ENCOMPASS HEALTH REHABILITATION HOSP
1. Target Overview & Investment Thesis
ENCOMPASS HEALTH REHABILITATION HOSP is a 90-bed rural/critical access in CLARK, NV with $35.7M in net patient revenue and a 13.2% operating margin. The hospital serves a payer mix of 65.3% Medicare, 8.2% Medicaid, and 26.5% commercial.
Thesis: Turnaround. Our ML models identify $2.6M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 13.2% to 20.5% (+736bps).
| Net Revenue HCRIS | $35.7M |
| Current EBITDA COMPUTED | $4.7M |
| Operating Margin COMPUTED | 13.2% |
| Occupancy HCRIS | 59.3% |
| Revenue / Bed COMPUTED | $397K |
| Net-to-Gross HCRIS | 65.6% |
| Distress Probability ML | 53.7% |
2. Market Context & Competitive Position
NV has 58 Medicare-certified hospitals with a median operating margin of 0.4%. The target's margin of 13.2% places it above the state median. Among 19 size-comparable peers (45-180 beds), the median margin is 0.8%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (45-180), prioritizing same-state peers. 19 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ENCOMPASS HEALTH REHABILITATIO (Target) | NV | 90 | $35.7M | 13.2% |
| CARSON TAHOE REGIONAL HEALTHCA | NV | 175 | $365.4M | 3.0% |
| ST. ROSE DOMINICAN - SAN MARTI | NV | 130 | $179.5M | -18.6% |
| NORTHERN NEVADA MEDICAL CENTER | NV | 88 | $150.8M | 10.5% |
| NORTH VISTA HOSPITAL | NV | 163 | $117.3M | 9.5% |
| 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% |
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: $2.6M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $750K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $714K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $707K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $434K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $23K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $4.7M |
| + RCM Uplift | +$2.6M |
| Pro Forma EBITDA | $7.3M |
| Current Margin | 13.2% |
| Pro Forma Margin | 20.5% |
| WC Released (1x) | $1.4M |
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 | $7.2M | $57.3M | 7.92x | 51.2% |
| Base (11x exit) | 10.0x | 11.0x | $7.2M | $65.4M | 9.03x | 55.3% |
| Bull Case | 9.0x | 11.0x | $6.5M | $76.5M | 11.73x | 63.6% |
| Bull (12x exit) | 9.0x | 12.0x | $6.5M | $85.3M | 13.09x | 67.3% |
| Bear Case | 11.0x | 10.0x | $8.0M | $41.8M | 5.25x | 39.3% |
| Bear (11x exit) | 11.0x | 11.0x | $8.0M | $48.6M | 6.10x | 43.6% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 65.3% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
| High | Elevated distress probability | Model estimates 53.7% 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
- 19 hospitals with 45-180 beds
- Same-state prioritization (n=20)
- Comp margins: P25=-10.9% / P50=0.8% / P75=7.3%
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.