BACHARACH INSTITUTE FOR REHABILITATI
1. Target Overview & Investment Thesis
BACHARACH INSTITUTE FOR REHABILITATI is a 80-bed rural/critical access in ATLANTIC, NJ with $25.8M in net patient revenue and a -54.4% operating margin. The hospital serves a payer mix of 62.5% Medicare, 0.2% Medicaid, and 37.3% commercial.
Thesis: Turnaround. Our ML models identify $1.9M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -54.4% to -47.0% (+736bps).
| Net Revenue HCRIS | $25.8M |
| Current EBITDA COMPUTED | $-14.0M |
| Operating Margin COMPUTED | -54.4% |
| Occupancy HCRIS | 35.2% |
| Revenue / Bed COMPUTED | $322K |
| Net-to-Gross HCRIS | 38.0% |
| Distress Probability ML | 54.2% |
2. Market Context & Competitive Position
NJ has 95 Medicare-certified hospitals with a median operating margin of -3.9%. The target's margin of -54.4% places it below the state median. Among 40 size-comparable peers (40-160 beds), the median margin is -6.3%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (40-160), prioritizing same-state peers. 40 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| BACHARACH INSTITUTE FOR REHABI (Target) | NJ | 80 | $25.8M | -54.4% |
| SOUTHERN OCEAN MEDICAL CENTER | NJ | 147 | $233.0M | 10.5% |
| DEBORAH HEART AND LUNG CENTER | NJ | 85 | $211.9M | -5.5% |
| ST LUKES WARREN HOSPITAL | NJ | 92 | $200.8M | 28.1% |
| ST. MICHAELS MEDICAL CENTER | NJ | 147 | $198.6M | -13.6% |
| ROBERT WOOD JOHNSON HOSPITAL @ | NJ | 152 | $193.9M | -15.5% |
| NEWTON MEDICAL CENTER | NJ | 139 | $189.3M | -6.7% |
| BERGEN NEW BRIDGE MEDICAL CENT | NJ | 101 | $187.0M | -39.4% |
| ST. MARYS HOSPITAL - PASSAIC | NJ | 122 | $173.8M | 0.9% |
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: $1.9M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $541K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $516K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $511K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $314K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $16K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-14.0M |
| + RCM Uplift | +$1.9M |
| Pro Forma EBITDA | $-12.1M |
| Current Margin | -54.4% |
| Pro Forma Margin | -47.0% |
| WC Released (1x) | $989K |
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 | $-21.6M | $-73.5M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-21.6M | $-87.9M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-19.4M | $-88.6M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-19.4M | $-102.4M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-23.7M | $-76.0M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-23.7M | $-91.3M | 0.00x | -100.0% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| High | Negative operating margin | RCM uplift bridge shows clear path to profitability; working capital release provides near-term cash cushion |
| Medium | Heavy Medicare dependence | Medicare comprises 62.5% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
| High | Elevated distress probability | Model estimates 54.2% 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
- 40 hospitals with 40-160 beds
- Same-state prioritization (n=41)
- Comp margins: P25=-26.2% / P50=-6.3% / P75=2.4%
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.