MERCY REHAB HOSPITAL OKLAHOMA CITY S
1. Target Overview & Investment Thesis
MERCY REHAB HOSPITAL OKLAHOMA CITY S is a 36-bed rural/critical access in OKLAHOMA, OK with $12.5M in net patient revenue and a 8.1% operating margin. The hospital serves a payer mix of 71.5% Medicare, 1.3% Medicaid, and 27.2% commercial.
Thesis: Turnaround. Our ML models identify $927K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 8.1% to 15.5% (+738bps).
| Net Revenue HCRIS | $12.5M |
| Current EBITDA COMPUTED | $1.0M |
| Operating Margin COMPUTED | 8.1% |
| Occupancy HCRIS | 53.7% |
| Revenue / Bed COMPUTED | $349K |
| Net-to-Gross HCRIS | 69.1% |
| Distress Probability ML | 53.8% |
2. Market Context & Competitive Position
OK has 147 Medicare-certified hospitals with a median operating margin of -8.8%. The target's margin of 8.1% places it above the state median. Among 90 size-comparable peers (18-72 beds), the median margin is -9.4%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (18-72), prioritizing same-state peers. 90 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| MERCY REHAB HOSPITAL OKLAHOMA (Target) | OK | 36 | $12.5M | 8.1% |
| STILLWATER MEDICAL CENTER | OK | 52 | $270.2M | -9.9% |
| ST ANTHONY SHAWNEE HOSPITAL | OK | 57 | $169.2M | -6.1% |
| MCBRIDE CLINIC ORTHOPEDIC HOSP | OK | 68 | $166.9M | -5.0% |
| OKLAHOMA HEART HOSPITAL SOUTH | OK | 43 | $148.5M | -0.6% |
| COMMUNITY HOSPITAL | OK | 45 | $143.9M | 21.7% |
| INTEGRIS CANADIAN VALLEY HOSPI | OK | 66 | $84.9M | 4.6% |
| OKLAHOMA SPINE HOSPITAL | OK | 23 | $79.0M | 8.4% |
| JACKSON COUNTY MEMORIAL HOSPIT | OK | 49 | $75.5M | -10.7% |
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: $927K (738bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $264K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $251K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $250K | +199bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $153K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +8bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.0M |
| + RCM Uplift | +$927K |
| Pro Forma EBITDA | $1.9M |
| Current Margin | 8.1% |
| Pro Forma Margin | 15.5% |
| WC Released (1x) | $481K |
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 | $1.6M | $15.9M | 10.24x | 59.2% |
| Base (11x exit) | 10.0x | 11.0x | $1.6M | $18.0M | 11.58x | 63.2% |
| Bull Case | 9.0x | 11.0x | $1.4M | $21.6M | 15.41x | 72.8% |
| Bull (12x exit) | 9.0x | 12.0x | $1.4M | $24.0M | 17.11x | 76.5% |
| Bear Case | 11.0x | 10.0x | $1.7M | $10.8M | 6.31x | 44.5% |
| Bear (11x exit) | 11.0x | 11.0x | $1.7M | $12.4M | 7.26x | 48.7% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 71.5% of days; rate updates may lag inflation. Mitigant: CDI/CMI lever directly increases Medicare reimbursement |
| High | Elevated distress probability | Model estimates 53.8% 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
- 90 hospitals with 18-72 beds
- Same-state prioritization (n=91)
- Comp margins: P25=-23.9% / P50=-9.4% / P75=3.3%
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.