ENCOMPASS HEALTH REHABILITATION HOSP
1. Target Overview & Investment Thesis
ENCOMPASS HEALTH REHABILITATION HOSP is a 79-bed suburban community hospital in CLARK, NV with $33.8M in net patient revenue and a 3.7% operating margin. The hospital serves a payer mix of 56.1% Medicare, 14.6% Medicaid, and 29.3% commercial.
Thesis: Turnaround. Our ML models identify $2.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 3.7% to 11.1% (+736bps).
| Net Revenue HCRIS | $33.8M |
| Current EBITDA COMPUTED | $1.2M |
| Operating Margin COMPUTED | 3.7% |
| Occupancy HCRIS | 74.9% |
| Revenue / Bed COMPUTED | $428K |
| Net-to-Gross HCRIS | 52.3% |
| Distress Probability ML | 49.8% |
2. Market Context & Competitive Position
NV has 58 Medicare-certified hospitals with a median operating margin of 0.4%. The target's margin of 3.7% places it above the state median. Among 18 size-comparable peers (40-158 beds), the median margin is 0.4%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (40-158), prioritizing same-state peers. 18 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ENCOMPASS HEALTH REHABILITATIO (Target) | NV | 79 | $33.8M | 3.7% |
| ST. ROSE DOMINICAN - SAN MARTI | NV | 130 | $179.5M | -18.6% |
| NORTHERN NEVADA MEDICAL CENTER | NV | 88 | $150.8M | 10.5% |
| RENOWN SOUTH MEADOWS MED CTR | NV | 78 | $91.0M | 4.0% |
| NORTHEASTERN NEVADA REGIONAL H | NV | 59 | $84.2M | 15.5% |
| NORTHERN NEVADA SIERRA MEDICAL | NV | 158 | $61.7M | -50.0% |
| KINDRED HOSPITAL LAS VEGAS | NV | 118 | $52.3M | -10.6% |
| HORIZON SPEC HOSPITAL-LAS VEGA | NV | 100 | $44.1M | -2.2% |
| DIGNITY HEALTH REHABILITATION | NV | 60 | $41.4M | 12.1% |
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: $2.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $709K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $676K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $669K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $411K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $22K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.2M |
| + RCM Uplift | +$2.5M |
| Pro Forma EBITDA | $3.7M |
| Current Margin | 3.7% |
| Pro Forma Margin | 11.1% |
| WC Released (1x) | $1.3M |
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 | $33.1M | 17.26x | 76.8% |
| Base (11x exit) | 10.0x | 11.0x | $1.9M | $37.0M | 19.31x | 80.8% |
| Bull Case | 9.0x | 11.0x | $1.7M | $45.8M | 26.57x | 92.7% |
| Bull (12x exit) | 9.0x | 12.0x | $1.7M | $50.5M | 29.28x | 96.5% |
| Bear Case | 11.0x | 10.0x | $2.1M | $20.0M | 9.50x | 56.9% |
| Bear (11x exit) | 11.0x | 11.0x | $2.1M | $22.7M | 10.77x | 60.9% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 56.1% 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
- 18 hospitals with 40-158 beds
- Same-state prioritization (n=19)
- Comp margins: P25=-11.0% / P50=0.4% / P75=10.4%
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.