ATLANTIC REHABILITATION INSTITUTE
1. Target Overview & Investment Thesis
ATLANTIC REHABILITATION INSTITUTE is a 38-bed suburban community hospital in MORRIS, NJ with $23.2M in net patient revenue and a 22.9% operating margin. The hospital serves a payer mix of 58.6% Medicare, 1.4% Medicaid, and 40.1% commercial.
Thesis: Turnaround. Our ML models identify $1.7M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 22.9% to 30.2% (+736bps).
| Net Revenue HCRIS | $23.2M |
| Current EBITDA COMPUTED | $5.3M |
| Operating Margin COMPUTED | 22.9% |
| Occupancy HCRIS | 86.7% |
| Revenue / Bed COMPUTED | $611K |
| Net-to-Gross HCRIS | 55.9% |
| Distress Probability ML | 43.8% |
2. Market Context & Competitive Position
NJ has 95 Medicare-certified hospitals with a median operating margin of -3.9%. The target's margin of 22.9% places it above the state median. Among 16 size-comparable peers (19-76 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 (19-76), prioritizing same-state peers. 16 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ATLANTIC REHABILITATION INSTIT (Target) | NJ | 38 | $23.2M | 22.9% |
| CHILDRENS SPECIALIZED HOPSITAL | NJ | 68 | $150.1M | -18.1% |
| RAMAPO RIDGE PSYCHIATRIC | NJ | 58 | $78.4M | -34.4% |
| SILVER LAKE (12 MONTH FOR FILI | NJ | 63 | $55.3M | -24.8% |
| MARLTON REHAB HOSPITAL | NJ | 61 | $38.4M | 9.5% |
| UNIVERSITY BEHAVIORAL HEALTHCA | NJ | 64 | $38.1M | -50.0% |
| SSH WILLINGBORO | NJ | 69 | $32.9M | 9.2% |
| SSH - NORTHEAST NEW JERSEY IN | NJ | 62 | $29.8M | 1.8% |
| ENCOMPASS HEALTH REHABILITATIO | NJ | 60 | $28.9M | 18.0% |
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: $1.7M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $488K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $464K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $460K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $282K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $15K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $5.3M |
| + RCM Uplift | +$1.7M |
| Pro Forma EBITDA | $7.0M |
| Current Margin | 22.9% |
| Pro Forma Margin | 30.2% |
| WC Released (1x) | $890K |
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 | $8.2M | $52.1M | 6.38x | 44.9% |
| Base (11x exit) | 10.0x | 11.0x | $8.2M | $59.9M | 7.34x | 49.0% |
| Bull Case | 9.0x | 11.0x | $7.3M | $68.2M | 9.29x | 56.2% |
| Bull (12x exit) | 9.0x | 12.0x | $7.3M | $76.6M | 10.43x | 59.8% |
| Bear Case | 11.0x | 10.0x | $9.0M | $40.9M | 4.55x | 35.4% |
| Bear (11x exit) | 11.0x | 11.0x | $9.0M | $47.9M | 5.33x | 39.8% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 58.6% 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
- 16 hospitals with 19-76 beds
- Same-state prioritization (n=17)
- Comp margins: P25=-25.1% / P50=-4.9% / P75=9.2%
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.