REGIONAL ONE HEALTH
1. Target Overview & Investment Thesis
REGIONAL ONE HEALTH is a 291-bed under-performing / distressed in SHELBY, TN with $407.9M in net patient revenue and a -79.0% operating margin. The hospital serves a payer mix of 7.3% Medicare, 1.3% Medicaid, and 91.4% commercial.
Thesis: Undervalued. Our ML models identify $30.0M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from -79.0% to -71.6% (+736bps).
| Net Revenue HCRIS | $407.9M |
| Current EBITDA COMPUTED | $-322.2M |
| Operating Margin COMPUTED | -79.0% |
| Occupancy HCRIS | 83.5% |
| Revenue / Bed COMPUTED | $1.4M |
| Net-to-Gross HCRIS | 21.0% |
| Distress Probability ML | 38.3% |
2. Market Context & Competitive Position
TN has 141 Medicare-certified hospitals with a median operating margin of -0.6%. The target's margin of -79.0% places it below the state median. Among 24 size-comparable peers (146-582 beds), the median margin is 1.5%. The target's below-peer margin suggests operational improvement opportunity.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (146-582), prioritizing same-state peers. 24 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| REGIONAL ONE HEALTH (Target) | TN | 291 | $407.9M | -79.0% |
| JACKSON-MADISON COUNTY GENERAL | TN | 580 | $797.1M | 1.4% |
| MEMORIAL HEALTH CARE SYSTEM IN | TN | 431 | $583.9M | -9.0% |
| JOHNSON CITY MEDICAL CENTER | TN | 537 | $546.1M | -8.6% |
| SAINT THOMAS RUTHERFORD HOSPIT | TN | 354 | $447.4M | 1.3% |
| PARKRIDGE MEDICAL CENTER | TN | 396 | $433.4M | 30.1% |
| PARKWEST MEDICAL CENTER | TN | 361 | $396.4M | -5.5% |
| COOKEVILLE REGIONAL MEDICAL CE | TN | 212 | $372.5M | 2.1% |
| SKYLINE MEDICAL CENTER | TN | 350 | $360.4M | 15.1% |
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: $30.0M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $8.6M | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $8.2M | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $8.1M | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $5.0M | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $261K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $-322.2M |
| + RCM Uplift | +$30.0M |
| Pro Forma EBITDA | $-292.2M |
| Current Margin | -79.0% |
| Pro Forma Margin | -71.6% |
| WC Released (1x) | $15.6M |
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 | $-495.7M | $-1.83B | 0.00x | -100.0% |
| Base (11x exit) | 10.0x | 11.0x | $-495.7M | $-2.17B | 0.00x | -100.0% |
| Bull Case | 9.0x | 11.0x | $-446.1M | $-2.23B | 0.00x | -100.0% |
| Bull (12x exit) | 9.0x | 12.0x | $-446.1M | $-2.56B | 0.00x | -100.0% |
| Bear Case | 11.0x | 10.0x | $-545.3M | $-1.81B | 0.00x | -100.0% |
| Bear (11x exit) | 11.0x | 11.0x | $-545.3M | $-2.17B | 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
- 24 hospitals with 146-582 beds
- Same-state prioritization (n=25)
- Comp margins: P25=-8.3% / P50=1.5% / P75=10.1%
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.