WEST TENNESSEE HEALTHCARE REHABILITA
1. Target Overview & Investment Thesis
WEST TENNESSEE HEALTHCARE REHABILITA is a 48-bed community hospital in nan, TN with $19.9M in net patient revenue and a 15.4% operating margin. The hospital serves a payer mix of 61.1% Medicare, 0.0% Medicaid, and 38.9% commercial.
Thesis: Turnaround. Our ML models identify $1.5M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 15.4% to 22.7% (+736bps).
| Net Revenue HCRIS | $19.9M |
| Current EBITDA COMPUTED | $3.1M |
| Operating Margin COMPUTED | 15.4% |
| Occupancy HCRIS | 84.3% |
| Revenue / Bed COMPUTED | $414K |
| Net-to-Gross HCRIS | 56.9% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
TN has 141 Medicare-certified hospitals with a median operating margin of -0.6%. The target's margin of 15.4% places it above the state median. Among 73 size-comparable peers (24-96 beds), the median margin is -0.5%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (24-96), prioritizing same-state peers. 73 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| WEST TENNESSEE HEALTHCARE REHA (Target) | TN | 48 | $19.9M | 15.4% |
| BAPTIST MEM HOSPITAL TIPTON CO | TN | 48 | $179.0M | -5.8% |
| INDIAN PATH COMMUNITY HOSPITAL | TN | 35 | $142.8M | 12.0% |
| HORIZON MEDICAL CENTER | TN | 96 | $141.3M | 15.3% |
| LECONTE MEDICAL CENTER | TN | 60 | $126.3M | 6.4% |
| FRANKLIN WOODS COMMUNITY HOSPI | TN | 80 | $110.3M | 18.7% |
| GREENEVILLE COMMUNITY HOSPITAL | TN | 81 | $104.5M | -5.1% |
| CUMBERLAND MEDICAL CENTER | TN | 72 | $84.3M | -12.0% |
| HENRY COUNTY MEDICAL CENTER | TN | 43 | $81.7M | -13.0% |
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: $1.5M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $418K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $398K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $394K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $242K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $13K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $3.1M |
| + RCM Uplift | +$1.5M |
| Pro Forma EBITDA | $4.5M |
| Current Margin | 15.4% |
| Pro Forma Margin | 22.7% |
| WC Released (1x) | $763K |
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 | $4.7M | $34.8M | 7.40x | 49.2% |
| Base (11x exit) | 10.0x | 11.0x | $4.7M | $39.8M | 8.47x | 53.3% |
| Bull Case | 9.0x | 11.0x | $4.2M | $46.2M | 10.91x | 61.3% |
| Bull (12x exit) | 9.0x | 12.0x | $4.2M | $51.6M | 12.20x | 64.9% |
| Bear Case | 11.0x | 10.0x | $5.2M | $26.0M | 5.02x | 38.1% |
| Bear (11x exit) | 11.0x | 11.0x | $5.2M | $30.2M | 5.84x | 42.4% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 61.1% 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
- 73 hospitals with 24-96 beds
- Same-state prioritization (n=74)
- Comp margins: P25=-12.1% / P50=-0.5% / 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.