REHOBOTH MCKINLEY CHRISTIAN HOSPITAL
1. Target Overview & Investment Thesis
REHOBOTH MCKINLEY CHRISTIAN HOSPITAL is a 50-bed under-performing / distressed in MCKINLEY, NM with $48.0M in net patient revenue and a -71.4% operating margin. The hospital serves a payer mix of 28.0% Medicare, 10.7% Medicaid, and 61.3% commercial.
Thesis: Turnaround. Our ML models identify $3.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -71.4% to -64.0% (+736bps).
| Net Revenue HCRIS | $48.0M |
| Current EBITDA COMPUTED | $-34.3M |
| Operating Margin COMPUTED | -71.4% |
| Occupancy HCRIS | 36.9% |
| Revenue / Bed COMPUTED | $959K |
| Net-to-Gross HCRIS | 24.2% |
| Distress Probability ML | 52.4% |
2. Market Context & Competitive Position
NM has 55 Medicare-certified hospitals with a median operating margin of -2.7%. The target's margin of -71.4% places it below the state median. Among 34 size-comparable peers (25-100 beds), the median margin is -1.4%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (25-100), prioritizing same-state peers. 34 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| REHOBOTH MCKINLEY CHRISTIAN HO (Target) | NM | 50 | $48.0M | -71.4% |
| GERALD CHAMPION REGIONAL MEDIC | NM | 66 | $245.9M | -11.6% |
| NOR-LEA HOSPITAL | NM | 25 | $131.5M | 0.9% |
| PLAINS REGIONAL MEDICAL CTR - | NM | 100 | $113.3M | -1.4% |
| UNM SANDOVAL REGIONAL MEDICAL | NM | 60 | $104.5M | -11.9% |
| CARLSBAD MEDICAL CENTER | NM | 53 | $97.1M | 19.9% |
| SANTA FE MEDICAL CENTER | NM | 36 | $95.0M | -26.5% |
| ESPANOLA HOSPITAL | NM | 70 | $84.1M | -2.3% |
| GILA REGIONAL MEDICAL CENTER | NM | 25 | $83.6M | -3.6% |
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: $3.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $1.0M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $959K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $950K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $584K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $31K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-34.3M |
| + RCM Uplift | +$3.5M |
| Pro Forma EBITDA | $-30.7M |
| Current Margin | -71.4% |
| Pro Forma Margin | -64.0% |
| WC Released (1x) | $1.8M |
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 | $-52.7M | $-190.6M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-52.7M | $-226.8M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-47.4M | $-232.3M | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-47.4M | $-267.4M | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-58.0M | $-191.2M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-58.0M | $-229.1M | 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 |
| High | Elevated distress probability | Model estimates 52.4% 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
- 34 hospitals with 25-100 beds
- Same-state prioritization (n=35)
- Comp margins: P25=-18.8% / P50=-1.4% / P75=8.8%
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.