | 4.13x | 32.8% |
| Bear (11x exit) | 11.0x | 11.0x | $8.8M | $42.9M | 4.86x | 37.2% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| High | Elevated distress probability | Model estimates 54.4% 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
- 84 hospitals with 30-120 beds
- Same-state prioritization (n=85)
- Comp margins: P25=-25.9% / P50=-4.9% / P75=3.6%
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.