ENCOMPASS HEALTH REHABILITATION HOSP
1. Target Overview & Investment Thesis
ENCOMPASS HEALTH REHABILITATION HOSP is a 50-bed suburban community hospital in CLARK, NV with $23.9M in net patient revenue and a 5.1% operating margin. The hospital serves a payer mix of 65.7% Medicare, 9.1% Medicaid, and 25.2% commercial.
Thesis: Turnaround. Our ML models identify $1.8M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 5.1% to 12.5% (+736bps).
| Net Revenue HCRIS | $23.9M |
| Current EBITDA COMPUTED | $1.2M |
| Operating Margin COMPUTED | 5.1% |
| Occupancy HCRIS | 79.1% |
| Revenue / Bed COMPUTED | $479K |
| Net-to-Gross HCRIS | 59.0% |
| Distress Probability ML | 48.4% |
2. Market Context & Competitive Position
NV has 58 Medicare-certified hospitals with a median operating margin of 0.4%. The target's margin of 5.1% places it above the state median. Among 20 size-comparable peers (25-100 beds), the median margin is 3.8%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (25-100), prioritizing same-state peers. 20 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ENCOMPASS HEALTH REHABILITATIO (Target) | NV | 50 | $23.9M | 5.1% |
| 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% |
| BANNER CHURCHILL COMMUNITY HOS | NV | 25 | $69.2M | 6.8% |
| DIGINTY HEALTH ST ROSE DOMINIC | NV | 32 | $61.5M | 12.2% |
| HUMBOLDT GENERAL HOSPITAL | NV | 25 | $58.8M | -37.3% |
| 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: $1.8M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $503K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $479K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $474K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $291K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $15K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.2M |
| + RCM Uplift | +$1.8M |
| Pro Forma EBITDA | $3.0M |
| Current Margin | 5.1% |
| Pro Forma Margin | 12.5% |
| WC Released (1x) | $918K |
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 | $25.7M | 13.67x | 68.7% |
| Base (11x exit) | 10.0x | 11.0x | $1.9M | $28.9M | 15.37x | 72.7% |
| Bull Case | 9.0x | 11.0x | $1.7M | $35.3M | 20.87x | 83.6% |
| Bull (12x exit) | 9.0x | 12.0x | $1.7M | $39.0M | 23.07x | 87.3% |
| Bear Case | 11.0x | 10.0x | $2.1M | $16.3M | 7.87x | 51.1% |
| Bear (11x exit) | 11.0x | 11.0x | $2.1M | $18.6M | 8.98x | 55.1% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 65.7% 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
- 20 hospitals with 25-100 beds
- Same-state prioritization (n=21)
- Comp margins: P25=-14.8% / P50=3.8% / P75=12.1%
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.