HOSPITAL PSIQUIATRICO CABO ROJO
1. Target Overview & Investment Thesis
HOSPITAL PSIQUIATRICO CABO ROJO is a 39-bed community hospital in nan, PR with $8.4M in net patient revenue and a -13.2% operating margin. The hospital serves a payer mix of 3.5% Medicare, 0.0% Medicaid, and 96.5% commercial.
Thesis: Turnaround. Our ML models identify $629K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -13.2% to -5.7% (+745bps).
| Net Revenue HCRIS | $8.4M |
| Current EBITDA COMPUTED | $-1.1M |
| Operating Margin COMPUTED | -13.2% |
| Occupancy HCRIS | 68.9% |
| Revenue / Bed COMPUTED | $216K |
| Net-to-Gross HCRIS | 75.9% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
PR has 61 Medicare-certified hospitals with a median operating margin of -8.8%. The target's margin of -13.2% places it below the state median. Among 13 size-comparable peers (20-78 beds), the median margin is -17.0%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (20-78), prioritizing same-state peers. 13 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| HOSPITAL PSIQUIATRICO CABO ROJ (Target) | PR | 39 | $8.4M | -13.2% |
| ADMIN DE SERVICIOS MEDICOS DE | PR | 65 | $179.7M | -50.0% |
| HOSPITAL MENONITA HUMACAO | PR | 73 | $53.1M | 31.3% |
| HOSP. METROPOLITANO DE SAN GER | PR | 63 | $28.5M | -8.2% |
| CARIBBEAN MEDICAL CENTER | PR | 44 | $24.8M | -0.6% |
| HOSPITAL METROPOLITANO TITO MA | PR | 67 | $24.3M | -17.0% |
| CENTRO COMPRENSIVO DE CANCER | PR | 48 | $20.4M | -50.0% |
| ENCOMPASS HEALTH REHABILITATIO | PR | 42 | $17.4M | 9.9% |
| HOSPITAL I GONZALEZ MARTINEZ | PR | 40 | $15.2M | -50.0% |
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: $629K (745bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $177K | +210bp | 18mo |
| Denial Rate Reduction | 12.0% | 6.5% | $171K | +202bp | 12mo |
| Cost to Collect | 4.5% | 2.5% | $169K | +200bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $103K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +11bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-1.1M |
| + RCM Uplift | +$629K |
| Pro Forma EBITDA | $-484K |
| Current Margin | -13.2% |
| Pro Forma Margin | -5.7% |
| WC Released (1x) | $323K |
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 | $-1.7M | $-1.1M | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-1.7M | $-1.7M | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-1.5M | $-198K | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-1.5M | $-671K | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-1.9M | $-3.6M | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-1.9M | $-4.6M | 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 |
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
- 13 hospitals with 20-78 beds
- Same-state prioritization (n=14)
- Comp margins: P25=-50.0% / P50=-17.0% / P75=-0.6%
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.