ERLANGER BEHAVIORAL HEALTH
1. Target Overview & Investment Thesis
ERLANGER BEHAVIORAL HEALTH is a 96-bed community hospital in HAMILTON, TN with $26.6M in net patient revenue and a 15.1% operating margin. The hospital serves a payer mix of 12.3% Medicare, 0.0% Medicaid, and 87.7% commercial.
Thesis: Turnaround. Our ML models identify $2.0M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 15.1% to 22.4% (+736bps).
| Net Revenue HCRIS | $26.6M |
| Current EBITDA COMPUTED | $4.0M |
| Operating Margin COMPUTED | 15.1% |
| Occupancy HCRIS | 82.2% |
| Revenue / Bed COMPUTED | $277K |
| Net-to-Gross HCRIS | 41.3% |
| 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 15.1% places it above the state median. Among 55 size-comparable peers (48-192 beds), the median margin is 1.7%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (48-192), prioritizing same-state peers. 55 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| ERLANGER BEHAVIORAL HEALTH (Target) | TN | 96 | $26.6M | 15.1% |
| BLOUNT MEMORIAL HOSPITAL | TN | 145 | $326.0M | -8.5% |
| SUMMIT MEDICAL CENTER | TN | 188 | $298.0M | 40.6% |
| METRO NASHVILLE GENERAL HOSPIT | TN | 114 | $287.4M | 48.9% |
| TRISTAR HENDERSONVILLE MEDICAL | TN | 129 | $208.6M | 41.5% |
| TRISTAR STONECREST MEDICAL CEN | TN | 115 | $190.0M | 39.5% |
| BAPTIST MEM HOSPITAL TIPTON CO | TN | 48 | $179.0M | -5.8% |
| SKYRIDGE MEDICAL CENTER | TN | 176 | $163.5M | 17.3% |
| SUMNER REGIONAL MEDICAL CENTER | TN | 138 | $161.9M | -2.7% |
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: $2.0M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $558K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $531K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $526K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $323K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $17K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $4.0M |
| + RCM Uplift | +$2.0M |
| Pro Forma EBITDA | $6.0M |
| Current Margin | 15.1% |
| Pro Forma Margin | 22.4% |
| WC Released (1x) | $1.0M |
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 | $6.2M | $46.0M | 7.46x | 49.5% |
| Base (11x exit) | 10.0x | 11.0x | $6.2M | $52.6M | 8.53x | 53.5% |
| Bull Case | 9.0x | 11.0x | $5.5M | $61.1M | 11.00x | 61.5% |
| Bull (12x exit) | 9.0x | 12.0x | $5.5M | $68.2M | 12.30x | 65.2% |
| Bear Case | 11.0x | 10.0x | $6.8M | $34.2M | 5.04x | 38.2% |
| Bear (11x exit) | 11.0x | 11.0x | $6.8M | $39.8M | 5.87x | 42.5% |
7. Key Risks & Mitigants
| Severity | Risk Factor | Mitigant |
|---|---|---|
| Medium | Standard execution risk | RCM improvement requires management buy-in and 12-18 month implementation timeline |
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
- 55 hospitals with 48-192 beds
- Same-state prioritization (n=56)
- Comp margins: P25=-8.3% / P50=1.7% / P75=13.5%
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.