SOUTH TEXAS REHABILITATION HOSPITAL
1. Target Overview & Investment Thesis
SOUTH TEXAS REHABILITATION HOSPITAL is a 40-bed community hospital in CAMERON, TX with $16.6M in net patient revenue and a 7.2% operating margin. The hospital serves a payer mix of 48.6% Medicare, 0.0% Medicaid, and 51.4% commercial.
Thesis: Turnaround. Our ML models identify $1.2M in annual EBITDA improvement potential from RCM optimization across 5 levers, lifting margin from 7.2% to 14.5% (+736bps).
| Net Revenue HCRIS | $16.6M |
| Current EBITDA COMPUTED | $1.2M |
| Operating Margin COMPUTED | 7.2% |
| Occupancy HCRIS | 69.6% |
| Revenue / Bed COMPUTED | $416K |
| Net-to-Gross HCRIS | 61.1% |
| Distress Probability ML | nan% |
2. Market Context & Competitive Position
TX has 583 Medicare-certified hospitals with a median operating margin of -0.7%. The target's margin of 7.2% places it above the state median. Among 286 size-comparable peers (20-80 beds), the median margin is -2.9%. The target performs in line with or above peers.
3. RCM Performance Analysis — Comparable Hospitals
Comps selected by bed count (20-80), prioritizing same-state peers. 286 hospitals in the comp set.
| Hospital | State | Beds | Revenue | Margin |
|---|---|---|---|---|
| SOUTH TEXAS REHABILITATION HOS (Target) | TX | 40 | $16.6M | 7.2% |
| WISE HEALTH SYSTEM - PARKWAY | TX | 36 | $361.0M | -15.5% |
| CHILDRENS MEDICAL CENTER OF PL | TX | 72 | $336.7M | 20.9% |
| CORYELL MEMORIAL HOSPITAL | TX | 25 | $305.9M | -1.5% |
| BAYLOR HEART AND VASCULAR HOSP | TX | 53 | $255.0M | 30.0% |
| TEXAS ORTHOPEDIC HOSPITA | TX | 42 | $237.8M | 46.3% |
| LAKE GRANBURY MEDICAL CENTER | TX | 53 | $181.6M | 38.5% |
| METHODIST HOSPITAL FOR SURGERY | TX | 32 | $178.4M | 22.8% |
| BAYLOR MEDICAL CENTER AT FRISC | TX | 68 | $161.1M | 10.8% |
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: $1.2M (736bps margin improvement).
| Lever | Current | Target | EBITDA Impact | Margin | Ramp |
|---|---|---|---|---|---|
| Net Collection Rate | 93.5% | 97.0% | $350K | +210bp | 18mo |
| Cost to Collect | 4.5% | 2.5% | $333K | +200bp | 12mo |
| Denial Rate Reduction | 12.0% | 6.5% | $330K | +198bp | 12mo |
| A/R Days Reduction | 5200.0% | 3800.0% | $203K | +122bp | 9mo |
| Clean Claim Rate | 88.0% | 96.0% | $11K | +6bp | 6mo |
5. EBITDA Bridge
| Current EBITDA | $1.2M |
| + RCM Uplift | +$1.2M |
| Pro Forma EBITDA | $2.4M |
| Current Margin | 7.2% |
| Pro Forma Margin | 14.5% |
| WC Released (1x) | $638K |
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 | $1.8M | $20.1M | 10.94x | 61.4% |
| Base (11x exit) | 10.0x | 11.0x | $1.8M | $22.8M | 12.36x | 65.4% |
| Bull Case | 9.0x | 11.0x | $1.7M | $27.4M | 16.54x | 75.3% |
| Bull (12x exit) | 9.0x | 12.0x | $1.7M | $30.4M | 18.34x | 78.9% |
| Bear Case | 11.0x | 10.0x | $2.0M | $13.4M | 6.63x | 46.0% |
| Bear (11x exit) | 11.0x | 11.0x | $2.0M | $15.4M | 7.62x | 50.1% |
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
- 286 hospitals with 20-80 beds
- Same-state prioritization (n=287)
- Comp margins: P25=-23.7% / P50=-2.9% / P75=10.5%
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.