BEHAVIORAL HEALTH CENTERS
1. Target Overview & Investment Thesis
BEHAVIORAL HEALTH CENTERS is a 16-bed community hospital in SHELBY, TN with $4.4M in net patient revenue and a 8.2% operating margin. The hospital serves a payer mix of 63.1% Medicare, 0.0% Medicaid, and 36.9% commercial.
Thesis: Turnaround. Our ML models identify $336K in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 8.2% to 15.9% (+765bps).
| Net Revenue HCRIS | $4.4M |
| Current EBITDA COMPUTED | $362K |
| Operating Margin COMPUTED | 8.2% |
| Occupancy HCRIS | 86.0% |
| Revenue / Bed COMPUTED | $275K |
| Net-to-Gross HCRIS | 75.5% |
| 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 8.2% places it above the state median. Among 35 size-comparable peers (8-32 beds), the median margin is -0.9%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (8-32), prioritizing same-state peers. 35 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| BEHAVIORAL HEALTH CENTERS (Target) | TN | 16 | $4.4M | 8.2% |
| THE CENTER FOR SPINAL SURGERY | TN | 23 | $78.7M | 39.3% |
| TRUSTPOINT HOSPITAL | TN | 18 | $50.8M | -0.8% |
| VANDERBILT BEDFORD COUNTY HOSP | TN | 24 | $49.5M | 1.9% |
| NEWPORT MEDICAL CENTER | TN | 32 | $47.8M | 11.6% |
| FORT LOUDOUN MEDICAL CENTER | TN | 30 | $41.3M | 10.0% |
| CLAIBORNE MEDICAL CENTER | TN | 26 | $30.9M | -9.9% |
| MARSHALL MEDICAL CENTER | TN | 25 | $29.5M | -28.0% |
| DELTA MEDICAL CENTER MEMPHIS | TN | 10 | $28.4M | 3.4% |
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: $336K (765bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Denial Rate Reduction | 12.0% | 6.5% | $93K | +211bp | 12mo |
| Net Collection Rate | 93.5% | 97.0% | $92K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $88K | +200bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $54K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $10K | +22bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $362K |
| + RCM Uplift | +$336K |
| Pro Forma EBITDA | $699K |
| Current Margin | 8.2% |
| Pro Forma Margin | 15.9% |
| WC Released (1x) | $169K |
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 | $558K | $5.8M | 10.32x | 59.5% |
| Base (11x exit) | 10.0x | 11.0x | $558K | $6.5M | 11.67x | 63.5% |
| Bull Case | 9.0x | 11.0x | $502K | $7.8M | 15.54x | 73.1% |
| Bull (12x exit) | 9.0x | 12.0x | $502K | $8.7M | 17.25x | 76.8% |
| Bear Case | 11.0x | 10.0x | $613K | $3.9M | 6.34x | 44.7% |
| Bear (11x exit) | 11.0x | 11.0x | $613K | $4.5M | 7.30x | 48.8% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Heavy Medicare dependence | Medicare comprises 63.1% 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
- 35 hospitals with 8-32 beds
- Same-state prioritization (n=37)
- Comp margins: P25=-16.7% / P50=-0.9% / P75=6.1%
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.