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TABLE OF CONTENTS Prospectus
INDEX TO FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on April 27, 2015

Registration No. 333-        


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Adeptus Health Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  8060
(Primary Standard Industrial
Classification Code Number)
  46-5037387
(I.R.S. Employer
Identification Number)



2941 Lake Vista Drive
Lewisville, Texas 75067
Telephone: (972) 899-6666

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)



Timothy L. Fielding
Chief Financial Officer
2941 Lake Vista Drive
Lewisville, Texas 75067
Telephone: (972) 899-6666

(Name, address, including zip code, and telephone number, including
area code, of agent for service)



With copies to:

Joseph H. Kaufman, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
(212) 455-2000

 

David C. Lopez, Esq.
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, New York 10006
(212) 225-2000

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement is declared effective.

          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:    o

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o



CALCULATION OF REGISTRATION FEE

               
 
Title of Each Class of Securities
to be Registered

  Amount to be
Registered(1)

  Proposed Maximum
Aggregate Offering
Price per Share(1)(2)

  Proposed Maximum
Aggregate Offering
Price(1)(2)

  Amount of
Registration Fee

 

Class A common stock, par value $0.01 per share

  2,300,000 shares   $52.48   $120,704,000   $14,025.81

 

(1)
Includes shares subject to the underwriters' option to purchase additional shares, if any.

(2)
Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(c) of the Securities Act, as amended. The price per share and aggregate offering price are based on the average of the high and low price of the registrant's Class A common stock on April 20, 2015, as reported on the New York Stock Exchange.



          The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

   


Table of Contents

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, Dated April 27, 2015.

2,000,000 Shares

LOGO

Adeptus Health Inc.

Class A Common Stock



        This is a public offering of shares of Class A common stock of Adeptus Health Inc.

        We are offering            shares of our Class A common stock and SCP III AIV THREE-FCER Conduit, L.P., or the selling stockholder, is offering            shares of our Class A common stock. We intend to use the net proceeds from this offering received by us to purchase            limited liability company units of Adeptus Health LLC, our direct subsidiary, from certain of the unit holders of Adeptus Health LLC specified herein, including certain of our directors and executive officers. We will not receive any of the proceeds from the sale of the shares being sold by the selling stockholder. The selling stockholder will receive all of the net proceeds from the sale of the shares of Class A common stock being sold by it.

        Our Class A common stock is listed on the New York Stock Exchange, or the NYSE, under the symbol "ADPT." On April 24, 2015, the last reported sale price of our Class A common stock on the NYSE was $63.78 per share.

        We are an "emerging growth company" as that term is defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, and, as such, have elected to comply with certain reduced public company reporting requirements in this prospectus, or documents incorporated by reference herein, and future filings. See "Summary—Implications of Being an Emerging Growth Company."

        Investing in our common stock involves significant risks. See "Risk Factors" beginning on page 19 of this prospectus and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, incorporated by reference herein, to read about factors you should consider before buying shares of our Class A common stock.

        Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.



       
 
 
  Per Share
  Total
 

Public offering price

  $   $
 

Underwriting discount(1)

  $   $
 

Proceeds, before expenses, to Adeptus Health Inc. 

  $   $
 

Proceeds, before expenses, to the selling stockholder

  $   $

 

(1)
We have agreed to reimburse the underwriters for certain Financial Industry Regulatory Authority, or FINRA, related expenses. See "Underwriting."

        To the extent that the underwriters sell more than 2,000,000 shares of our Class A common stock, the underwriters have the option to purchase up to an additional 300,000 shares from us and the selling stockholder at the public offering price less the underwriting discount.



        The underwriters expect to deliver the shares of Class A common stock on or about                        , 2015.



Goldman, Sachs & Co.



   

The date of this prospectus is                        , 2015.


Table of Contents




TABLE OF CONTENTS

Prospectus

 
  Page  

Market and Industry Data

    ii  

Presentation of Certain Financial Measures

    ii  

About This Prospectus

    iii  

Summary

    1  

Risk Factors

    19  

Special Note Regarding Forward-Looking Statements

    48  

Use of Proceeds

    50  

Price Range of Our Class A Common Stock

    51  

Dividend Policy

    52  

Capitalization

    53  

Organizational Structure

    54  

Unaudited Pro Forma Financial Information

    58  

Selected Historical Consolidated Financial Data

    63  

Selling Stockholders

    67  

Description of Indebtedness

    69  

Description of Capital Stock

    72  

Shares Eligible for Future Sale

    77  

Certain Material United States Federal Income and Estate Tax Consequences to Non-U.S. Holders

    79  

Underwriting

    83  

Legal Matters

    88  

Experts

    88  

Change in Independent Registered Public Accounting Firm

    88  

Incorporation by Reference

    88  

Where You Can Find More Information

    89  

Index to Financial Statements

    F-1  



        We and the underwriters (and any of our or their affiliates) have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who obtain this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of Class A common stock and the distribution of this prospectus outside of the United States.

        Unless we state otherwise or the context otherwise requires, the terms "Adeptus Health," "Adeptus," "we," "us," "our" and the "Company" refer to Adeptus Health Inc. and its consolidated subsidiaries after giving effect to the Reorganization Transactions completed in connection with our initial public offering, as described under the heading "Organizational Structure" and elsewhere in this prospectus; prior to the consummation of the Reorganization Transactions and the completion of our initial public offering, these terms refer to Adeptus Health LLC, a Delaware limited liability company through which we are currently conducting our operations and its consolidated subsidiaries.

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MARKET AND INDUSTRY DATA

        This prospectus and documents incorporated by reference herein include industry data and forecasts that we have prepared based, in part, on information obtained from industry publications and surveys and internal company surveys. Third-party industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, including the American College of Emergency Physicians, or ACEP, a professional organization of emergency medicine physicians that publishes reports relating to emergency medical care, the American Hospital Association, or AHA, a national organization that represents, serves and advocates for nearly 5,000 hospitals, health systems, networks and other providers, and Press Ganey Associates, Inc., or Press Ganey, an independent healthcare advisory services and consulting organization. References to the ACEP National Report Card may be sourced to the ACEP Annual National Report Card released in January 2014. References to AHA Annual Survey data may be sourced to the AHA Annual Survey of Hospitals released in 2013.

        The statements regarding our market position in this prospectus or documents incorporated by reference herein are based on information derived from market studies and research reports cited above and elsewhere in this prospectus or documents incorporated by reference herein. Although some of the companies that compete in our markets are publicly held as of the date of this prospectus, some are not. Accordingly, only limited public information is available with respect to our relative market strength or competitive position. Unless we state otherwise, our statements about our relative market strength and competitive position in this prospectus or documents incorporated by reference herein are based on our management's beliefs, internal studies and our management's knowledge of industry trends.


PRESENTATION OF CERTAIN FINANCIAL MEASURES

        Certain financial measures presented in this prospectus or documents incorporated by reference herein, such as Adjusted EBITDA, are not recognized under accounting principles generally accepted in the United States, which we refer to as "GAAP." Adjusted EBITDA has been presented in this prospectus or documents incorporated by reference herein as a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define Adjusted EBITDA as net income before interest, taxes, depreciation and amortization, further adjusted to eliminate the impact of certain additional items, including advisory services paid to our Sponsor (as defined herein), facility preopening expenses, management recruiting expenses, stock compensation expense, costs associated with our public offerings and other non-recurring costs that we do not consider in our evaluation of ongoing operating performance from period to period as discussed further below. Adjusted EBITDA is included in this prospectus or documents incorporated by reference herein because it is a key metric used by management to assess our financial performance. We use Adjusted EBITDA to supplement GAAP measures of performance in order to evaluate the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures. Adjusted EBITDA is also frequently used by analysts, investors and other interested parties to evaluate companies in our industry.

        Adjusted EBITDA is a non-GAAP measure of our financial performance and should not be considered as an alternative to net income (loss) as a measure of financial performance, or any other performance measure derived in accordance with GAAP, nor should it be construed as an inference that our future results will be unaffected by unusual or other items. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments in this presentation, such as preopening expenses, stock compensation expense and other adjustments. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management's discretionary use, as it does not reflect certain cash requirements such as tax payments, debt service requirements, capital expenditures, facility openings and certain other cash costs

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that may recur in the future. Adjusted EBITDA contains certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. Management compensates for these limitations by supplementally relying on our GAAP results in addition to using Adjusted EBITDA. Our presentation of Adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.


ABOUT THIS PROSPECTUS

        We and the underwriters (and any of our or their affiliates) have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus, or documents incorporated by reference herein, or in any free writing prospectuses filed with the Securities and Exchange Commission. We and the underwriters (and any of our or their affiliates) take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so.

        Throughout this prospectus or in the documents incorporated by reference herein, we provide a number of key operating metrics used by management and that we believe are used by our competitors. These key operating metrics are discussed in more detail under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations—Overview—Key Performance Measures" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 incorporated by reference herein. We also reference certain non-GAAP financial measures. See "Presentation of Certain Financial Measures," "Summary—Summary Financial and Other Data" and "Selected Historical Consolidated Financial Data" in this prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Overview—Key Performance Measures" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, incorporated by reference herein, for a discussion of these measures, as well as a reconciliation of these measures to the most directly comparable financial measures required by, or presented in accordance with GAAP.

        We are an "emerging growth company" as defined in Section 2(a)(19) of the Securities Act of 1933 and Section 3(a)(80) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Pursuant to Section 102 of the Jumpstart Our Business Startups Act, or the JOBS Act, we have provided reduced executive compensation disclosure and have omitted a compensation discussion and analysis from the documents incorporated by reference herein. We previously opted out of the extended transition period with respect to new or revised accounting standards and, as a result, we comply with any such new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards was irrevocable.

        Certain monetary amounts, percentages and other figures included in this prospectus or documents incorporated by reference herein have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.

        Unless we state otherwise, the information in this prospectus or documents incorporated by reference herein gives effect to the Reorganization Transactions described under the heading "Organizational Structure" and elsewhere in this prospectus.

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SUMMARY

        This summary highlights selected information contained elsewhere in this prospectus or documents incorporated by reference herein, but it does not contain all of the information that you should consider before deciding to invest in our Class A common stock. You should read this entire prospectus carefully, including the matters discussed under the headings "Risk Factors," "Organizational Structure," "Unaudited Pro Forma Financial Information," our financial statements and related notes, which are included elsewhere in this prospectus, and the detailed information that is incorporated in this prospectus by reference to our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (including, without limitation, matters discussed under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in our consolidated financial statements and related notes). In this prospectus, our "Annual Report" refers to our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 that we filed with the SEC on February 27, 2015 and is incorporated herein by reference. See "Incorporation by Reference." Unless we state otherwise or the context otherwise requires, the terms "Adeptus Health," "Adeptus," "we," "us," "our" and the "Company" refer to Adeptus Health Inc. and its consolidated subsidiaries after giving effect to the Reorganization Transactions completed in connection with our initial public offering, as described under the heading "Organizational Structure" and elsewhere in this prospectus; prior to the consummation of the Reorganization Transactions and the completion of our initial public offering, these terms refer to Adeptus Health LLC, a Delaware limited liability company through which we are currently conducting our operations, and its consolidated subsidiaries. Some of the statements in this prospectus or documents incorporated by reference herein constitute forward-looking statements. For more information, see "Special Note Regarding Forward-Looking Statements."

Company Overview

        We own and operate First Choice Emergency Rooms, the largest network of independent freestanding emergency rooms in the United States. We have experienced rapid growth in recent periods, growing from 14 freestanding facilities at the end of 2012 to 26 freestanding facilities at the end of 2013, and to 55 freestanding facilities as of December 31, 2014. Our facilities are currently located in the: (i) Houston, Dallas/Fort Worth, San Antonio and Austin, Texas markets; (ii) Colorado Springs and Denver, Colorado markets; and (iii) Phoenix, Arizona market, which includes a full service, licensed general hospital. Each of our facilities opened in 2014 were newly constructed.

        Since our founding in 2002, our mission has been to address the need within our local communities for immediate and convenient access to quality emergency care in a patient-friendly, cost-effective setting. We believe we are transforming the emergency care experience with a differentiated and convenient care delivery model which improves access, reduces wait times and provides high-quality clinical and diagnostic services on-site. Our facilities are fully licensed and provide comprehensive emergency care with an acuity mix that we believe is comparable to hospital-based emergency rooms.

        Emergency care is a significantly underserved market in the United States today and the current system is overburdened.

    Demand has grown dramatically, with emergency room visits increasing 46.7%, from 90.8 million in 1992 to 133.2 million in 2012, while the number of emergency room departments decreased by 11.4% over the same period, from approximately 5,035 in 1992 to approximately 4,460 in 2012, according to the American Hospital Association, or AHA.

    In their 2014 National Report Card on America's emergency care environment, the American College of Emergency Physicians, or ACEP, assigned an overall grade of "D–" for the category of access to emergency care, reflecting too few emergency departments to meet the needs of a growing, aging population and the projected increase in the number of insured individuals as a

 

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      result of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010, or PPACA.

        We believe freestanding emergency rooms are an essential part of the solution, providing access to quality care and offering a significantly improved patient experience relative to traditional hospital emergency departments.

What We Do and Why We Are Different

        We focus on providing emergency care through our freestanding emergency rooms with the goal of improving the quality of care and enhancing the overall experience for patients and physicians. We have developed an innovative facility design and infrastructure specifically tailored to the emergency care delivery system that combines staff, equipment and physical layout to deliver high-quality, cost-effective and coordinated patient-focused care. This approach limits the need to move patients and provides ease of access to all necessary medical services we provide, allowing us to enhance the overall experience of the patient. Our facility design also allows physicians and nursing staff to provide all levels of care required for our patients during their visit. Our philosophy is to center care around the patient, rather than expect the patient to adapt to our facilities and staff. We believe our focused approach increases patient, physician and staff satisfaction. Innovative characteristics of our emergency facilities include:

    24/7 Emergency Care.  Freestanding emergency room facilities, which typically range from approximately 6,000 to 7,000 square feet and are located in a convenient, local community setting and open 24 hours a day, seven days a week with on-site emergency staff, including a physician, at all times;

    Board-Certified Physicians.  Staffed with experienced healthcare professionals capable of handling all emergency issues. As of December 31, 2014 we contracted with approximately 434 Board-certified physicians with an average of 15 years of medical experience who have treated more than 400,000 patients at our facilities;

    Streamlined.  Streamlined check-in process designed to have patients seen by a physician within minutes;

    Focused Capability.  Typically six to nine emergency exam rooms, which include two high-acuity suites, one child-friendly pediatric room and a specialized obstetrics/gynecology room;

    Coordinated Care.  Centralized nurses' station that serves as a command center to coordinate care;

    Full Radiology Suite.  In-house diagnostic imaging technology, including CT scanners, digital x-rays and ultrasounds, with final reads from on-call radiologists; and

    On-Site Laboratory.  On-site laboratories, which provide results within approximately 20 minutes, and are certified by the Clinical Laboratory Improvements Amendments, or CLIA, and accredited by the Commission on Office Laboratories Accreditation, or COLA.

        We operate at the higher end of the acuity and emergency care spectrum. Our capabilities and offerings differ from other care models as outlined below:

Spectrum of Primary and Emergency Care Services

Market Opportunity

        Freestanding emergency rooms remain the least penetrated alternate site provider segment in the U.S. healthcare sector. As of 2012, there were approximately 400 freestanding emergency rooms in the United States as compared to approximately 1,400 retail clinics, 6,000 ambulatory surgery centers and

 

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9,300 urgent care centers. We believe this represents a significant opportunity to deliver quality care in the freestanding emergency room setting and transform this underpenetrated market. We have developed a highly scalable business model for establishing new freestanding emergency rooms that include attractive unit economics, sophisticated data analytics to support our site-selection process, proven real estate development practices and innovative marketing programs. Using this model, we have grown to become more than three times the size of our next largest independent freestanding emergency room competitor and are expanding rapidly. We seek to transform the emergency care delivery model by offering high-quality, efficient and consumer-oriented healthcare in our local communities.

        In their 2014 National Report Card on America's emergency care environment, ACEP assigned an overall grade of "D–" for the category of access to emergency care, reflecting too few emergency departments to meet the needs of a growing, aging population and the projected increase in the number of insured individuals as a result of PPACA. We believe freestanding emergency rooms are an essential part of the solution.

        We also believe that we offer a dramatically improved patient experience relative to traditional hospital emergency departments by significantly reducing wait times and providing rapid access to Board-certified physicians on-site. We also provide convenient access to critical, high-acuity care as compared with urgent care centers and are open 24 hours a day, seven days a week. Based on patient feedback collected by Press Ganey, First Choice Emergency Room received the prestigious Guardian of Excellence Award in 2013 and 2014 for exceeding the 95th percentile in patient satisfaction nationwide.

Our Value Proposition

Value Proposition for Patients

        As healthcare has evolved, the consumer has taken greater control of healthcare expenditures and demands more convenient access to healthcare, better value and an improved overall patient experience. Our philosophy is to center care around the patient, rather than expect the patient to adapt to our facilities and staff. We offer patients an attractive value proposition:

    Access to Care.  Our facilities are located in a convenient, local community setting and are open 24 hours a day, seven days a week with on-site emergency staff, including a Board-certified physician at all times.

    Immediate Care.  A streamlined check-in process designed to have patients seen by a physician within minutes.

    Physician Focus.  Our physicians are focused on the patient, spending more time on patient care than on administrative tasks, providing high-quality service, prompt diagnoses and the appropriate medical treatment.

    Technology.  Facilities equipped with full radiology suites, including CT scanners, digital x-rays and ultrasounds, as well as on-site laboratories certified by CLIA and accredited by COLA that provide test results within approximately 20 minutes.

    Superior Experience.  An overall enhanced patient experience.

        As a result, based on patient feedback collected by Press Ganey, First Choice Emergency Room received the prestigious Guardian of Excellence Award in 2013 and 2014 for exceeding the 95th percentile in patient satisfaction nationwide.

 

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Value Proposition for Communities

        Community providers, including physician's offices and hospital emergency rooms, serve a critical and valuable purpose in delivering healthcare. However, the shortage of emergency rooms makes it increasingly challenging to meet the rising demand for emergency care. This has led to an overburdened emergency room network that is often poorly aligned with care consumption trends.

        We seek to transform the emergency delivery model and fill a public need by offering high quality, efficient and consumer oriented healthcare in our local communities. We offer communities an attractive value proposition:

    Access to Care.  Facilities located in convenient, local community settings. Approximately 60% of each facility's patients come from a three-mile radius, with approximately 80% coming from a five-mile radius.

    24/7.  Access to Board-certified physicians at all times, including outside normal business hours.

    Partnership.  Key partner for health systems seeking to enhance their local community presence through direct admissions relationships and new innovative partnerships.

    Care Continuum.  Connectivity across the patient-care continuum from patient referrals to post-emergency care.

Value Proposition for Physicians

        The evolving healthcare delivery environment, reflected by significant regulatory changes, increasing administrative burdens, shifting competitive provider landscape and a transition to new reimbursement models, is increasing pressure on physicians. We offer an attractive working environment:

    Team-Based Care.  Team-based environment, supported by dedicated staff.

    Patient Centric.  Our model allows physicians to spend more time with each patient, which enables them to focus their attention on the patient in order to deliver high-quality care.

    Dedicated Support.  Rapid delivery of lab and diagnostic results through on-site capabilities.

    Physician Friendly.  Scheduling flexibility and a well-defined compensation program. Payment of malpractice insurance coverage premiums for physicians practicing at our facilities.

Value Proposition for Payors

        We believe that our emergency room facilities reduce overall costs for payors by reducing unnecessary tests and patient admittances. According to the National Hospital Ambulatory Medical Care Survey, the national average emergency room inpatient admittance rate was approximately 11.6% in 2011, while our average inpatient admittance rate was approximately 3.8% for the year ended December 31, 2014. We believe our facilities provide comprehensive emergency care with an acuity mix that is comparable to hospital-based emergency rooms.

Value Proposition for Hospitals

        We have an attractive business model that provides communities direct access to emergency care, helping to relieve the overburdened hospital emergency room system. Our facilities provide high-quality emergency care for a wide variety of conditions, including heart attacks, severe abdominal pain and respiratory distress similar to the care provided in traditional hospital emergency rooms. When hospital-based services such as surgery or cardiac catheterization are needed, patients are stabilized at

 

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our facilities before being transferred to nearby hospitals via ambulance. Transfer agreements are in place with local hospitals that often facilitate direct admission.

Recent Initiatives and Outlook

        Following an investment in 2011 by Sterling Partners, which we refer to as our Sponsor, we embarked on a number of growth initiatives. These included the hiring of a number of senior officers, including our CEO Tom Hall, as part of our efforts to enhance and expand our management team, developing the necessary clinical and operational infrastructure to position us for future growth and entering new geographic markets such as Colorado. We are also building strategic alliances with leading health systems. In October 2014, we entered into a joint venture with Dignity Health to support the growing demand for access to quality medical care in Arizona. As described below, this partnership has started with Dignity Health Arizona General Hospital, a full-service healthcare hospital facility in the Phoenix market, and includes plans for additional access to emergency medical care in Phoenix. In April 2015, we announced a new joint venture with University of Colorado Health to improve access to high-quality and convenient emergency medical care in Colorado. We have also entered into alliances with affiliates of Hospital Corporation of America, or HCA, in the North Texas and Houston areas to enhance the continuum of care for our patients by streamlining clinical protocols for transfers to hospitals and providing direct access to approximately 5,500 physicians and 11 hospitals in North Texas and approximately 3,300 physicians and 9 hospitals in the Houston area, for follow-up care. In addition, we have a relationship with an affiliate of Concentra Medical Centers, or Concentra, urgent care clinics in the Dallas/Fort Worth market, whereby we are able to refer workers' compensation patients to Concentra when follow-up, non-emergent, care is needed.

        Our commitment to delivering superior patient care in the local community setting, identifying and retaining outstanding healthcare professionals, and investing in systems and processes to drive results, coupled with strong industry trends and sophisticated real estate development and marketing, has enabled us to build a track record of growth. We expect to grow our facility base at a rate of more than 20 facilities annually over the next several years, targeting communities within mid-sized and large metropolitan markets currently underserved by emergency departments. We believe we have the opportunity to substantially grow our footprint to more than 100 facilities over the next two years in both existing and new markets. We have a robust pipeline of more than 50 sites under development in our existing and additional new markets, including opening a full-service general hospital in Texas in 2015. To support this growth and development, we have made significant investments in our professional and real estate development staff, as well as in sales and marketing initiatives. Our consolidated total net patient service revenue increased from $102.9 million in 2013 to $210.7 million in 2014, representing approximately 104.8% annual growth.

Recent Developments

Initial Public Offering

        On June 30, 2014, we completed our initial public offering of 5,321,414 shares of our Class A common stock at a price to the public of $22.00 per share and received net proceeds of approximately $96.2 million, after deducting underwriting discounts and commissions and offering expenses. We used the net proceeds from the initial public offering to purchase limited liability company units of Adeptus Health LLC, or LLC Units, from Adeptus Health LLC. Adeptus Health LLC used the proceeds it received as a result of our purchase of LLC Units to cause First Choice ER, LLC to reduce outstanding borrowings under its senior secured credit facility, to make a $2.0 million one-time payment to an affiliate of our Sponsor in connection with the termination of an advisory services agreement and for general corporate purposes. An additional 313,586 shares were also sold by an affiliate of our Sponsor in our initial public offering.

 

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Additional Master Funding and Development Agreements

        In July 2014, we entered into a second Master Funding and Development Agreement, or the Second MPT Agreement, with an affiliate of Medical Properties Trust, or MPT, to fund future facilities. The Second MPT Agreement allows for a maximum aggregate funding of $150.0 million, of which $89.4 million remained available as of December 31, 2014. In April 2015, we entered into an amendment to the Second MPT Agreement, or the Amended MPT Agreement. The Amended MPT Agreement allows for a maximum aggregate funding of $250.0 million. The Second and Amended MPT Agreements are separate from and in addition to our initial Master Funding and Development Agreement, or the Initial MPT Agreement. All other material terms in these agreements remain consistent with our Initial MPT Agreement. We refer to these agreements collectively as the MPT Agreements.

Joint Venture with Dignity Health

        On October 22, 2014, we announced our expansion into Arizona through a joint venture with Dignity Health, one of the nation's largest health systems. The new partnership has started with Dignity Health Arizona General Hospital, a full-service healthcare hospital facility in Phoenix, Arizona, and includes plans for additional access to emergency medical care in Phoenix. This facility began its training and certification phase of operation in December 2014 and received its CMS certification from the Joint Commission on January 30, 2015. Department of Health and Human Services' Centers for Medicare and Medicaid Services, or CMS, certification allows us to receive reimbursement for services provided to Medicare and Medicaid patients of the hospital. Dignity Health Arizona General Hospital is a full-service healthcare hospital facility, licensed by the state as a general hospital. Spanning 39,000 square-feet, the hospital has 16 inpatient rooms, two operating rooms for inpatient and outpatient surgical procedures, an emergency department, a high-complexity laboratory and a full radiology suite. Patients have full access to the Dignity Health area facilities and physicians, and the hospital provides Phoenix-area residents with 24/7 access to emergency medical care.

Joint Venture with University of Colorado Health

        On April 21, 2015, we announced a new partnership with University of Colorado Health, or UCHealth, to improve access to high-quality and convenient emergency medical care in Colorado. Under the partnership, UCHealth will hold a majority stake in our freestanding emergency rooms throughout Colorado Springs, northern Colorado and the Denver metro area. All 12 existing Colorado First Choice Emergency Room locations, and two more under construction, are included in the partnership. The partnership will also include hospital locations planned for Colorado Springs and Denver.

Competitive Strengths

        We believe the following strengths differentiate us from our competitors and will enable us to capitalize on favorable industry dynamics:

Leader in the Rapidly Expanding Freestanding Emergency Room Market

        First Choice Emergency Room is the largest freestanding emergency room provider in the United States with 55 facilities as of December 31, 2014, of which 29 were opened in 2014. We are more than three times the size of our next largest independent freestanding emergency room competitor. We believe our innovative facility model enables us to offer our customers comprehensive emergency services with individualized attention and local convenience. We believe that our scale and scope, when combined with our comprehensive service offerings and tailored best practices, differentiate us from our local and regional competitors. Given our market positions in the highly fragmented and rapidly

 

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expanding markets in which we provide our services, we believe there continue to be opportunities to build more facilities in existing and new markets as well as develop new alliances with health systems seeking to enhance their local community presence. This will result in further expanding our leadership in the freestanding emergency room market.

Superior Patient Experience

        We strive to consistently offer a superior patient experience through both our medical staff and facility capabilities. Our emergency rooms are staffed with Board-certified physicians and emergency-trained registered nurses capable of handling all emergency room issues with a physician on-site at all times. Each of our facilities is equipped with a full radiology suite, including CT scanners, digital x-ray and ultrasound, as well as on-site laboratories certified by CLIA and accredited by COLA. Our patients are typically face-to-face with a medical professional within minutes of arrival, and our patient satisfaction ratings exceed the vast majority of hospital emergency rooms nationally. Based on patient feedback collected by Press Ganey, we exceeded the 95th percentile in the nation for patient satisfaction and received the Guardian of Excellence Award in 2013 and 2014, the highest award bestowed by the organization.

Scalable Service Model Well-Positioned for Growth

        We maintain the highest standards of clinical excellence, led by our 434 contracted Board-certified physicians who have an average of 15 years of medical experience. We have standardized, highly scalable clinical and operational infrastructure that we believe will support significant continued growth. Our highly trained staff is complemented by our managed care contracting and revenue cycle management expertise. Moreover, our innovative sales and marketing programs combine active outreach and awareness campaigns with patient-centric marketing programs in order to most effectively reach our target populations. We endeavor to continue to develop multiple sites because we believe regional density creates value through leverage in managed care contracting and greater brand awareness.

Distinctive Real Estate Development Strategy Supports Attractive Unit Growth and Economics

        We have built an internal team with significant experience in multi-unit retail expansion strategy and execution. As a result, our approach to real estate planning is highly consumer-centric with a discipline traditionally utilized by sophisticated retail businesses. Our proprietary site selection model is a key to the success of our business, allowing us to identify and fill critical voids in community healthcare delivery systems. When combined with our scalable operating structure and attractive new-facility model, our real estate development strategy allows us to maximize performance and quickly grow our facility base. Our seasoned real estate planning and development team follows a proven and disciplined strategy that leverages advanced data analytics to identify opportunities to provide underserved communities with high-quality emergency care.

        This development model has also proven commercially successful in highly competitive markets and is currently supporting growth outside of our home state of Texas. Our sophisticated selection guidelines and scalable procedures allow us to open a new facility within 14 to 21 months of site selection, enabling us to quickly capitalize on emerging opportunities. We have experienced rapid growth in recent periods, growing from 14 facilities at the end of 2012 to 26 facilities at the end of 2013, and to 55 facilities as of December 31, 2014. We have a robust pipeline under development designed to support the addition of a similar number of facilities in 2015.

 

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Ability to Attract and Retain High-Quality Physicians and Clinicians

        Through our differentiated recruiting and development programs, we are able to identify and target high-quality physicians and clinicians to optimally match the needs of our facilities. Each of our facilities is staffed with Board-certified physicians, who have an average of 15 years of medical experience. Compared to a traditional hospital setting, our physicians have a significantly reduced administrative workload, which allows them to spend more time focusing on patient care. Additionally, we offer our physicians extensive flexibility in managing their work schedules. Due to our customized staffing model, physicians can schedule their own work hours, practice at multiple sites, and take advantage of a wide variety of career development opportunities, including maintaining their own practice or affiliations with other healthcare facilities or hospitals. Consequently, our facilities offer a positive work environment that leads to high retention rates and strong customer and provider relationships. We believe these programs will allow us to continue to effectively recruit physicians and clinicians to support our robust pipeline of new facilities.

Management Team with Significant Public Company Experience

        We have an experienced management team that leverages expertise across the healthcare, retail and hospitality sectors. The members of our executive management team with healthcare backgrounds have an average of 11 years of experience in that industry and have proven and extensive knowledge of healthcare operations and facility expansion. Additionally, our management has significant experience with high-growth, multi-state customer-focused operations through involvement in the retail and hospitality sectors. The three most senior members of the executive team have substantial experience in leading publicly traded companies. Over their respective tenures, members of our team have been instrumental in establishing a successful, scalable operating model, consistently generating strong financial results and developing an effective site selection and build out process. They have also developed proven recruiting and staffing capabilities to identify, hire and retain high quality physicians. We believe the breadth of management's background and the depth of its expertise will continue to drive our dynamic growth and continued success.

Growth Strategies

        We believe we have significant growth potential in both new and existing markets because of our leading market position in the freestanding emergency room sector, high-quality care delivery, strong unit economics, disciplined development strategy and significant management experience. We plan to pursue the following growth strategies:

Grow our Presence in Existing Markets

        We believe there is a significant opportunity to expand in our existing markets, which include: Dallas/Fort Worth, Houston, San Antonio and Austin, Texas; Colorado Springs and Denver, Colorado; and Phoenix, Arizona. Our scale, scope and leading market position, combined with our sophisticated, proven site selection and development processes provide us with competitive advantages to continue to expand our facility base in these markets. We endeavor to continue to develop multiple sites because we believe regional density creates value through leverage in managed care contracting and greater brand awareness. We anticipate that as we further build our brand and increase the visibility of our facilities in our existing markets these efforts will increase patient awareness, and drive patient volume and same-store growth.

Build Strategic Alliances with Leading Health Systems

        Development of our existing and new health system alliances is an important part of our continued growth. We expect to be a key partner for health systems seeking to enhance their local community

 

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presence through direct admissions relationships and new innovative partnerships. Our alliance with HCA in North Texas provides an example of one such innovative partnership, giving our patients direct access to HCA's approximately 5,500 physicians and 11 hospitals in North Texas and approximately 3,300 physicians and 9 hospitals in the Houston area. In addition, we have a relationship with the Concentra urgent care clinics in the Dallas/Fort Worth market, whereby we are able to refer workers' compensation patients to Concentra when follow-up, non-emergent, care is needed. We also recently expanded into Arizona through a joint venture with Dignity Health, one of the nation's largest health systems, with the opening of a full-service healthcare hospital facility and includes plans for additional access to emergency medical care in the Phoenix area through freestanding emergency departments of the hospital. To improve access to high-quality and convenient emergency medical care in the northern Colorado and Denver metro area, we recently partnered with UCHealth. We believe our ability to alleviate hospital emergency room over-crowding, while providing a new access point to patients, enhances our value proposition as a partner of choice for health systems.

Pursue a Disciplined Development Strategy in New States and Markets

        We intend to continue expanding our facility base through new facility openings in new states and markets by leveraging our core capabilities in site selection, development and efficient facility openings. We view expansion as a core competency and see a significant opportunity to replicate the regional platform model established in Texas in new geographic markets. We entered the Colorado market in 2013, where we now have 12 facilities and recently announced a joint venture with UCHealth, and the Arizona market in 2015, through our partnership with Dignity Health, with a full-service general hospital in the Phoenix area that has 16 inpatient rooms, two operating rooms, a nine-room emergency department, a high-complexity laboratory and a full radiology suite. We have experienced rapid growth in recent periods, growing from 14 facilities at the end of 2012 to 26 facilities at the end of 2013, and to 55 facilities as of December 31, 2014. We have a robust pipeline under development designed to support the addition of a similar number of facilities in 2015. As we expand into new markets, particularly in states with complex regulatory requirements, we believe there is a potential to implement different operating models, such as innovative hospital partnership models, including a hospital hub and freestanding emergency room satellite model.

Risks Related to Our Business and Industry, Healthcare Regulation and Organizational Structure

        An investment in our Class A common stock involves a high degree of risk. See "Risk Factors" in this prospectus and "Risk Factors" in our Annual Report. Some of the more significant challenges and risks related to our business include the following:

    We may not be able to successfully implement our growth strategy on a timely basis or at all, which could harm our growth and results of operations;

    Our expansion into new markets presents increased risks and may require us to develop new business models;

    Our long-term success is highly dependent on our ability to successfully identify and secure appropriate sites for our facilities and develop and expand our operations in existing and new markets;

    We conduct business in a heavily regulated industry and, if we fail to comply with these laws and government regulations, we could incur penalties or be required to make significant changes to our operations;

    Compliance with a number of additional federal and state regulatory schemes as a result of our recent enrollment of our Arizona general hospital to participate in the federal Medicare program and the Arizona Medicaid program;

 

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    Our current facilities are subject to state statutes and regulations that govern our operations, and the failure to comply with these laws and regulations can result in civil or criminal sanctions;

    State law regulation of construction or expansion of emergency rooms could prevent us from developing additional freestanding emergency rooms or other facilities; and

    Recent healthcare reform legislation and other changes in the healthcare industry and in healthcare spending could adversely affect our business model, financial condition or results of operations.

Our History and Sponsor

        First Choice ER, LLC was founded in Texas by Dr. Jacob J. Novak in 2002, when he recognized the need for convenient access to high-quality emergency care in a patient-friendly, community-based manner, and as an alternative to traditional hospital-based emergency care. The community's response to our initial facility in Flower Mound, Texas was so positive that we began looking for opportunities to expand. In 2003, Richard Covert joined the company and eventually became its Chief Executive Officer. Mr. Covert was instrumental in securing legislation to license and regulate freestanding emergency rooms in the state of Texas. Mr. Covert helped expand the company to 12 facilities in three Texas markets. In 2007, we received the Gold Seal of Approval from The Joint Commission on Accreditation of Healthcare Organizations, or the Joint Commission. In 2011, funds affiliated with Sterling Partners acquired a 75% share in First Choice ER, LLC. In 2013, Adeptus Health LLC was created as a holding company to own and operate First Choice Emergency Rooms. Adeptus Health Inc. was incorporated as a Delaware corporation on March 7, 2014 for the purpose of becoming our new parent company in connection with the Reorganization Transactions described under the heading "Organizational Structure" and elsewhere in this prospectus or in documents incorporated by reference herein.

Corporate Information

        Our principal executive offices are located at 2941 Lake Vista Drive, Lewisville, Texas 75067 and our telephone number is (972) 899-6666. Our website is www.adhc.com. Information contained on our website or that can be accessed through our website is not incorporated by reference herein.

Implications of Being an Emerging Growth Company

        We are an "emerging growth company" as defined in the JOBS Act. For so long as we remain an emerging growth company, we are permitted, and intend, to rely on exemptions from specified disclosure requirements that are applicable to other public companies that are not emerging growth companies. These include:

    being permitted to provide only two years of audited financial statements, with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure included in this prospectus or in documents incorporated by reference herein;

    not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;

    not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements;

    reduced disclosure obligations regarding executive compensation; and

 

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    exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

        We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of some reduced reporting burdens in this prospectus or in documents incorporated by reference herein. Accordingly, the information contained or incorporated by reference herein may differ from the information provided by other public companies. We may avail ourselves of these provisions until the last day of the fiscal year following the fifth anniversary of the date of our initial public offering, which occured on June 24, 2014, or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1 billion in annual revenue, have more than $700 million in market value of our capital stock held by non-affiliates or issue more than $1 billion of non-convertible debt securities over a three-year period.

        The JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We previously opted out of this provision. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards was irrevocable.

 

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The Offering

Class A common stock offered by Adeptus Health Inc. 

              shares.

Class A common stock offered by the selling stockholder

 

            shares.

Option to purchase additional shares of Class A common stock. 

 

We and the selling stockholder have granted the underwriters an option for a period of 30 days from the date of this prospectus to purchase up to 300,000 additional shares of Class A common stock, of which            will be sold by the selling stockholder and            sold by the Company, with the proceeds used to purchase an equivalent number of LLC Units from certain of our Post-IPO Unit Holders, as defined under the heading "Organizational Structure."

Class A common stock outstanding after this offering. 

 

            shares (or            shares if the Post-IPO Unit Holders were to exchange all of their LLC Units and Class B common stock for Class A common stock on a one-for-one basis).

Class B common stock outstanding after giving effect to this offering. 

 

            shares. The shares of Class B common stock have no economic rights but entitle the holder to one vote per share on matters presented to stockholders of Adeptus Health Inc. Shares of Class B common stock are generally not transferable other than in connection with an exchange of LLC Units for Class A common stock.

Use of proceeds

 

The net proceeds to us from this offering, after deducting estimated underwriting discounts and commissions, will be approximately $            million (or $            million if the underwriters exercise in full their option to purchase additional shares of Class A common stock), based on the offering price per share of $                . We estimate that our expenses from this offering will be approximately $            million.

 

We intend to use the proceeds received by us to purchase, for cash,             outstanding LLC Units from certain of our Post-IPO Unit Holders at a purchase price per unit equal to the public offering price per share of Class A common stock in this offering net of underwriting discounts and commissions.

 

We will not receive any of the proceeds from the sale of shares of Class A common stock by the selling stockholder.

 

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If the underwriters exercise in full their option to purchase up to an aggregate of 300,000 additional shares of Class A common stock, we intend to purchase, for cash,            outstanding LLC Units from certain of our Post-IPO Unit Holders at a purchase price per unit equal to the public offering price per share of Class A common stock in this offering net of underwriting discounts and commissions. The remaining            shares of Class A common stock subject to the underwriters' option are expected to be Class A common stock to be held by the selling stockholder. We will not receive any of the proceeds from the sale of shares of Class A common stock by the selling stockholder.

Exchange rights of holders of Adeptus Health LLC units

 

The amended and restated limited liability company agreement of Adeptus Health LLC, or the Amended and Restated Limited Liability Company Agreement, gives the Post-IPO Unit Holders (subject to the terms of the Amended and Restated Limited Liability Company Agreement) the right to exchange their vested LLC Units (together with a corresponding number of shares of our vested Class B common stock) for shares of our Class A common stock on a one-for-one basis. The Post-IPO Unit Holders will hold                 LLC Units following this offering and the application of the net proceeds from this offering as described under the heading "Use of Proceeds."

Voting rights

 

Each share of our Class A common stock entitles its holder to one vote on all matters to be voted on by stockholders generally.

 

Following this offering, the Post-IPO Unit Holders will continue to hold            shares of Class B common stock. Shares of Class B common stock have no economic rights but entitle the holder to one vote per share on all matters to be voted on by stockholders generally. Following this offering, such Class B common stock will entitle the Post-IPO Unit Holders to            % of the voting power of our outstanding capital stock.

 

Holders of our Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law.

 

See "Description of Capital Stock—Common Stock."

Dividend policy

 

We do not currently plan to pay a dividend on our common stock following this offering. The declaration, amount and payment of any future dividends on shares of Class A common stock will be at the sole discretion of our board of directors.

 

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Risk factors

 

You should read the "Risk Factors" section of this prospectus and the "Risk Factors" section of our Annual Report, for a discussion of factors that you should consider carefully before deciding to invest in our Class A common stock.

NYSE ticker symbol

 

"ADPT."

Certain Material United States Federal Income and Estate Tax Consequences to Non-U.S. Holders

 

For a discussion of certain material U.S. federal income and estate tax consequences that may be relevant to certain prospective stockholders who are not individual citizens or residents of the United States, see "Certain Material United States Federal Income and Estate Tax Consequences to Non-U.S. Holders."

        In this prospectus, unless otherwise indicated, the number of shares of Class A common stock outstanding and the other information based thereon:

    does not reflect any exercise by the underwriters of their option to purchase 300,000 additional shares of our Class A common stock from us and the selling stockholder;

    does not reflect                shares of Class A common stock issuable upon exchange of LLC Units (together with a corresponding number of shares of Class B common stock) that will be held by the Post-IPO Unit Holders immediately following this offering; and

    does not reflect 1,033,500 shares of Class A common stock that may be issued under our equity incentive plan.

 

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Summary Financial and Other Data

        The following tables set forth the summary historical consolidated financial and other data and pro forma financial data for the Company as of the dates and for the periods indicated. The summary consolidated statements of operations data presented below for the fiscal years ended December 31, 2014, 2013 and 2012 and the consolidated balance sheet data presented below as of December 31, 2014 and 2013 have been derived from our audited consolidated financial statements included in our Annual Report. The consolidated balance sheet data as of December 31, 2012 has been derived from our audited consolidated financial statements not included or incorporated by reference in this prospectus.

        The summary unaudited pro forma financial information has been developed by application of pro forma adjustments to the historical consolidated financial statements included or incorporated by reference herein. The summary unaudited pro forma financial information for the year ended December 31, 2014 gives effect to the transactions described under the heading "Unaudited Pro Forma Financial Information" as if all such events had been completed as of January 1, 2014 with respect to the unaudited pro forma consolidated statements of operations. The unaudited pro forma adjustments are based upon available information and certain assumptions we believe are reasonable under the circumstances. The summary unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of, and does not purport to represent, what our financial position or results of operations would actually have been had the transactions been consummated as of the dates indicated. In addition, the summary unaudited pro forma financial information is not necessarily indicative of our future financial condition or results of operations.

        You should read the information contained in this table in conjunction with the matters discussed under the headings "Use of Proceeds," "Organizational Structure," "Unaudited Pro Forma Financial Information," "Selected Historical Consolidated Financial Data" and "Capitalization" in this prospectus and under the headings "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as with our audited consolidated financial statements and related notes, in our Annual Report.

 

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  Unaudited Pro
Forma Adeptus
Health Inc. as of
or for the year
ended
December 31,
2014
 
 
  Year ended
December 31,
 
(dollars in thousands, except per share data)
  2014   2013   2012  

Statement of Operations Data:

                         

Revenue:

                         

Patient service revenue

  $ 243,298   $ 114,960   $ 80,977   $ 243,298  

Provision for bad debt

    (32,624 )   (12,077 )   (8,376 )   (32,624 )

Net patient service revenue

    210,674     102,883     72,601     210,674  

Management and contract services revenue

    20             20  

Total net operating revenue

    210,694     102,883     72,601     210,694  

Equity in net loss of unconsolidated joint venture

    (900 )           (900 )

Operating expenses:

                         

Salaries, wages and benefits

    136,498     65,244     41,754     136,498  

General and administrative

    37,604     17,436     12,805     37,604  

Other operating expenses

    27,329     11,185     7,493     27,329  

(Gain) loss from the disposal or impairment of assets

    (42 )   207     652     (42 )

Depreciation and amortization

    15,037     7,920     4,640     15,037  

Total operating expenses

    216,426     101,992     67,344     216,426  

(Loss) income from operations

    (6,632 )   891     5,257     (6,632 )

Other (expense) income:

                         

Interest expense

    (11,966 )   (2,827 )   (1,056 )   (11,966 )

Change in fair market value of derivatives

        112     (533 )    

Write-off of deferred loan costs

        (440 )        

Total other (expense)

    (11,966 )   (3,155 )   (1,589 )   (11,966 )

(Loss) income before (benefit) provision for income taxes

    (18,598 )   (2,264 )   3,668     (18,598 )

(Benefit) provision for income taxes

    (1,326 )   720     467     (2,713 )

Net (loss) income

    (17,272 )   (2,984 )   3,201     (15,885 )

Less: Net (loss) income attributable to non-controlling interest

    (13,921 )   (2,984 )   3,201     (8,828 )

Net loss attributable to Adeptus Health Inc. 

    (3,351 )           (7,057 )

Net loss per share of Class A common stock:

                         

Basic

  $ (0.34 )         $ (0.62 )

Diluted

  $ (0.34 )         $ (0.62 )

Weighted average shares of Class A common stock:

                         

Basic

    9,845,016             11,216,675  

Diluted

    9,845,016             11,216,675  

Consolidated Balance Sheet Data:

                         

Cash

  $ 2,002   $ 11,495   $ 3,455   $ 1,502  

Total assets

    282,818     183,292     120,367     324,617  

Total debt and capital lease obligations

    110,935     79,411     23,604     110,935  

Shareholders'/Owners' equity

    99,880     78,651     82,734     103,090  

Cash Flow Data:

                         

Cash flows provided by (used in):

                         

Operating activities

  $ (24,698 ) $ 6,872   $ 11,408        

Investing activities

    (49,448 )   (44,647 )   (15,537 )      

Financing activities

  $ 64,653     45,815     2,820        

Other Financial Data:

                         

Adjusted EBITDA(1)

  $ 28,200   $ 16,010   $ 13,689        

Same-store revenue(2)

    85,629     70,641     64,506        

Capital expenditures

    47,429     46,048     11,504        

Other Operational Data:

                         

Patient volume (number of patient visits)

    146,058     77,044     58,434        

Number of facilities

    55     26     14        

(1)
We define Adjusted EBITDA as net income before interest, taxes, depreciation, and amortization, further adjusted to eliminate the impact of certain additional items, including advisory services paid to our Sponsor, facility preopening expenses, management recruiting expenses, stock compensation expense, costs associated with our public offerings and other non-recurring costs. Adjusted EBITDA is included or incorporated by reference herein because it is a key metric used by management to assess our financial performance. We use Adjusted EBITDA to supplement GAAP measures of performance in order to evaluate the effectiveness of our business strategies, to make budgeting decisions and to compare

 

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    our performance against that of other peer companies using similar measures. Adjusted EBITDA is also frequently used by analysts, investors and other interested parties to evaluate companies in our industry.


Adjusted EBITDA is a non-GAAP measure of our financial performance and should not be considered as an alternative to net income (loss) as a measure of financial performance, or any other performance measure derived in accordance with GAAP, nor should it be construed as an inference that our future results will be unaffected by unusual or other items. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments in this presentation, such as preopening expenses, stock compensation expense, and other adjustments. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management's discretionary use, as it does not reflect certain cash requirements such as tax payments, debt service requirements, capital expenditures, facility openings and certain other cash costs that may recur in the future. Adjusted EBITDA contains certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. Management compensates for these limitations by supplementally relying on our GAAP results in addition to using Adjusted EBITDA. Our presentation of Adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.



The following table sets forth a reconciliation of our Adjusted EBITDA to net income (loss) using data derived from our consolidated financial statements for the periods indicated:

 
  Year ended
December 31,
 
(dollars in thousands)
  2014   2013   2012  

Net (loss) income

  $ (17,272 ) $ (2,984 ) $ 3,201  

Depreciation and amortization

    15,037     7,920     4,640  

Interest expense(a)

    11,966     3,155     1,589  

(Benefit) provision for income taxes

    (1,326 )   720     467  

Advisory Services Agreement fees and expenses(b)

    293     559     553  

Preopening expenses(c)

    10,550     3,977     497  

Management recruiting expenses(d)

    376     719     970  

Stock compensation expense(e)

    1,015     586     253  

Initial public offering costs(f)

    5,157          

Other(g)

    2,404     1,358     1,519  

Total adjustments

    45,472     18,994     10,488  

Adjusted EBITDA

  $ 28,200   $ 16,010   $ 13,689  

(a)
Consists of interest expense and fees of $11.9 million, $2.8 million, and $1.1 million for the years ended December 31, 2014, 2013 and 2012, respectively, a gain in fair market value of derivatives of $0.1 million for the year ended December 31, 2013, a loss in fair market value of derivatives of $0.5 million for the year ended December 31, 2012, and a write-off of deferred loan costs of $0.4 million for the year ended December 31, 2013.

(b)
Consists of management fees and expenses paid to a significant shareholder under our Advisory Services Agreement. The Advisory Services Agreement was terminated in connection with the consummation of our initial public offering in June 2014.

(c)
Includes labor, marketing costs and occupancy costs prior to opening a facility and the equity in loss of our unconsolidated joint venture in 2014.

(d)
Third-party costs and fees involved in recruiting our management team.

(e)
Stock compensation expense associated with grants of management incentive units.

(f)
Consists of costs incurred in conjunction with our initial public offering, including $2.4 million in bonuses for certain members of management, $2.3 million in costs related to the termination of our Advisory Services Agreement and $0.5 million of other offering costs.

(g)
For the year ended December 31, 2014, we incurred costs to develop long-term strategic goals and objectives totaling $1.7 million, real-estate development costs associated with potential real estate projects that were terminated totaling $0.6 million and board fees and travel expenses paid to members of the board of directors totaling $0.1 million. For the year ended December 31, 2013, we incurred costs to develop long-term strategic goals and objectives totaling approximately $0.5 million, real-estate development costs associated with potential real estate projects that were terminated totaling $0.4 million, board fees and travel expenses paid to members of the board of directors totaling $0.2 million and $0.25 million of termination costs paid to the former CEO. For the year ended December 31, 2012, we incurred terminated real-estate development costs totaling $0.5 million, legal costs primarily associated with real estate development and litigation for violation of our trademark totaling $0.8 million and board fees and travel expenses paid to members of the board of directors totaling approximately $0.2 million.

 

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(2)
We begin including revenue for a new facility as same store revenue from the first day of the 16th full fiscal month following the facility's opening, which is when we believe same store comparison becomes meaningful. When a facility is relocated, we continue to include revenue from that facility in same store revenue. Same store revenue allows us to evaluate how our facility base is performing by measuring the change in period over period net revenue in facilities that have been open for 15 months or more. Various factors affect same store revenue, including outbreaks of illnesses, changes in marketing and competition.

 

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RISK FACTORS

        An investment in our Class A common stock involves a high degree of risk. You should carefully consider the risks described below and in the "Risk Factors" section of our Annual Report, together with the other information in this prospectus or documents incorporated by reference herein, before deciding whether to purchase our Class A common stock. If any of the risks described below or in our Annual Report actually occur, our business, financial condition, results of operations or prospects could be materially adversely affected. In any such case, the trading price of our Class A common stock could decline and you could lose all or part of your investment. The risks described below or in our Annual Report are not the only risks we face. Additional risks we are not presently aware of or that we currently believe are immaterial could also materially adversely affect our business, financial condition, results of operations or prospects.

Risks Related to Our Business and Our Industry

We may not be able to successfully implement our growth strategy on a timely basis or at all, which could harm our growth and results of operations.

        Our growth depends on our ability to open profitable new facilities. Our growth strategy is to substantially grow the number of our freestanding emergency care facilities in 2015 and beyond. Our ability to open profitable facilities depends on many factors, including our ability to:

    open facilities and achieve brand awareness in new markets;

    access capital to fund construction costs and preopening expenses;

    manage increases in costs, which could give rise to delays or cost overruns;

    recruit and train physicians, nurses and technicians in our local markets;

    obtain all required governmental licenses and permits, including state facility licenses, on a timely basis;

    compete for appropriate sites in new markets, including against emergency care competitors and against traditional retailers; and

    maintain adequate information systems and other operational system capabilities.

        Delays in the opening of new facilities, delays or costs resulting from a decrease in commercial development due to capital constraints, difficulties resulting from commercial, residential and infrastructure development (or lack thereof) near our new facilities, difficulties in staffing and operating new locations or lack of acceptance in new market areas may negatively impact our new facility growth and the costs or the profitability associated with new facilities. Further, additional federal or state legislative or regulatory restrictions or licensure requirements could negatively impact our ability to operate both new and existing facilities.

        Accordingly, we may not be able to achieve our planned growth or, even if we are able to grow our facility base as planned, any new facilities may not be profitable or otherwise perform as planned. In addition, to the extent we have misjudged the nature and extent of industry trends or our competition, we may have difficulty in achieving our strategic objectives. Failure to successfully implement our growth strategy would likely have an adverse impact on the price of our Class A common stock.

Our expansion into new markets presents increased risks and may require us to develop new business models.

        Our continued growth and profitability depend on our ability to successfully realize our growth strategy by expanding the number of facilities we operate in both new and existing markets. We cannot assure you our efforts to expand into new markets, particularly in states where we do not currently

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operate, will succeed. In order to operate in new markets, we may need to modify our existing business model and cost structure to comply with local regulatory or other requirements, which may expose us to new operational, regulatory or legal risks. In addition, expanding into new states, including our joint ventures with Dignity Health and UCHealth and the opening of full-service general hospitals in Arizona and Texas (planned) in 2015, may subject us to unfamiliar or uncertain local regulations that may adversely affect our operations, for example, by impacting our insurance reimbursement practices or our ability to operate facilities as licensed or unlicensed freestanding emergency rooms or hospitals. See "—Risks Related to Healthcare Regulation" below. Facilities we open in new markets may also take longer to reach expected revenue and profit levels on a consistent basis and may have higher construction, occupancy or operating costs than facilities we open in existing markets, thereby affecting our overall profitability. New markets may have competitive conditions, consumer preferences and healthcare spending patterns that are more difficult to predict or satisfy than our existing markets.

        We may need to make greater investments than we originally planned in advertising and promotional activity in new markets to build brand awareness. We may find it more difficult in new markets to hire, motivate and keep qualified physicians, nurses, technicians and other personnel. We may need to augment our labor model to meet regulatory requirements and the overall cost of labor may be higher. As a result, these new facilities may be less successful and may not achieve target facility level profit margins at the same rate or at all. If any steps taken to expand our existing business model into new markets are unsuccessful, we may not be able to achieve our growth strategy and our business, financial condition or results of operations could be adversely affected.

Our long-term success is highly dependent on our ability to successfully identify and secure appropriate sites for our facilities and develop and expand our operations in existing and new markets.

        One of the key means of achieving our growth strategy will be through opening new facilities and operating those facilities on a profitable basis. We expect this to be the case for the foreseeable future. We identify target markets where we can enter or expand, taking into account numerous factors such as the location of our current facilities, demographics, traffic patterns and other factors that support our site-selection process. As we operate more facilities, our rate of expansion relative to the size of our current facility base will eventually decline. As of December 31, 2014, we had 55 facilities in operation. We have 12 locations currently under construction, including a regional hospital in Texas and 15 locations in the building permit process. Based on our typical development timeline we believe that at least 24 of these facilities will be completed and operational by December 31, 2015. We currently expect that 19 of the facilities will be funded by MPT under the MPT Agreements and the remaining facilities will be funded by other third party capital funding sources. Even though our 2015 expansion strategy is under way, the number and timing of new facilities opened during any given period may be negatively impacted by a number of factors including, without limitation:

    the cost and availability of capital to fund construction costs and preopening expenses;

    the identification and availability of attractive sites for new facilities and the ability to negotiate suitable lease terms;

    anticipated commercial, residential and infrastructure development near our new facilities;

    the proximity of potential sites to an existing facility;

    construction delays or cost overruns that may increase project costs;

    our ability to obtain zoning, occupancy and other required governmental permits and authorizations on a timely basis;

    our ability to control construction and development costs incurred for projects, including those that are not pursued to completion;

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    hurricanes, floods, fires or other natural disasters that could adversely affect a project;

    defects in design or construction that may result in additional costs to remedy or require all or a portion of a property to be closed during the period required to rectify the situation; and

    governmental restrictions on the nature and size of a project or timing of completion.

        If we are unable to find and secure attractive locations to expand in existing markets or penetrate new markets, this may harm our ability to increase our revenues and profitability and realize our growth strategy and our financial results may be negatively affected.

New facilities, once opened, may not be profitable, and the increases in comparable facility revenue that we have experienced in the past may not be indicative of future results.

        Our results have been, and in the future may continue to be, significantly impacted by a number of factors, including factors outside of our control, related to the opening of new facilities, including the timing of new facility openings, associated facility preopening costs and operating inefficiencies, as well as changes in our geographic concentration due to the opening of new facilities. We typically incur the most significant portion of opening expenses associated with a given facility within the first few months immediately preceding and following the opening of the facility. A new facility generally takes up to 12 months to achieve a level of operating performance comparable to our similar existing facilities due to lack of market awareness and other factors. We also may incur additional costs in new markets, particularly for contracting, real estate, labor, marketing and regional support, which may impact the profitability of those facilities. Accordingly, the volume and timing of new facility openings may have a meaningful impact on our profitability.

        Although we target specified operating and financial metrics, new facilities may not meet these targets or may take longer than anticipated to do so. Any new facilities we open may not be profitable or achieve operating results similar to those of our existing facilities. If our new facilities do not perform as planned, our business and future prospects could be harmed. In addition, if we are unable to achieve expected comparable facility revenues, our business, financial condition or results of operations could be adversely affected.

Opening new facilities in existing markets may negatively affect revenue at our existing facilities.

        The target area of our facilities varies by location and depends on a number of factors, including population density, other available emergency medical services, area demographics and geography. As a result, the opening of a new facility in or near markets in which we already have facilities could adversely affect the revenues of those existing facilities. Existing facilities could also make it more difficult to build our patient base for a new facility in the same market. Our business strategy does not entail opening new facilities that we believe will materially affect revenue at our existing facilities, but we may selectively open new facilities in and around areas of existing facilities that are operating at or near capacity to effectively serve our patients. Revenue cannibalization between our facilities may become significant in the future as we continue to expand our operations and could affect our revenue growth, which could, in turn, adversely affect our business, financial condition or results of operations.

We are required to make capital expenditures, particularly to implement our growth strategy, in order to remain competitive.

        Our capital expenditure requirements primarily relate to identifying expansion opportunities for our facilities, the costs associated to establish such new facilities in existing and new markets and maintaining and upgrading our medical equipment to serve our customers and remain competitive. Our capital expenditures totaled $47.4 million, $46.0 million and $11.5 million, for the years ended December 31, 2014, 2013 and 2012, respectively. In addition, changing competitive conditions or the

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emergence of any significant advances in medical technology could require us to invest significant capital in additional equipment or capacity in order to remain competitive. If we are unable to fund any such investment or otherwise fail to invest in new medical equipment, our business, financial condition or results of operations could be materially and adversely affected.

We currently rely on our Master Funding and Development Agreements with Medical Properties Trust to execute our expansion strategy.

        We have experienced rapid growth in recent periods, growing from 14 facilities at the end of 2012 to 26 facilities at the end of 2013, and to 55 facilities as of December 31, 2014. We have a robust pipeline under development designed to support the addition of a similar number of facilities in 2015. A major source of financing we have and employ to open new facilities is derived from our MPT Agreements. Under the terms of the MPT Agreements, MPT acquires parcels of land, funds the ground-up construction of new freestanding emergency room facilities and leases the facilities to us upon completion of construction. MPT is also required to fund all hard and soft costs, including the project purchase price, closing costs and pursuit costs for the assets relating to the construction of up to a maximum aggregate funding of $505.0 million, of which $339.4 million remained available under the MPT Agreements as of the date of this prospectus. An inability to rely on our relationship with MPT or to obtain alternate funding sources to fund our expansion strategies may require us to delay, scale back or eliminate some or all of the expansion of our current pipeline and future projects, which may have a material adverse effect on our business, operating results, financial condition or prospects.

We may require additional capital to fund our expansion, and our inability to obtain such capital could harm our business.

        To support our expansion strategy, we must have sufficient capital to continue to make significant investments in our new and existing facilities. Funding from outside financing or cash generated by our operations may not be sufficient to allow us to sustain our expansion efforts. If funding from outside financing sources or cash flows from operations are not sufficient, we may need additional equity or debt financing to provide the funds required to expand our business. If such financing is not available on satisfactory terms or at all, we may be unable to expand our business or to develop new business at the rate desired and our operating results may suffer. Debt financing increases expenses and must be repaid regardless of operating results, and the documents governing indebtedness may contain covenants that restrict the operation of our business. Equity financing, or debt financing that is convertible into equity, could result in additional dilution to our existing stockholders. Furthermore, our inability to obtain adequate capital resources, whether in the form of equity or debt, to fund our business and growth strategies may require us to delay, scale back or eliminate some or all of our operations or the expansion of our business, which may have a material adverse effect on our business, operating results, financial condition or prospects.

Damage to our reputation or our brand in existing or new markets could negatively impact our business, financial condition and results of operations.

        We believe we have built our reputation on the high quality of our emergency medical services, physicians and operating personnel, as well as on our unique culture and the experience of our patients in our facilities, and we must protect and grow the value of our brand to continue to be successful in the future. Our brand may be diminished if we do not continue to make investments in areas such as marketing and advertising, as well as the day-to-day investments required for facility operations, equipment upgrades and staff training. Any incident, real or perceived, regardless of merit or outcome, that erodes our brand, such as, but not limited to, patient disability or death due to medical malpractice or allegations of medical malpractice, failure to comply with federal, state or local regulations including allegations or perceptions of non-compliance or failure to comply with ethical and

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operating standards, could significantly reduce the value of our brand, expose us to adverse publicity and damage our overall business and reputation. Further, our brand value could suffer and our business could be adversely affected if patients perceive a reduction in the quality of service or staff, or an adverse change in our culture, or otherwise believe we have failed to deliver a consistently positive patient experience.

We may be unable to maintain or improve our operating margins, which could adversely affect our financial condition and ability to grow.

        If we are unable to successfully manage the potential difficulties associated with growth, we may not be able to capture the efficiencies and opportunities that we expect from our expansion strategy. If we are not able to capture expected efficiencies of scale, maintain patient volumes, improve our systems and equipment, continue our cost discipline and retain appropriate physician and overall labor levels, our operating margins may stagnate or decline, which could have a material adverse effect on our business, financial condition and results of operations and adversely affect the price of our Class A common stock.

Our marketing programs may not be successful.

        We incur costs and expend other resources in our marketing efforts to attract and retain patients. Our total marketing initiatives for the years ended December 31, 2014, 2013 and 2012 resulted in costs of approximately $9.3 million, $5.9 million and $2.8 million, respectively. Our marketing activities are principally focused on increasing brand awareness and awareness of our service capabilities and our marketing team is responsible for implementing our marketing efforts through activating field marketing teams, underscoring leadership through brand wide program initiatives, participating in trade show sponsorship, white paper publication, arranging for speaking engagements for our senior executives and formal training about our products and services. We also sponsor and host local community activities including fundraisers, street parties and sporting events to bolster our overall community involvement. As we open new facilities, we undertake aggressive marketing campaigns to increase community awareness about our growing presence. We plan to utilize targeted marketing efforts within local neighborhoods through channels such as direct mail, mobile billboards, radio advertisements, television, community sponsorships and a robust online/social media presence. These initiatives may not be successful, resulting in expenses incurred without the benefit of higher revenue. Our ability to market our services may be restricted or limited by federal or state law.

We face intense competition in the emergency care market, including competition for patients, strategic relationships and commercial payor contracts which could adversely affect our contract and revenue base.

        The market for providing emergency care services is highly competitive and each of the individual geographic areas in which we operate has a different competitive landscape. We compete with national, regional and local enterprises, some of which may have greater financial and other resources available to them, greater access to physicians or greater access to potential customers. We may also compete with urgent care centers and physician-owned facilities for lower-acuity cases and with hospitals for higher acuity cases. Such competition could adversely affect our ability to obtain new contracts, retain existing contracts and increase or maintain profit margins.

        In each of our markets we compete with other healthcare providers for patients and in contracting with commercial payors. We are also in competition with other emergency care providers, hospitals, urgent care centers, clinics and healthcare systems in the communities we serve to attract patients and provide them with the care they need. There are hospitals and health systems that compete with us in each market in which we operate, and many of them have more established relationships with physicians and payors than we do. In addition, other companies are currently in the same or similar business of developing, acquiring and operating emergency care facilities, or may decide to enter this

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business. We also compete with some of these companies for entry into strategic relationships with health systems. As a result of the differing competitive factors within the markets in which we operate, the individual results of our facilities may be volatile. If we are unable to compete effectively with any of these entities or groups we may be unable to implement our business strategies successfully, which could have a material adverse effect on our business, prospects, results of operations and financial condition.

We may not be able to successfully recruit and retain physicians and other healthcare professionals with the qualifications and attributes we and our patients' desire.

        Our success depends upon our continuing ability to recruit and retain qualified physicians, nurses, technologists and other operating staff. There is currently a national shortage of certain of these healthcare professionals. To the extent that a significant number of physicians within an individual community or market decide to partner with competing emergency care providers, hospitals or health systems and not with us, we may not be able to operate our facilities in such community. We face competition for such personnel from emergency care providers and other organizations. This competition may require us to enhance wages and benefits to recruit and retain qualified personnel. In the event we are unable to recruit and retain these professionals, such shortages could have a material adverse effect on our ability to grow or be profitable.

If we are unable to negotiate and enter into favorable contracts or maintain satisfactory relationships and renew existing contracts on favorable terms with third-party payors, our revenue and profitability may decrease.

        We estimate that 97.8%, 98.8% and 98.1%, of our net patient service revenue for the years ended December 31, 2014, 2013 and 2012, respectively, was derived from third party payors such as managed care organizations, commercial insurance providers and employer sponsored healthcare plans. We receive most of these payments from third party payors that have contracts or other arrangements in place with us in Texas and Colorado. We currently have a contract in place with one significant commercial insurance provider and an arrangement with another organization that enables us to access third party payors at in network rates. These third party payors use a variety of methods for reimbursement depending on the arrangement involved. These arrangements include fee for service, preferred provider organizations, health maintenance organizations, as well as prepaid and discounted medical service packages and capitated (fixed fee) contracts. Rates for health maintenance organization benefit plans are typically lower than those for preferred provider organization or other benefit plans that offer broader provider access.

        There is often pressure to renegotiate our reimbursement levels, including, in particular, in connection with changes to Medicare. Typically, third party commercial payors reimburse us based upon contracted discounts to our established base rates. In 2012, we entered into a contract with a large third-party payor and implemented a price increase in May 2013 and May 2014 under that contract. To date, we have not experienced a shift toward payors who base reimbursement levels on Medicare rates. During the past three years, we have experienced a trend towards increasing reimbursement by third party commercial payors. If managed care organizations and other third party payors reduce their rates or we were to experience a significant shift in our revenue mix toward Medicare, Medicaid or Tricare, which we recently began to accept in Arizona, or other government reimbursement programs, which we do not currently accept, but may accept in the future, then our revenue and profitability may decline and our operating margins will be reduced. Third party payors continue to demand discounted fee structures, and the trend toward consolidation among third party payors tends to increase their bargaining power over fee structures. Because some third party payors rely on all or portions of Medicare payment systems to determine payment rates, changes to government healthcare programs that reduce payments under these programs may negatively impact payments from third-party payors.

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Other healthcare providers may impact our ability to negotiate increases and other favorable terms in our reimbursement arrangements with third party payors. For example, some of our competitors may negotiate exclusivity provisions with third party payors or otherwise restrict the ability of third party payors to contract with us or our health system partners. Our results of operations will depend, in part, on our and our health system partners' ability to retain and renew our managed care contracts as well as enter into new managed care contracts on terms favorable to us. Our inability to maintain suitable financial arrangements with third party payors could have a material adverse impact on our business.

        As various provisions of PPACA are implemented, including the establishment of health insurance exchanges, quality-based reimbursement and bundled payments, third-party payors may increasingly demand reduced fees. In addition, there is a growing trend for third-party payors to take steps to shift the primary cost of care to the plan participant by increasing co-payments, co-insurance and deductibles, and these actions could discourage such patients from seeking treatment at our facilities. Patient volumes could decrease if we or our health system partners are unable to enter into acceptable contracts with such third-party payors, which could have a material adverse effect on our business, prospects, results of operations and financial condition.

We depend on payments from a variety of third-party payors. If these payments are significantly delayed, are reduced or eliminated, our revenue and profitability could decrease.

        We depend upon compensation from third-party payors for the services provided to patients in our facilities. The amount that our facilities receive in payment for their services may be adversely affected by factors we do not control, including state regulatory changes, cost-containment decisions and changes in reimbursement schedules of third-party payors and legislative changes. Any reduction or elimination of these payments could have a material adverse effect on our business, prospects, results of operations and financial condition.

        Additionally, the reimbursement process is complex and can involve lengthy delays. While we recognize revenue when healthcare services are provided, there can be delays before we receive payment. In addition, third-party payors may disallow, in whole or in part, requests for reimbursement based on determinations that certain amounts are not reimbursable under plan coverage, that services provided were not medically necessary, that services rendered in our facilities did not require emergency level care or that additional supporting documentation is necessary. Retroactive adjustments may change amounts realized from third-party payors. Delays and uncertainties in the reimbursement process may adversely affect accounts receivable, increase the overall costs of collection and cause us to incur additional borrowing costs.

Significant changes in our payor mix or acuity mix resulting from fluctuations in the types of patients seen at our facilities could have a material adverse effect on our business, prospects, results of operations and financial condition.

        Our results may change from period to period due to fluctuations in payor mix or acuity mix or other factors relating to the type of treatment performed by physicians at our facilities. Payor mix refers to the relative share of total cases provided to patients with, respectively, no insurance, commercial insurance and other coverage. Since, generally speaking, we receive relatively higher payment rates from third-party payors than self-pay patients, a significant shift in our payor mix toward a higher percentage of self-pay or Medicare, Medicaid or Tricare, which we recently began to accept in Arizona, or other government reimbursement programs, which we do not currently accept, but may accept in the future, which could occur for reasons beyond our control, could result in a material adverse effect on our business, prospects, results of operations and financial condition. Acuity mix refers to the relative share of total visits by acuity level, which affects the costs of the services we provide as well as the related revenue. Generally speaking, we derive relatively higher revenue from more complex treatments and patient encounters. Therefore, a significant shift in our acuity mix toward a higher percentage of

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lower revenue treatments could result in a material adverse effect on our business, prospects, results of operations and financial condition.

Failure to timely or accurately bill for our services could have a negative impact on our net revenues, bad debt expense and cash flow.

        Billing for our services is complex. The practice of providing medical services in advance of payment or prior to assessing a patient's ability to pay for such services may have a significant negative impact on our patient service revenue, bad debt expense and cash flow. We bill numerous and varied payors, including self-pay patients and various forms of commercial insurance providers. Different payors typically have differing forms of billing requirements that must be met prior to receiving payment for services rendered. Self-pay patients and third-party payors may fail to pay for services even if they have been properly billed. Reimbursement to us is typically conditioned, among other things, on our providing the proper procedure and diagnosis codes. Incorrect or incomplete documentation and billing information could result in non-payment for services rendered.

        Additional factors that could complicate our billing include:

    disputes between payors as to which party is responsible for payment;

    variation in coverage for similar services among various payors;

    the difficulty of adherence to specific compliance requirements, coding and various other procedures mandated by responsible parties;

    the fact that we bill payors a facility fee, a professional services fee and other related fees;

    the transition to new coding standards, which will require significantly more information than the codes currently used for medical coding and will require covered entities to code with much greater detail and specificity; and

    failure to obtain proper physician enrollment and documentation in order to bill various payors.

        To the extent the complexity associated with billing for our services causes delays in our cash collections, we assume the financial risk of increased carrying costs associated with the aging of our accounts receivable as well as the increased potential for bad debt expense.

Our relationships with health systems are important to our growth strategy. If we fail to maintain good relationships with these health systems or to enter into new relationships, we may be unable to implement our growth strategy successfully and our reputation could be adversely affected.

        Our business depends in part upon the success of our health system partners and the strength of our relationships with those health systems. Our business could be adversely affected by any damage to those health systems' reputation or to our relationships with them, or as a result of an irreconcilable dispute with a health system partner. Additionally, our reputation in the communities we serve is bolstered by our relationships with our partners. If we are unable to maintain such partnerships, our own reputation could be adversely affected. We may enter into affiliation agreements or have informal arrangements with health systems in which we agree to transfer certain patients to affiliated hospitals in a defined geographic area. We expect to focus on the creation of additional partnerships with health systems, and others, as part of our expansion strategy. For example, we have arrangements with HCA to ensure bed availability for our patients in need of acute care services at nearby HCA hospitals in both the North Texas and Houston areas. In addition, we have a relationship with the Concentra urgent care clinics in the Dallas/Fort Worth market, whereby we are able to refer workers' compensation patients to Concentra when follow-up, non-emergent, care is needed. If we are unable to develop and maintain good relationships with such health systems, maintain our existing agreements on terms and

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conditions favorable to us or enter into relationships with additional health systems on favorable terms, or at all, we may be unable to implement our growth strategies successfully.

We may enter into partnerships with healthcare providers. If this strategy is not successful, our financial performance could be adversely affected.

        In recent years, we have entered into strategic business partnerships with hospital systems and other large providers to take advantage of commercial opportunities in our facility based business. For example, and as discussed above, we have agreements with HCA and Concentra to ensure that patients have direct access to nearby hospitals and urgent care centers, as necessary. However, there can be no assurance that our efforts in these areas will continue to be successful.

        Moreover, this strategic partnership model exposes us to commercial risks that may be different from our own business model, including that the success of such partnerships is only partially under our operational and legal control, the potential for opportunity costs in not being able to pursue other partnerships should we enter into exclusive arrangements, and the risk that our partners may enter into additional arrangements with our competitors if these arrangements are not exclusive. Furthermore, partnership arrangements may raise fraud and abuse issues. For example, the Office of Inspector General of the Department of Health and Human Services, or the OIG, has taken the position that certain contractual arrangements between a party that receives remuneration for making referrals and a party that receives referrals for a specific type of service may violate the federal Anti-Kickback Statute, or the Anti-Kickback Statute, if one purpose of the arrangement is to encourage referrals. Our strategic partnership agreements do not involve the payment of any compensation. We believe our strategic partnership arrangements comply with the Anti-Kickback Statute; however, other regulatory bodies or a court may interpret these agreements differently and there is a risk that we may be found non-compliant and subject to government investigation, private and public lawsuits, civil penalties and criminal sanctions.

Proposed changes to financial accounting standards could require our operating leases to be recognized on the balance sheet.

        In addition to our significant level of indebtedness, we have considerable obligations relating to our current capital and operating leases. Proposed changes to financial accounting standards could require such leases to be recognized on our balance sheet. All of our existing facilities are subject to leases. All facilities under the MPT Agreements have initial terms of 15 years, with three five year renewal options. The terms of our non-MPT facilities vary, but typically have initial terms of between five and seven years with three year to five year renewal options. As of December 31, 2014 and 2013, we had 54 and 25 leased facilities, 53 and 24 of which were classified as operating leases and one of which was classified as a capital lease, respectively. The accounting treatment of these leases is described in Note 11 to our consolidated financial statements. For the years ended December 31, 2014, 2013 and 2012, our operating lease expense was approximately $15.2 million, $4.5 million and $2.1 million, respectively.

        In May 2013, the Financial Accounting Standards Board, or FASB, and the International Accounting Standards Board issued a revised joint discussion paper highlighting proposed changes to financial accounting standards for leases. The proposed changes would require that substantially all operating leases be recognized as assets and liabilities on our balance sheet, which would be a significant departure from the current standard, which classifies operating leases as off balance sheet transactions and accounts for only the current year operating lease expense in the statement of operations. The right to use the leased property would be capitalized as an asset and the expected lease payments over the life of the lease would be accounted for as a liability. The effective date, which has not been determined, could be as early as 2016 and may require retrospective adoption. While we have not quantified the impact this proposed standard would have on our financial statements, if our current

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operating leases are instead recognized on the balance sheet, it will result in a significant increase in the liabilities reflected on our balance sheet and in the interest expense and depreciation and amortization expense reflected in our statement of operations, while reducing the amount of rent expense. This could potentially decrease our reported net income.

A successful challenge by tax authorities to our treatment of certain physicians as independent contractors or the elimination of an existing safe harbor could materially increase our costs relating to these physicians.

        As of December 31, 2014, through National Medical Professionals of Texas PLLC, National Medical Professionals of Colorado, P.C. and National Medical Professionals of Arizona LLC, affiliated professional limited liability companies owned and operated by our Executive Medical Director, we contracted with approximately 434 physicians and other medical staff as independent contractors to fulfill our contractual obligations to customers. Because these staff members are treated as independent contractors rather than as employees, National Medical Professionals of Texas PLLC, National Medical Professionals of Colorado, P.C. and National Medical Professionals of Arizona LLC do not (i) withhold federal or state income or other employment related taxes from their compensation, (ii) make federal or state unemployment tax or Federal Insurance Contributions Act payments with respect to them, (iii) provide workers compensation insurance with respect to them (except in states where they are required to do so for independent contractors), or (iv) allow them to participate in benefits and retirement programs available to employees. The contracts in place with these physicians obligate them to pay these taxes and other costs. Whether these physicians are properly classified as independent contractors generally depends upon the facts and circumstances of our relationship with them. If a challenge to our treatment of these physicians as independent contractors by federal or state authorities were successful and these physicians were treated as employees instead of independent contractors, we and/or National Medical Professionals of Texas PLLC, National Medical Professionals of Colorado, P.C. and National Medical Professionals of Arizona LLC could be liable for taxes, penalties and interest. In addition, there are currently, and have been in the past, proposals made to eliminate an existing safe harbor that would potentially protect us from the imposition of taxes in these circumstances, and similar proposals could be made in the future. If such a challenge were successful or if the safe harbor were eliminated, this could cause a material increase in our costs relating to these physicians and, therefore, a material adverse effect on our business, financial condition and results of operations.

We have experienced net losses and may not achieve or sustain profitability in the future.

        We have experienced periods of net losses, including consolidated net losses of approximately $17.3 million and $3.0 million for the years ended December 31, 2014 and 2013, respectively. Our revenue may not grow and we may not achieve or maintain profitability in the future. Even if we do achieve profitability, we may not sustain or increase profitability on a quarterly or annual basis in the future. Our ability to achieve profitability will be affected by the other risks and uncertainties described in this section and in "Management's Discussion and Analysis of Financial Condition and Results of Operations." If we are not able to achieve, sustain or increase profitability, our business will be materially adversely affected and the price of our Class A common stock may decline.

We depend on our senior management and may not be able to retain those employees or recruit additional qualified personnel.

        We depend on our senior management, including Thomas S. Hall, our Chairman and Chief Executive Officer, Timothy Fielding, our Chief Financial Officer, and Graham Cherrington, our President and Chief Operating Officer. We rely on the extensive experience of our management team across the healthcare, retail and hospitality sectors as well as extensive knowledge of healthcare operations and facility expansion. The loss of services of any of these or any other members of our senior management could adversely affect our business until a suitable replacement can be found.

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There may be a limited number of persons with the requisite skills to serve in these positions, and we cannot assure you that we would be able to identify or employ such qualified personnel on acceptable terms.

Our business depends on numerous complex information systems, and any failure to successfully maintain these systems or implement new systems could materially harm our operations.

        We depend on complex, integrated information systems and standardized procedures for operational and financial information and our billing operations. We may not have the necessary resources to enhance existing information systems or implement new systems where necessary to handle our increased patient volume and changing needs. Furthermore, we may experience unanticipated delays, complications and expenses in implementing, integrating and operating our systems. Any interruptions in operations during periods of implementation would adversely affect our ability to properly allocate resources and process billing information in a timely manner, which could result in customer dissatisfaction and delayed cash flow. In addition, our technology systems, or a disruption in the operation of such systems, could be subject to physical or electronic break-ins, and similar disruptions from unauthorized tampering. The failure to successfully implement and maintain operational, financial and billing information systems could have an adverse effect on our ability to obtain new business, retain existing business and maintain or increase our profit margins.

Our facilities currently located in Texas, Colorado and Arizona make us particularly sensitive to regulatory, economic and other conditions in those states.

        Our facilities are currently located in Texas, Colorado and Arizona. If there were an adverse regulatory, economic or other development in any of these states, our patient volume could decline, our ability to operate our facilities under our existing business model could be impacted, or there could be other unanticipated adverse impacts on our business that could have a material adverse effect on our business, prospects, results of operations and financial condition. See "Risk Factors—Risks Related To Healthcare Regulation—Changes in the rates or methods of third party reimbursements, including due to political discord in the budgeting process outside our control, may adversely affect our revenue and operations."

Our patient volumes are sensitive to seasonal fluctuations and patient concerns over outbreaks and other infectious diseases, which impact our results of operations.

        Our patient volumes are sensitive to seasonal fluctuations in emergency activity. Typically, winter months see a higher occurrence of influenza, bronchitis, pneumonia and similar illnesses; however the timing and severity of these outbreaks can vary dramatically. Our patient volumes are influenced by fluctuations in the demand for our healthcare services and are sensitive to patient concerns over pandemic outbreaks such as Ebola and other infectious diseases, including patient concerns over the possibility of acquiring or communicating such diseases in a medical care environment. Additionally, as consumers shift towards high deductible insurance plans, they are responsible for a greater percentage of their bill, particularly in the early months of the year before other healthcare spending has occurred, which may lead to an increase in bad debt expense during that period. Our quarterly operating results may fluctuate significantly in the future depending on these and other factors.

Our ability to open and operate facilities may be impacted by weather conditions.

        Our construction timelines may be delayed due to weather conditions. This may prevent us from opening facilities on time and increase our preopening expense burden. Additionally, extreme weather or natural disasters could also severely hinder our ability to operate existing facilities, delay capital improvements or cause us to close facilities. For example, in 2014, 38.5% of our patient service revenue was generated from facilities in the Houston market. If a hurricane, or other severe weather, were to affect this market, it could impact our ability to operate these facilities.

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Disruptions in our disaster recovery systems or management continuity planning could limit our ability to operate our business effectively.

        While we have disaster recovery systems and business continuity plans in place, any disruptions in our disaster recovery systems or the failure of these systems to operate as expected could, depending on the magnitude of the problem, adversely affect our operating results by limiting our capacity to effectively monitor and control our operations. In addition, in the event that a significant number of our management personnel were unavailable in the event of a disaster, our ability to effectively conduct business could be adversely affected.

We could be subject to lawsuits for which we are not fully reserved.

        Physicians, hospitals, clinics and other participants in the healthcare industry have become subject to an increasing number of lawsuits alleging medical malpractice and related legal theories such as negligent hiring, supervision and credentialing. Some of these lawsuits may involve large claim amounts and substantial defense costs. We generally procure professional liability insurance coverage for our affiliated medical professionals and professional and corporate entities. As of December 31, 2014, our professional liability insurance coverage was $20 million. This insurance coverage may not cover all claims against us, and insurance coverage may not continue to be available at a cost satisfactory to us to allow for the maintenance of adequate levels of insurance. If one or more successful claims against us were not covered by or exceeded the coverage of our insurance, it could have a material adverse effect on our business, prospects, results of operations and financial condition. Moreover, in the normal course of our business, we are involved in lawsuits, claims, audits and investigations, including those arising out of our billing and marketing practices, employment disputes, contractual claims and other business disputes for which we may have no insurance coverage, and which are not subject to actuarial estimates. The outcome of these matters could have a material effect on our results of operations in the period when we identify the matter, and the ultimate outcome could have a material adverse effect on our financial position, results of operations, or cash flows.

The reserves we establish with respect to our losses not covered under our insurance programs are subject to inherent uncertainties.

        In connection with our insurance programs, we establish reserves for losses and related expenses, which represent estimates involving actuarial and statistical projections, at a given point in time, of our expectations of the ultimate resolution and administration costs of losses we have incurred in respect of our liability risks. Insurance reserves are inherently subject to uncertainty. Our reserves are based on historical claims, demographic factors, industry trends, severity and exposure factors and other actuarial assumptions calculated by an independent actuary firm. The independent actuary firm performs studies of projected ultimate losses on an annual basis and provides quarterly updates to those projections. We use these actuarial estimates to determine appropriate reserves. Our reserves could be significantly affected if current and future occurrences differ from historical claim trends and expectations. While we monitor claims closely when we estimate reserves, the complexity of the claims and the wide range of potential outcomes may hamper timely adjustments to the assumptions we use in these estimates. Actual losses and related expenses may deviate, individually and in the aggregate, from the reserve estimates reflected in our consolidated financial statements. As of December 31, 2014 and 2013, we had a reserve of approximately $0.7 million and $0.7 million for incurred but unreported health claims, respectively. If we determine that our estimated reserves are inadequate, we will be required to increase reserves at the time of the determination, which would result in a reduction in our net income in the period in which the deficiency is determined.

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Insurance coverage for some of our losses may be inadequate and may be subject to the credit risk of commercial insurance providers.

        Our insurance coverage is through various third-party insurers. To the extent we hold policies to cover certain groups of claims or rely on insurance coverage obtained by third parties to cover such claims, but either we or such third parties did not obtain sufficient insurance limits, did not buy an extended reporting period policy, where applicable, or the issuing insurance company is unable or unwilling to pay such claims, we may be responsible for those losses. Furthermore, for our losses that are insured or reinsured through commercial insurance providers, we are subject to the "credit risk" of those insurance companies. While we believe our commercial insurance providers are currently creditworthy, they may not remain so in the future.

We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business, or to defend successfully against intellectual property infringement claims by third parties.

        Our ability to compete effectively depends in part upon our intellectual property rights, including but not limited to our trademarks. Our use of contractual provisions, confidentiality procedures and agreements, and trademark, copyright, unfair competition, trade secret and other laws to protect our intellectual property rights may not be adequate. Litigation may be necessary to enforce our intellectual property rights, or to defend against claims by third parties that the conduct of our businesses or our use of intellectual property infringes upon such third party's intellectual property rights. Any intellectual property litigation or claims brought against us, whether or not meritorious, could result in substantial costs and diversion of our resources, and there can be no assurances that favorable final outcomes will be obtained in all cases. The terms of any settlement or judgment may require us to pay substantial amounts to the other party or cease exercising our rights in such intellectual property, including ceasing the use of certain trademarks used by us to distinguish our services from those of others or ceasing the exercise of our rights in copyrightable works. In addition, we may have to seek a license to continue practices found to be in violation of a third party's rights, which may not be available on reasonable terms, or at all. Our business, financial condition or results of operations could be adversely affected as a result.

Risks Related to Healthcare Regulation

We conduct business in a heavily regulated industry and, if we fail to comply with these laws and government regulations, we could incur penalties or be required to make significant changes to our operations.

        The healthcare industry is heavily regulated and closely scrutinized by federal, state and local governments. Comprehensive statutes and regulations govern the manner in which we provide and bill for services, our contractual relationships with our physicians, vendors and customers, our marketing activities and other aspects of our operations. Failure to comply with these laws can result in civil and criminal penalties such as fines, damages, overpayment recoupment, loss of enrollment status or exclusion from government healthcare programs. The risk of our being found in violation of these laws and regulations is increased by the fact that many of them have not been fully interpreted by regulatory authorities or the courts, and their provisions are sometimes open to multiple interpretations. Any action against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our managements' attention from the operation of our business.

        Our physicians, nurses and technicians, as well as the third-party payors with which we have a relationship are also subject to ethical guidelines and operating standards of professional and trade associations and private accreditation agencies. Compliance with these guidelines and standards is often required by our contracts with our customers or to maintain our reputation.

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        The laws, regulations and standards governing the provision of healthcare services may change significantly in the future. New or changed healthcare laws, regulations or standards may materially and adversely affect our business. In addition, a review of our business by judicial, law enforcement, regulatory or accreditation authorities could result in a determination that could adversely affect our operations.

Our current facilities are subject to state statutes and regulations that govern our operations, and the failure to comply with these laws and regulations can result in civil or criminal sanctions.

        Our operating freestanding emergency room facilities in Texas and Colorado, and our hospital in Arizona, are subject to many laws and regulations, particularly at the state and local government levels. These laws and regulations require our freestanding emergency rooms and our hospital in Arizona to meet various licensing, certification and other requirements, including those relating to:

    building and construction codes, fire codes and life safety standards for our facilities;

    the qualifications of medical and support personnel in our facilities;

    the adequacy of medical care, equipment, personnel, operating policies and procedures;

    required governance boards and organizational plans to oversee the facility;

    required services and treatment lines, particularly in the hospital setting;

    facility licensure;

    maintenance and protection of medical records;

    environmental protection and health and safety, including the handling and disposal of medical waste;

    development of infection control and quality improvement policies and procedures;

    required operating hours;

    requirements to treat our emergent patients regardless of ability to pay;

    restrictions on advertising and billing with respect to patients to make clear the facility is operating as an emergency room; and

    patient transfer agreements and patient transfer plans to care for patients of an acuity beyond the capability of the facility.

        We may be subject to regulatory fines, penalties or other sanctions if our operations or facilities are found to not comply with applicable laws and regulations. Further, these laws and regulations are subject to change. New regulation of such facilities is also possible, which could force us to change our operational approach or lead to a finding by regulators that our facilities do not meet legal requirements.

State law regulation of construction or expansion of emergency rooms could prevent us from developing additional freestanding emergency rooms or other facilities.

        Approximately 36 states have certificate of need programs that require some level of prior approval for the construction of a new facility, acquisition or expansion of an existing facility, or the addition of new services for various healthcare facilities. One of the most common categories of healthcare services reviewed under certificate of need laws is hospital services, which may include the emergency services we provide at our freestanding emergency rooms. While the states where our facilities are currently operational (Texas, Colorado and Arizona) do not require a certificate of need, other states where we seek to expand our operations may require certificates of need under

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circumstances not currently applicable to our facilities. If these states require such a certificate, they may examine any proposed facility for the cost of adding additional services compared with other treatment models, the impact of our proposed facility on existing providers, the need for additional or expanded healthcare services in the relevant market and other analyses that may require changes to our business model. In such case, we may not be able to obtain the necessary certificates of need or other required approvals to meet our expansion plans. In addition, if we seek to acquire other facilities, in certificate of need states, we may be required to obtain a certificate of need before the acquisition, before we replace the equipment or before we expand the acquired facility. If we are unable to obtain such approvals, we may not be able to move forward with a planned acquisition, expand the acquired facility, add additional services to the facility or replace its equipment.

        In addition, there is a significant risk of additional state legislation restricting our ability to obtain licensure for new facilities. Only a few states, including Texas and Colorado, currently license the freestanding emergency room facilities that we operate. The lack of a specific licensure process for freestanding emergency facilities may lead state legislators or regulators to aggressively regulate the growth of such facilities, potentially seeking to treat our freestanding emergency room facilities in a manner similar to hospitals. In other states, the growing number of freestanding emergency departments may lead state legislatures to pass legislation requiring us to substantially change our operations or cease our operations in that state entirely. Any such licensure challenges could materially impact our prospects and growth strategy.

        Alternatively, without current state licensure of freestanding emergency room facilities, we may need to develop new models or form partnerships with existing facilities to expand to new states. Such challenges were one reason we entered into a joint venture with Dignity Health announced in October 2014. The new partnership has started with Dignity Health Arizona General Hospital, which was recently licensed as a general hospital by the Arizona Department of Health Services. These alternative models or partnerships may not be as profitable as our current freestanding facilities, and such development may materially impact our prospects or our growth strategy.

We are subject to comprehensive and complex laws and rules that govern the manner in which we bill and are paid for our services by third-party payors, and the failure to comply with these rules, or allegations that we have failed to do so, can result in civil or criminal sanctions, including exclusion from federal and state healthcare programs.

        Substantially all of our services are paid for by third-party commercial payors. These third-party payors typically have differing and complex billing and documentation requirements that we must meet in order to receive payment for our services. Reimbursement is typically conditioned on our providing the correct procedure and diagnostic codes and properly documenting the services themselves, including the level of service provided, the medical necessity for the services, the site of service, and the identity of the physician, nurse or technician who provided the service.

        We must also comply with numerous other state and federal laws applicable to our documentation and the claims we submit for payment, including but not limited to (i) "coordination of benefits" rules that dictate which payor we must bill first when a patient has potential coverage from multiple payors, (ii) requirements that we obtain the signature of the patient or patient representative, or, in certain cases, alternative documentation, prior to submitting a claim, (iii) requirements that we make repayment within a specified period of time to any payor which pays us more than the amount to which we are entitled, (iv) "reassignment" rules governing our ability to bill and collect professional fees on behalf of our physicians, (v) requirements that our electronic claims for payment be submitted using certain standardized transaction codes and formats and (vi) laws requiring us to handle all health and financial information of our patients in a manner that complies with specified security and privacy standards.

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        Private third-party payors carefully audit and monitor our compliance with these and other applicable rules. Our failure to comply with the billing and other rules applicable to us could result in non-payment for services rendered or refunds of amounts previously paid for such services.

        Additionally, on January 16, 2009, the United States Department of Health and Human Services, or HHS, released the final rule mandating that everyone covered by the Administrative Simplification Provisions of the Health Insurance Portability and Accountability Act of 1996, or HIPAA, which includes our facilities must implement the International Classification of Diseases (10th Edition), or ICD-10, for medical coding on October 1, 2013. HHS subsequently postponed the deadline for implementation of ICD-10 codes until October 1, 2014, which Congress extended until October 1, 2015, as part of the Protecting Access to Medicare Act of 2014. ICD-10 codes contain significantly more information than the ICD-9 codes currently used for medical coding and will require covered entities to code with much greater detail and specificity than ICD-9 codes. However, the transition to ICD-10 does not affect Current Procedural Terminology coding for physician services or outpatient procedures. We may incur additional costs for computer system updates, training, and other resources required to implement these changes. We may also incur additional costs from further delays in training staff on both the ICD-9 and ICD-10 codes and maintaining software that can operate under both systems through the inherent uncertainty from ongoing delays it ICD-10 implementation.

        If our operations are found to be in violation of these or any of the other laws which govern our activities, any resulting penalties, damages, fines or other sanctions could adversely affect our ability to operate our business and our financial results.

Changes in the rates or methods of third-party reimbursements, including due to political discord in the budgeting process outside our control, may adversely affect our revenue and operations.

        We derive a majority of our revenue from direct billings to patients and third-party payors. As a result, any changes in the rates or methods of reimbursement for the services we provide could have a significant adverse impact on our revenue and financial results. Reimbursement rates can vary depending on whether the facility provider is an in-network or out-of-network provider. Each of our facilities will be out-of-network for some patients. Some facilities, as an out-of-network provider, may have issues billing appropriately with certain third-party payors. In some states, we may rely on state law that requires reimbursement of our services at in-network rates. A change in state law where the majority of our facilities are operated could have a material effect on our revenue or force us to negotiate lower rates with third-party payors who may or may not be willing to enter into agreements with us. In the last legislative session, members of the Colorado legislature proposed but did not pass a bill which would have significantly reduced reimbursement rates for our facilities within the state by making it a violation of the state insurance code to bill insurers or their beneficiaries for facility fees. We cannot predict the outcome of any legislation and cannot assure you that the Colorado legislature or another state where we operate would not pass another law that damages our ability to operate under our current model.

        Additionally, PPACA could ultimately result in substantial changes in coverage and reimbursement, including changes in coverage or amounts paid by private payors, which could have an adverse impact on our revenue from those sources.

Recent healthcare reform legislation and other changes in the healthcare industry and in healthcare spending could adversely affect our business model, financial condition or results of operations.

        Our results of operations and financial condition could be affected by changes in healthcare spending and policy. The healthcare industry is subject to changing political, regulatory and other influences. In March 2010, the President signed PPACA into law, which made major changes in how healthcare is delivered and reimbursed, and increased access to health insurance benefits to the

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uninsured and underinsured population of the United States. However, certain provisions in PPACA, such as the establishment of the Independent Payment Advisory Board, could cause us to face negative reimbursement rates that would adversely affect our business model.

        PPACA may also adversely affect payors by increasing their medical cost trends, which could have an effect on the industry and potentially impact our business and revenue as payors seek to offset these increases by reducing costs in other areas, although the extent of this impact is currently unknown.

        Because of the continued uncertainty about the implementation of PPACA, including litigation currently pending before the U.S. Supreme Court, we cannot quantify or predict with any certainty the likely impact of PPACA on our business model, prospects, financial condition or results of operations. We also anticipate that Congress and state legislatures may continue to review and assess alternative healthcare delivery and payment systems and may in the future propose and adopt legislation effecting additional fundamental changes in the healthcare delivery system. We cannot assure you as to the ultimate content, timing, or effect of changes, nor is it possible at this time to estimate the impact of potential legislation.

If current or future laws or regulations force us to restructure our arrangements with physicians, professional corporations and hospitals, we may incur additional costs, lose contracts and suffer a reduction in net revenue under existing contracts, and we may need to refinance our debt or obtain debt holder consent.

        A number of laws bear on our relationships with our physicians. State authorities in some jurisdictions could find that our contractual relationships with our physicians violate laws prohibiting the corporate practice of medicine or fee-splitting. These laws are generally intended to prevent unlicensed persons or entities from interfering with or inappropriately influencing the physician's professional judgment, but they may also prevent the sharing of professional services income with professional, non-professional or other business interests. Approximately 30 states have some form of corporate practice of medicine restrictions and as we continue to expand into new markets, our current business model may implicate these restrictions. The states in which we currently operate (Colorado, Texas and Arizona) have some level of corporate practice of medicine restrictions. In each of these states, a business corporation may not employ physicians or provide medical services. While we believe we are currently in material compliance with applicable state laws relating to the corporate practice of medicine and fee-splitting, regulatory authorities or other parties, including our affiliated physicians, may assert that, despite these arrangements, we are impermissibly engaged in the practice of medicine or that our contractual arrangements with affiliated physician groups constitute unlawful fee-splitting. In this event, we could be subject to adverse judicial or administrative interpretations, to civil or criminal penalties, our contracts could be found legally invalid and unenforceable or we could be required to restructure our contractual arrangements with our affiliated physicians and physician groups.

        Our physician contracts include contracts with individual physicians and with physicians organized as separate legal professional entities (e.g., professional medical corporations). Antitrust laws may deem each such physician/entity to be separate, both from us and from each other, and, accordingly, each such physician/practice would be subject to a wide range of laws that prohibit anti-competitive conduct between or among separate legal entities or individuals. A review or action by regulatory authorities or the courts could force us to terminate or modify our contractual relationships with physicians and affiliated medical groups, or to revise them in a manner that could be materially adverse to our business.

        Various licensing and certification laws, regulations and standards apply to us, our affiliated physicians and our relationships with our affiliated physicians. Failure to comply with these laws and regulations could result in our services being found to be non-reimbursable or prior payments being subject to recoupment, and can give rise to civil or criminal penalties, including loss of licensure for the

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facility. We routinely take actions we believe are necessary to retain or obtain all requisite licensure and operating authorities, including all building codes, state licensure rules and all state-mandated services. While we have made reasonable efforts to substantially comply with federal, state and local licensing and certification laws and regulations and standards as we interpret them, agencies that administer these programs may find that we have failed to comply in some material respects. Further, any expansion in new states or participation in the Medicare or Medicaid programs may add additional licensing and certification requirements with which we may not be in full compliance today.

        Adverse judicial or administrative interpretations could result in a finding that we are not in compliance with one or more of these laws and rules that affect our relationships with our physicians.

        These laws and rules, and their interpretations, may also change in the future. Any adverse interpretations or changes could force us to restructure our relationships with physicians, professional corporations or our hospital systems, or to restructure our operations. This could cause our operating costs to increase significantly. A restructuring could also result in a loss of contracts or a reduction in revenue under existing contracts. Moreover, if we are required to modify our structure and organization to comply with these laws and rules, our financing agreements may prohibit such modifications and require us to obtain the consent of the holders of such debt or require the refinancing of such debt.

We are subject to the data privacy, security and breach notification requirements of HIPAA and other data privacy and security laws, and the failure to comply with these rules, or allegations that we have failed to do so, can result in civil or criminal sanctions.

        HIPAA required HHS to adopt standards to protect the privacy and security of certain health-related information. The HIPAA privacy regulations contain detailed requirements concerning the use and disclosure of individually identifiable health information and the grant of certain rights to patients with respect to such information by "covered entities." As a provider of healthcare who conducts certain electronic transactions, each of our facilities is considered a covered entity under HIPAA. We have taken actions to comply with the HIPAA privacy regulations and believe that we are in substantial compliance with those regulations. These actions include the creation and implementation of policies and procedures, staff training, execution of HIPAA-compliant contractual arrangements with certain service providers and various other measures. Ongoing implementation and oversight of these measures involves significant time, effort and expense.

        In addition to the privacy requirements, HIPAA covered entities must implement certain administrative, physical, and technical security standards to protect the integrity, confidentiality and availability of certain electronic health-related information received, maintained, or transmitted by covered entities or their business associates. We have taken actions in an effort to be in compliance with these security regulations and believe that we are in substantial compliance, however, a security incident that bypasses our information security systems causing an information security breach, loss of protected health information or other data subject to privacy laws or a material disruption of our operational systems could result in a material adverse impact on our business, along with fines. Ongoing implementation and oversight of these security measures involves significant time, effort and expense.

        The Health Information Technology for Economic and Clinical Health Act, or HITECH, as implemented in part by an omnibus final rule published in the Federal Register on January 25, 2013, further requires that patients be notified of any unauthorized acquisition, access, use, or disclosure of their unsecured protected health information, or PHI, that compromises the privacy or security of such information. HHS has established the presumption that all unauthorized uses or disclosures of unsecured protected health information constitute breaches unless the covered entity or business associate establishes that there is a low probability the information has been compromised. HITECH and implementing regulations specify that such notifications must be made without unreasonable delay

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and in no case later than 60 calendar days after discovery of the breach. If a breach affects 500 patients or more, it must be reported immediately to HHS, which will post the name of the breaching entity on its public website. Breaches affecting 500 patients or more in the same state or jurisdiction must also be reported to the local media. If a breach involves fewer than 500 people, the covered entity must record it in a log and notify HHS of such breaches at least annually. These breach notification requirements apply not only to unauthorized disclosures of unsecured PHI to outside third parties, but also to unauthorized internal access to or use of such PHI.

        HITECH significantly expanded the scope of the privacy and security requirements under HIPAA and increased penalties for violations. Currently, violations of the HIPAA privacy, security and breach notification standards may result in civil penalties ranging from $100 to $50,000 per violation, subject to a cap of $1.5 million in the aggregate for violations of the same standard in a single calendar year. The amount of penalty that may be assessed depends, in part, upon the culpability of the applicable covered entity or business associate in committing the violation. Some penalties for certain violations that were not due to "willful neglect" may be waived by the Secretary of HHS in whole or in part, to the extent that the payment of the penalty would be excessive relative to the violation. HITECH also authorized state attorneys general to file suit on behalf of residents of their states. Applicable courts may able to award damages, costs and attorneys' fees related to violations of HIPAA in such cases. HITECH also mandates that the Secretary of HHS conduct periodic compliance audits of a cross-section of HIPAA covered entities and business associates. Every covered entity and business associate is subject to being audited, regardless of the entity's compliance record.

        States may impose more protective privacy restrictions in laws related to health information and may afford individuals a private right of action with respect to the violation of such laws. Both state and federal laws are subject to modification or enhancement of privacy protection at any time. We are subject to any federal or state privacy-related laws that are more restrictive than the privacy regulations issued under HIPAA. These statutes vary and could impose additional requirements on us and more severe penalties for disclosures of health information. Texas, Colorado and Arizona each have privacy regulations that impose requirements and restrictions in addition to those under HIPAA. If we fail to comply with HIPAA or similar state laws, including laws addressing data confidentiality, security or breach notification, we could incur substantial monetary penalties and our reputation.

        In addition, states may also impose restrictions related to the confidentiality of personal information that is not considered "protected health information" under HIPAA. Such information may include certain identifying information and financial information of our patients. Theses state laws may impose additional notification requirements in the event of a breach of such personal information. Failure to comply with such data confidentiality, security and breach notification laws may result in substantial monetary penalties.

We recently enrolled our Arizona general hospital in the federal Medicare program and the Arizona Medicaid program. As a result of participating in these programs, we will be required to comply with a number of additional federal and state regulatory schemes.

        While the majority of our facilities do not currently participate as providers in the federal Medicare, Medicaid or Tricare programs, our hospital in Arizona recently received confirmation of its enrollment in Medicare and Medicaid. By enrolling in these programs, we will face certain federal and state regulatory schemes for the first time. For example, the federal physician self-referral law, or the Stark Law, and the Anti-Kickback Statute apply to the provision of healthcare services and supplies to Medicare and Medicaid patients. While we have sought to organize our operations—both at our freestanding emergency rooms that do not participate in these programs and at our newly-opened hospital in Arizona—to comply with both the Stark Law and Anti-Kickback Statute, we cannot assure you that our enrollment in these government programs will not require some reorganization of our

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existing relationships with our physicians, referral sources and other partners, or that we will not be subject to government investigation for failure to comply with these laws.

        By not participating in these programs at our freestanding emergency rooms, many potential consumers of our services in our target markets may choose to receive services from other providers. To participate in these programs at our freestanding emergency room facilities we would need to significantly modify our current operational model. Such programs, particularly Medicare, have substantial statutory and regulatory requirements to participate. For example, the Medicare program does not currently allow the participation of independent freestanding emergency room facilities. To participate as a Medicare provider in states where we operate only freestanding emergency rooms, we would need to open a central-hospital facility that owns and operates the satellite freestanding emergency rooms as "provider-based facilities" under a unified organization. Under Medicare, establishing such a central-hospital facility with satellite freestanding emergency rooms structure requires a hospital to be "primarily engaged in the provision of services to inpatients." This requirement could limit our ability to grow by restricting the number of additional freestanding facilities associated with each Medicare-certified hospital to ensure compliance with the inpatient service requirements. This and other Medicare conditions of participation could be costly and limit our expansion plans. Our current accreditation from The Joint Commission as freestanding emergency room facilities does not guarantee that our facilities would meet The Joint Commission hospital standards, Medicare conditions of participation or Medicaid requirements for hospitals.

        Furthermore, the Medicare and Medicaid programs are particularly susceptible to statutory and regulatory changes, retroactive and prospective rate adjustments, spending freezes, federal and state funding reductions and administrative rulings and interpretations concerning, without limitation, patient eligibility requirements, funding levels and the method of calculating payments or reimbursements, all of which we now face for the first time at our Arizona hospital. PPACA reduces annual payment updates for certain providers, including hospitals, and reduces Medicare payments for certain events, such as hospital readmissions and hospital-acquired infections. Furthermore, the Budget Control Act of 2011 requires automatic spending reductions for each fiscal year through 2021. We are unable to predict how these spending reductions will be structured, what other deficit reduction initiatives may be adopted by the U.S. Congress or how these changes will impact our Arizona hospital or would impact our freestanding emergency room facilities if such facilities subsequently participate in the Medicare program.

        Enrolling as a Medicaid provider also subjects a portion of our revenue to fluctuations and limitations in state budgets. Many state legislatures, including Arizona, Colorado and Texas, are required by their state constitution or laws to balance the state's budgets annually and the Medicaid program is often the largest budget expenditure for many states. In recent years, as economic forces put pressure on state budgets, many states decreased spending or decreased spending growth for their Medicaid programs. States also continually review and revise their Medicaid programs and request waivers from the CMS from otherwise national requirements, which could result in certain payments being reduced or eliminated. Such spending changes could have a material impact on the performance of our Arizona general hospital and our freestanding emergency rooms, if such facilities later participate in state Medicaid programs.

State regulation of healthcare marketing in our current or target markets could impact our marketing efforts, which may in turn hamper our ability to increase patient volume, increase same store sales, or build awareness of our care model, particularly if we choose to participate in Medicaid in the future.

        Some states regulate healthcare providers' marketing efforts to persons enrolled in governmental healthcare programs, such as Medicaid and the Children's Health Insurance Program, or CHIP. These marketing restrictions may impact our future marketing efforts. In particular, some state laws prohibit direct and/or indirect marketing and outreach efforts to enrollees of state-funded governmental

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healthcare programs. Some states restrict the direct marketing activities of providers by prohibiting providers from engaging in unsolicited personal contact or promotions of their practices to enrollees. In states that restrict providers' marketing efforts directly, regulations sometimes prohibit provider marketing materials from containing any false, misleading, or inaccurate statements relating to the providers' services, benefits or costs. A number of states also prohibit provider marketing materials from containing any state-owned logos or making any statement of endorsement by federal or state governmental entities.

        Other states, including Arizona, restrict providers' marketing efforts indirectly by regulating the activities of health plans that contract with state-funded governmental healthcare programs. Some states require state-contracted health plans to report their marketing costs to state regulatory agencies and submit all marketing materials for prior regulatory approval. We are not classified as a health plan, but we may contract with state-contracted health plans as a subcontracted provider subject to such restrictions in the future. In such case, some states' state-contracted health plans may restrict our marketing activities, in order to ensure the health plans' compliance with state-funded governmental healthcare programs' marketing restrictions. For example, a number of state-contracted health plans require their subcontracted providers to submit all marketing materials to the health plan. If the health plan deems it necessary, the health plan may then submit the subcontracted providers' marketing materials to the appropriate state regulatory agency. To our knowledge, we are currently in compliance with state healthcare marketing laws in the states in which we operate. However, these restrictions are rapidly evolving and we may be required to change our practices in the future. This risk is more pronounced in Arizona where we have enrolled our hospital in the state's Medicaid program, and such risks may increase in other states if we choose to enroll our facilities in those states' Medicaid or CHIP programs.

Our facilities, billing practices, relationships with healthcare providers and third parties, and our marketing practices are (at least in part) subject to the Anti-Kickback Statute, Stark Law, False Claims Act and similar state laws.

        By enrolling in the federal Medicare, Medicaid, and Tricare programs, our Arizona hospital (and any other of our facilities that enroll in such programs in the future) is directly subject to additional federal laws, including, but not limited to, those discussed below.

Anti-Kickback Statute

        Provisions in Title XI of the Social Security Act, commonly referred to as the Anti-Kickback Statute, prohibit the knowing and willful offer, payment, solicitation or receipt of remuneration, directly or indirectly, in return for the referral of patients or arranging for the referral of patients, or in return for the recommendation, arrangement, purchase, lease or order of items or services that are covered, in whole or in part, by a federal healthcare program such as Medicare or Medicaid. The definition of "remuneration" has been broadly interpreted to include anything of value such as gifts, discounts, rebates, waiver of payments or providing anything at less than its fair market value. Many states such as Texas and Arizona have adopted similar prohibitions against kickbacks and other practices that are intended to influence the purchase, lease or ordering of healthcare items and services reimbursed by a governmental health program or state Medicaid. Some of these state prohibitions apply to remuneration for referrals of healthcare items or services reimbursed by any payor, including private payors.

        Even at facilities where we do not currently accept Medicare, Medicaid or Tricare reimbursement, we could still be subject to the Anti-Kickback Statute to the extent we have referral or financial relationships with other parties that do participate in those programs.

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        Violations of the Anti-Kickback Statute can result in exclusion from Medicare, Medicaid or other governmental programs as well as civil and criminal penalties, such as $25,000 per violation and up to three times the remuneration involved. We may be required to enter into settlement agreements with the government to avoid such sanctions. Typically, such settlement agreements require substantial payments to the government in exchange for the government to release its claims, and may also require us to enter into a Corporate Integrity Agreement, or CIA, with the OIG. The obligations contained in such CIA could have a material adverse effect on our business, financial condition and results of operations.

Stark Law

        The Stark Law prohibits a physician from referring a patient to a healthcare provider for certain designated health services reimbursable by Medicare if the physician (or close family members) has a financial relationship with that provider, including an investment interest, a loan or debt relationship or a compensation relationship. The designated health services covered by the law include, among others, hospital inpatient, hospital outpatient, laboratory and imaging services. Some states, including Texas and Colorado, have self-referral laws similar to Stark Law for Medicaid claims (and commercial claims). States such as Arizona and Texas also require physicians to disclose to their patients that they have a direct financial relationship in a separate diagnostic or treatment agency or in services and goods being prescribed.

        Violation of the Stark Law may result in prohibition of payment for services rendered, a refund of any Medicare payments for services that resulted from an unlawful referral, $15,000 civil monetary penalties for specified infractions, criminal penalties, exclusion from Medicare and Medicaid programs, and potential false claims liability. The repayment provisions in the Stark Law are not dependent on the parties having an improper intent; rather, the Stark Law is a strict liability statute and any violation is subject to repayment of all tainted referrals. If physician self-referral laws are interpreted differently or if other legislative restrictions are issued, we could incur significant sanctions and loss of revenues, or we could have to change our arrangements and operations in a way that could have a material adverse effect on our business, prospects, results of operations and financial condition.

False Claims Act

        The federal government is authorized to impose criminal, civil and administrative penalties on any person or entity that files a false claim for payment from the Medicare or Medicaid programs. False claims filed with private insurers can also lead to criminal and civil penalties under state law. While the criminal statutes are generally reserved for instances of fraudulent intent, the government applies criminal, civil and administrative penalty statutes to a range of circumstances, including coding errors, billing for services not provided, submitting false cost reports, submitting claims resulting from arrangements prohibited by the Stark Law or the Anti-Kickback Statute, billing for services not rendered in compliance with complex Medicare and Medicaid regulations and guidance, misrepresenting services rendered (e.g., miscoding, upcoding, etc.) and application for duplicate reimbursement. Additionally, the federal government has taken the position that claiming reimbursement for unnecessary or substandard services violates these statutes if the claimant should have known that the services were unnecessary or substandard. Criminal penalties also are available in the case of claims filed with private insurers if the federal government shows that the claims constitute mail fraud or wire fraud or violate a number of federal criminal healthcare fraud statutes.

        Under the "qui tam" provisions of the Federal False Claims Act, private parties ("relators" or "whistleblowers") may bring actions against providers on behalf of the federal government. Such private parties are entitled to share in any amounts recovered by the government through trial or settlement. Qui tam cases are sealed by the court at the time of filing. The only parties privy to the

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information contained in the complaint are the relator, the federal government and the presiding court. In recent years, the number of suits brought by private individuals has increased dramatically.

        Both direct enforcement activity by the government and whistleblower lawsuits under the Federal False Claims Act have increased significantly in recent years and have increased the risk of healthcare companies like us having to defend a false claims action, repay claims paid by the government, pay fines or be excluded from the Medicare and Medicaid programs. In addition, under PPACA, providers must report and refund the overpayments before the later of 60 days after the overpayment was identified or the date any corresponding cost report is due, if applicable. Any overpayment that is retained after this deadline is considered an obligation subject to an action under the Federal False Claims Act.

        A number of states have enacted false claims acts that are applicable to claims submitted to state Medicaid programs and are similar to the Federal False Claims Act. Section 6031 of the Deficit Reduction Act of 2005 as amended, or DRA, amended federal law to encourage these types of state laws, along with a corresponding increase in state initiated false claims enforcement efforts. Currently, most states and the District of Columbia have some form of state false claims act. As of April 23, 2015, the OIG has reviewed 28 of these laws and determined that 18 of these laws satisfy the DRA standards, including Texas and Colorado. Several states were given a grace period to amend their false claims acts to come into compliance with recent amendments to the Federal False Claims Act. We anticipate this figure will continue to increase.

CMS Recovery Audit Program

        We believe that the CMS will continue to operate its Recovery Audit Program, which could randomly audit our Arizona hospital and any of our other facilities that enroll in the Medicare or Medicaid in the future. The Recovery Audit Program's mission is to identify and correct Medicare improper payments through the efficient detection and collection of overpayments made on claims of healthcare services provided to Medicare beneficiaries, and the identification of underpayments to providers so that the CMS can implement actions that will prevent future improper payments. Federal law also requires states to create Recovery Audit Programs for their state Medicaid programs. Enrollment in Arizona's and other states' Medicaid programs may mean additional state scrutiny of potential overpayments.

The Emergency Medical Treatment and Labor Act

        Our participation in Medicare, Medicaid and Tricare at our Arizona hospital subjects the hospital to certain requirements of the Emergency Medical Treatment and Labor Act, or EMTALA. Under EMTALA, all participating hospitals with emergency departments are required to provide an appropriate medical screening examination upon request by any individual to determine whether an emergency medical condition exists or if the patient is in active labor. If the hospital determines that there is an emergency medical condition, then the hospital must stabilize the individual. Violations of these EMTALA obligations (if applicable) could subject us to civil penalties. Furthermore, individuals have a private right of enforcement if they suffer harm that is a direct result of a violation of EMTALA.

        Our facilities are subject to state requirements similar to those of EMTALA, regardless of whether our facilities are enrolled in Medicare, Medicaid or Tricare. For example, in Texas, as freestanding emergency room facilities, we are required by state law to provide appropriate screening and examinations to individuals to determine if an emergency medical condition exists. The facilities are also required to provide the necessary stabilizing treatment without assessing the individual's ability to pay. Violations of these requirements could lead to administrative and criminal penalties.

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Changes in our ownership structure and operations may require us to comply with numerous notification and reapplication requirements in order to maintain our licenses, certifications or other authorizations to operate, and failure to do so, or an allegation that we have failed to do so, could result in payment delays, forfeiture of payment or civil and criminal penalties.

        We and our contracted physicians are subject to various federal, state and local licensing and certification laws with which we must comply in order to maintain authorization to provide, or receive payment for, our services. Compliance with these requirements is complicated by the fact that they differ from jurisdiction to jurisdiction, and in some cases are not uniformly applied or interpreted even within the same jurisdiction. Failure to comply with these requirements can lead not only to delays in payment and refund requests, but in extreme cases can give rise to civil or criminal penalties.

        In certain jurisdictions, changes in our ownership structure require pre- or post-notification to state governmental licensing and certification agencies, or agencies with which we have contracts. Relevant laws in some jurisdictions may also require re-application or re-enrollment and approval to maintain or renew our licensure, certification, contracts or other operating authority. Our changes in corporate structure and ownership involving changes in our beneficial ownership required us in some instances to give notice, re-enroll or make other applications for authority to continue operating in various jurisdictions or to begin to receive payment from government payment programs. The extent of such notices and filings may vary in each jurisdiction in which we operate, although those regulatory entities requiring notification generally request factual information regarding the new corporate structure and new ownership composition of the operating entities that hold the applicable licensing and certification.

        While we have made consistent efforts to substantially comply with these requirements, we cannot assure you that the agencies that administer these programs or have awarded us contracts will not find that we have failed to comply in some material respects. A finding of non-compliance and any resulting payment delays, refund demands or other sanctions could have a material adverse effect on our business, financial condition or results of operations.

Federal law does not mandate coverage or reimbursement amounts by private payors for services provided in our freestanding facilities.

        PPACA requires all non-grandfathered insurance plans covering emergency services to cover treatment of a "prudent layperson" who reasonably believes his or her health is in jeopardy at emergency departments of a hospital without regard to whether that hospital is in-network. PPACA further prohibits insurance providers from requiring pre-approval authorization or other administrative limits on such services in out-of-network hospitals, and has certain minimum payment provisions for emergency care in a hospital emergency department that meet this prudent layperson standard. Our Arizona hospital should be eligible to receive certain payment protections from these provisions for services provided in the hospital's emergency room. There is no guarantee that these payment protections will continue to be available to us (or any provider) in the future.

Risks Related to Our Organizational Structure

We are an "emerging growth company" as defined in the Securities Act and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors.

        We are an "emerging growth company" as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, among other things, not being required to comply with the auditor attestation requirements of Section 404, reduced financial disclosure requirements, which include being permitted to provide only two years of audited financial statements, with correspondingly reduced "Management's Discussion

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and Analysis of Financial Condition and Results of Operations" disclosure, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a non-binding stockholder advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information that they may deem important. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2) of the Securities Act for complying with new or revised accounting standards. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

        We could be an emerging growth company until the last day of the fiscal year following the fifth anniversary of the date of our initial public offering, which occurred on June 24, 2014, although circumstances could cause us to lose that status earlier, including if our total annual gross revenue exceeds $1.0 billion, if we issue more than $1.0 billion in non-convertible debt securities during any three-year period, or if the market value of our Class A common stock held by non-affiliates exceeds $700.0 million as of any June 30 before that time. Investors may find our Class A common stock less attractive because we may rely on these exemptions. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our stock price may be more volatile.

Pursuant to the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 for so long as we are an "emerging growth company."

        Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second annual report that we file with the SEC as a public company, and generally requires in the same report a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. However, under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an "emerging growth company." We could be an "emerging growth company" until the last day of the fiscal year following the fifth anniversary of the date of our initial public offering, which occurred on June 24, 2014.

        Furthermore, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to conclude that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. If we are not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or with adequate compliance, our independent registered public accounting firm may issue an adverse opinion due to ineffective internal controls over financial reporting and we may be subject to sanctions or investigation by regulatory authorities, such as the SEC. As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, we may be required to incur costs in improving our internal control system and the hiring of additional personnel. Any such action could have a material adverse effect on our business, prospects, results of operations and financial condition.

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Adeptus Health Inc.'s only material asset is its interest in Adeptus Health LLC, and it is accordingly dependent upon distributions from Adeptus Health LLC to pay taxes and pay dividends.

        Adeptus Health Inc. is a holding company that was formed in connection with our initial public offering and has no material assets other than its ownership of LLC Units. Adeptus Health Inc. has no independent means of generating revenue. Adeptus Health Inc. intends to cause Adeptus Health LLC to make distributions to its unitholders in an amount sufficient to cover all applicable taxes at assumed tax rates and dividends, if any. Deterioration in the financial condition, earnings or cash flow of Adeptus Health LLC and its subsidiaries for any reason could limit or impair their ability to pay such distributions. Additionally, to the extent Adeptus Health Inc. needs funds, and Adeptus Health LLC is restricted from making such distributions under applicable law or regulation or under the terms of our financing arrangements, or is otherwise unable to provide such funds, it could materially adversely affect our business, prospects, results of operations or financial condition.

        Payments of dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including general and economic conditions, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications of the payment of dividends by us to our stockholders or by our subsidiaries (including Adeptus Health LLC) to us, and such other factors as our board of directors may deem relevant. First Choice ER, LLC and its subsidiaries are currently subject to certain restrictions and covenants under our senior secured credit facility, or, as amended, the Senior Secured Credit Facility, including limits on amounts of leverage, interest charges and capital expenditures. These restrictions and covenants may restrict the ability of those entities to make distributions to Adeptus Health Inc. Any additional financing arrangement we enter into in the future may include restrictive covenants that limit our ability to pay dividends. In addition, Adeptus Health LLC is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of Adeptus Health LLC (with certain exceptions) exceed the fair value of its assets. Subsidiaries of Adeptus Health LLC are generally subject to similar legal limitations on their ability to make distributions to Adeptus Health LLC.

Adeptus Health Inc. is required to pay the Post-IPO Unit Holders and the Merged Owner certain tax benefits they may claim arising in connection with this offering and related transactions and subsequent exchanges in the future, and the amounts it may pay could be significant.

        In connection with our initial public offering, we entered into a tax receivable agreement with the Post-IPO Unit Holders and the Merged Owner, each as defined under the heading "Organizational Structure," providing for the payment by Adeptus Health Inc. to the Post-IPO Unit Holders of 85% of the benefits, if any, that Adeptus Health Inc. is deemed to realize as a result of increases in tax basis and certain other tax benefits. See "Organizational Structure."

        We expect the payments that Adeptus Health Inc. may make under the tax receivable agreement will be substantial. There may be a material negative effect on our liquidity if, as a result of timing discrepancies or otherwise or if distributions to Adeptus Health Inc. by Adeptus Health LLC are not sufficient to permit Adeptus Health Inc. to make payments under the tax receivable agreement after it has paid taxes. The payments under the tax receivable agreement are not conditioned upon the Post-IPO Unit Holders' or Merged Owner's continued ownership of us.

        Estimating the amount of payments that may be made under the tax receivable agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors. The actual increase in tax basis, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including the timing of exchanges, the relative value of our assets at the time of the exchange, the price of shares of our common stock at the

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time of the exchange, the extent to which such exchanges are taxable, the amount and timing of the taxable income we realize in the future and the tax rate then applicable, our use of loss carryovers and the portion of our payments under the tax receivable agreement constituting imputed interest or depreciable or amortizable basis.

        We are not aware of any issue that would cause the IRS to challenge a tax basis increase; however, if the IRS were successful in making such a challenge, we would not be reimbursed for any payments that may previously have been made under the tax receivable agreement if it is later determined that we did not receive the anticipated corresponding tax benefit. As a result, in certain circumstances we could make payments under the tax receivable agreement in excess of our cash tax savings.

Our corporate structure may result in conflicts of interest between our stockholders and the holders of LLC Units.

        We hold our assets and conduct substantially all of our operations through Adeptus Health LLC, which may in the future issue additional LLC Units to third parties. Persons holding LLC Units would have the right to vote on certain amendments to the limited liability company agreement of Adeptus Health LLC, as well as on certain other matters. Persons holding these voting rights may exercise them in a manner that conflicts with the interests of our stockholders. Circumstances may arise in the future when the interests of members in Adeptus Health LLC conflict with the interests of our stockholders. As we are the managing member of Adeptus Health LLC, we have fiduciary duties to the other members of Adeptus Health LLC that may conflict with fiduciary duties our officers and directors owe to our stockholders. These conflicts may result in decisions that are not in the best interests of stockholders.

Transformation into a public company has increased our costs and may disrupt the regular operations of our business.

        Our initial public offering had a significant transformative effect on us. Prior to our initial public offering, our business operated as a privately owned company and we now incur significant additional legal, accounting, reporting and other expenses as a result of having publicly-traded Class A common stock. We also incur costs that we have not incurred previously, and will incur additional costs after we are no longer an "emerging growth company." Such costs include, but are not limited to, costs and expenses for directors' fees, increased directors and officers insurance, investor relations, compliance with the Sarbanes-Oxley Act and rules and regulations of the SEC, and various other costs of a public company.

        The additional demands associated with being a public company may disrupt regular operations of our business by diverting the attention of some of our senior management team away from revenue producing activities to management and administrative oversight, adversely affecting our ability to attract and complete business opportunities and increasing the difficulty in both retaining professionals and managing and growing our businesses. Any of these effects could harm our business, financial condition and results of operations.

Our Sponsor will continue to have significant influence over us after this offering, including in connection with decisions that require the approval of stockholders, which could limit your ability to influence the outcome of key transactions, including a change of control.

        We do not qualify as a "controlled company" under applicable New York Stock Exchange listing standards and will be required to appoint a board of directors comprised of a majority of independent members within one year of June 24, 2014, the effective date of our initial public offering, which will necessitate a transition in our existing governance structure. However, our Sponsor will hold approximately        % of the voting power of our outstanding capital stock upon consummation of this

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offering (or        % if the underwriters exercise in full their option to purchase additional shares of Class A common stock). As a result of our Sponsor's ownership, our Sponsor may have, through our board of directors, the ability to control decision-making with respect to our business direction and policies. We have in recent years depended on our relationship with our Sponsor to help guide our business plan. In addition, our Sponsor will continue to have the right to designate certain of the members of our board of directors, as well as members of our nominating and corporate governance committee and compensation committee. Our Sponsor will also continue to have consent rights with respect to certain significant corporate actions, including the hiring and firing of our chief executive officer, any change in control and any significant acquisitions, divestitures and equity issuances. As a result, our Sponsor potentially has the ability to influence or effectively control our decisions to enter into any corporate transaction (and the terms thereof) and the ability to prevent any change in the composition of our board of directors and certain transactions that require stockholder approval regardless of whether others believe that such change or transaction is in our best interests. Conversely, after the offering, our Sponsor may elect to reduce its ownership in our company or reduce its involvement on our board of directors, which could reduce or eliminate the benefits we have historically achieved through our relationship with it. Additionally, our Sponsor is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. Our Sponsor's interests may differ from yours.

Anti-takeover provisions in our charter documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.

        Our amended and restated certificate of incorporation and amended and restated by-laws contain provisions that may make the acquisition of our company more difficult without the approval of our board of directors. Among other things, these provisions:

    authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend or other rights or preferences superior to the rights of the holders of Class A common stock;

    expressly authorize the board of directors to make, alter or repeal our by-laws by majority vote; and

    establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

        These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of our company, including actions that our stockholders may deem advantageous, or negatively affect the trading price of our Class A common stock. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire. See "Description of Capital Stock."

Risks Related to this Offering and Our Class A Common Stock

Our share price may decline due to the large number of shares eligible for future sale and for exchange.

        The market price of our Class A common stock could decline as a result of sales of a large number of shares of Class A common stock in the market after this offering or the perception that such sales could occur. These sales, or the possibility these sales may occur, might also make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. After the consummation of this offering, we will have            outstanding shares of Class A common stock. This number includes shares of our Class A common stock we are selling in this offering, which

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may be resold immediately in the public market. In addition, after the consummation of this offering, the Merged Owner will hold            shares of Class A common stock and the Post-IPO Unit Holders will hold             LLC Units. See "Shares Eligible for Future Sale."

        In addition, the Post-IPO Unit Holders (or certain permitted transferees thereof) will have the right (subject to the terms of the Amended and Restated Limited Liability Company Agreement) to exchange their vested LLC Units (together with a corresponding number of shares of our vested Class B common stock) for shares of our Class A common stock on a one-for-one basis, subject to customary adjustments for stock splits, stock dividends and reclassifications. These exchanges, or the possibility these exchanges may occur, might also make it more difficult for holders of our Class A common stock to sell such stock in the future at a time and at a price that they deem appropriate.

        We, our executive officers, directors and holders of our common stock, including the selling stockholder, have agreed not to sell or transfer any of our Class A common stock or securities convertible into, exchangeable for, exercisable for or repayable with our Class A common stock (including LLC Units), for 90 days after the date of this prospectus without first obtaining the written consents of certain of the underwriters.

        In connection with our initial public offering, we entered into a registration rights agreement pursuant to which the Post-IPO Unit Holders, their affiliates and certain of their transferees have the ability to cause us to register the shares of our Class A common stock they acquired in connection with the Reorganization Transactions described under the heading "Organizational Structure" and elsewhere in this prospectus or will receive upon exchange of their LLC Units (together with a corresponding number of shares of our Class B common stock).

The market price of our Class A common stock may be volatile, which could cause the value of your investment to decline or could subject us to litigation.

        The market for equity securities worldwide experiences significant price and volume fluctuations that could result in a reduced market price of our Class A common stock, even if our operating performance is strong. In addition, general economic, market or political conditions could have an adverse effect on our stock price. Our Class A common stock price could also suffer significantly if our operating results are below the expectations of analysts and investors. Investors may be unable to resell their shares of our Class A common stock at or above your purchase price, if at all. In addition, when the market price of a company's common stock drops significantly, stockholders sometimes institute securities class action lawsuits against that company. A securities class action lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources from our business.

If securities analysts do not publish research or reports about our business or if they downgrade our company or our sector, the price of our Class A common stock could decline.

        The trading market for our Class A common stock depends in part on the research and reports that industry or financial analysts publish about us or our business. We do not influence or control the reporting of these analysts. If one or more of the analysts who do cover us downgrade or provide a negative outlook on our company or our industry, or the stock of any of our competitors, the price of our Class A common stock could decline. If one or more of these analysts ceases coverage of our company, we could lose visibility in the market, which in turn could cause the price of our Class A common stock to decline.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains and incorporates by reference "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views as to future events, development and results with respect to, without limitation, conditions in our industry, our operations, our economic performance and financial condition, including, in particular, statements relating to our business and growth strategy under the heading "Summary" in this prospectus and under the headings "Management's Discussion and Analysis of Financial Conditions and Results of Operations" and "Business" in our Annual Report. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as "outlook," "aim," "anticipate," "are confident," "estimate," "expect," "will be," "will continue," "will likely result," "project," "intend," "plan," "believe," "see," "look to" and other words and terms of similar meaning or the negative versions of such words in connection with a discussion of future operating or financial performance. Forward-looking statements speak only as of the date made. All statements we make relating to our estimated and projected earnings, costs, expenditures, cash flows, growth rates and financial results are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are subject to risks and uncertainties that may change at any time, and, therefore, our actual results may differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations ("cautionary statements") are disclosed under the heading "Risk Factors" and elsewhere in this prospectus and under the heading "Risk Factors" in our Annual Report, including, without limitation, in conjunction with the forward-looking statements included and incorporated by reference herein. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could affect our results include without limitation:

    our ability to implement our growth strategy;

    our ability to maintain sufficient levels of cash flow to meet growth expectations;

    our ability to protect our brand;

    federal and state laws and regulations relating to our facilities, which could lead to the incurrence of significant penalties by us or require us to make significant changes to our operations;

    our ability to locate available facility sites on terms acceptable to us;

    competition from hospitals, clinics and other emergency care providers;

    our dependence on payments from third-party payors;

    our ability to source and procure new products and equipment to meet patient preferences;

    our reliance on MPT and the MPT Agreements;

    disruptions in the global financial markets leading to difficulty in borrowing sufficient amounts of capital to finance the carrying costs of inventory to pay for capital expenditures and operating costs;

    our ability or the ability of our healthcare system partners to negotiate favorable contracts or renew existing contracts with third-party payors on favorable terms;

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    significant changes in our payor mix or case mix resulting from fluctuations in the types of cases treated at our facilities;

    significant changes in the rules, regulations and systems governing Medicare and Medicaid reimbursements;

    material changes in IRS revenue rulings, case law or the interpretation of such rulings;

    shortages of, or quality control issues with, emergency care-related products, equipment and medical supplies that could result in a disruption of our operations;

    the intense competition we face for patients, physician use of our facilities, strategic relationships and commercial payor contracts;

    the fact that we are subject to significant malpractice and related legal claims;

    the growth of patient receivables or the deterioration in the ability to collect on those accounts;

    the impact on us of PPACA, which represents a significant change to the healthcare industry; and

    ensuring our continued compliance with HIPAA, which could require us to expend significant resources and capital.

        Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this prospectus and in the documents incorporated by reference herein. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements contained in this prospectus or incorporated by reference. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments, changes in our expectations, or otherwise, except as required by law.

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USE OF PROCEEDS

        The net proceeds from the sale of shares of our Class A common stock by us in this offering will be approximately $         million, or approximately $         million if the underwriters exercise in full their option to purchase additional shares of Class A common stock, in each case after deducting underwriting discounts and commissions payable by us. We intend to use all of the net proceeds received by us to purchase, for cash,                 outstanding LLC Units from certain of the Post-IPO Unit Holders, as defined under the heading "Organizational Structure," at a purchase price per unit equal to the public offering price per share of Class A common stock in this offering net of underwriting discounts and commissions. We will not retain any of the net proceeds from this offering. We will not receive any of the proceeds from the sale of shares of Class A common stock by the selling stockholder.

        If the underwriters exercise in full their option to purchase up to an aggregate of 300,000 additional shares of Class A common stock, we intend to purchase, for cash,                 outstanding LLC Units from certain of the Post-IPO Unit Holders at a purchase price per unit equal to the public offering price per share of Class A common stock in this offering net of underwriting discounts and commissions. The remaining                shares of Class A common stock subject to the underwriters' option to purchase additional shares are expected to be Class A common stock to be held by the selling stockholder. We will not receive any of the proceeds from the sale of shares of Class A common stock by the selling stockholder.

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PRICE RANGE OF OUR CLASS A COMMON STOCK

        Shares of our Class A common stock have been listed and traded on the NYSE under the symbol "ADPT" since June 25, 2014. The following table sets forth, for the periods indicated, the high and low intra-day sale prices in dollars on the NYSE for our Class A common stock.

Quarter Ended
  High   Low  

June 25, 2014 through June 30, 2014

  $ 26.75   $ 25.00  

September 30, 2014

  $ 29.33   $ 23.35  

December 31, 2014

  $ 38.78   $ 24.22  

March 31, 2015

  $ 50.62   $ 30.12  

June 30, 2015 (through April 24, 2015)

  $ 65.89   $ 47.05  

        There is no trading market for shares of our Class B common stock.

        On April 24, 2015, the last reported sale price of our Class A common stock on the NYSE was $63.78 per share. As of April 24, 2015, there were approximately 240 stockholders of record of our Class A common stock and 20 stockholders of record of our Class B common stock. These figures do not reflect the beneficial ownership or shares held in nominee name, nor do they include holders of any restricted stock units.

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DIVIDEND POLICY

        We do not currently plan to pay a dividend on our common stock following this offering. The declaration, amount and payment of any future dividends on shares of Class A common stock will be at the sole discretion of our board of directors.

        Adeptus Health Inc. is a holding company and has no material assets other than its ownership of LLC Units in Adeptus Health LLC. In the event that we do pay a dividend, we intend to cause Adeptus Health LLC to make distributions to us in an amount sufficient to cover such dividend. If Adeptus Health LLC makes such distributions to us, the other holders of LLC Units will also be entitled to receive distributions pro rata in accordance with the percentages of their respective LLC Units.

        The Senior Secured Credit Facility limits the ability of Adeptus Health LLC to pay distributions to us. See "Description of Indebtedness."

        Any financing arrangements that we enter into in the future may include restrictive covenants that limit our ability to pay dividends. In addition, Adeptus Health LLC is generally prohibited under Delaware law from making a distribution to a member to the extent that, at the time of the distribution, after giving effect to the distribution, liabilities of Adeptus Health LLC (with certain exceptions) exceed the fair value of its assets. Subsidiaries of Adeptus Health LLC are generally subject to similar legal limitations on their ability to make distributions to Adeptus Health LLC.

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CAPITALIZATION

        The following table sets forth the cash and cash equivalents and capitalization as of December 31, 2014 on an actual basis and on a pro forma basis giving effect to the transactions described under the heading "Unaudited Pro Forma Financial Information," including the application of net proceeds from this offering.

        You should read the information contained in this table in conjunction with the matters discussed under the headings "Use of Proceeds," Organizational Structure," "Unaudited Pro Forma Financial Information" and "Selected Historical Consolidated Financial Data" in this prospectus and under the headings "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as with our audited consolidated financial statements and related notes, in our Annual Report.

 
  As of December 31, 2014  
(in thousands, except for share amounts)
  Actual   Pro Forma
(unaudited)
 

Cash and cash equivalents

  $ 2,002   $ 1,502  

Short-term debt:

             

Insurance financing agreement

    1,816     1,816  

Current maturities of capital lease obligations

    81     81  

Total short-term debt

    1,897     1,897  

Long-term debt:

             

Senior Secured Credit Facility-term loan(1)

    104,982     104,982  

Capital lease obligations

    4,056     4,056  

Total long-term debt

    109,038     109,038  

Shareholders' equity:

             

Shareholders' equity

         

Class A common stock: par value $0.01 per share; 50,000,000 shares authorized; 9,845,016 shares issued and outstanding;            shares issued and outstanding, as adjusted for this offering

    98     99  

Class B common stock: par value $0.01 per share; 20,000,000 shares authorized; 10,781,153 shares issued and outstanding;            shares issued and outstanding, as adjusted for this offering

    108     107  

Additional paid-in capital

    51,238     59,903  

Accumulated other comprehensive loss

    (74 )   (74 )

Accumulated deficit

    (3,351 )   (3,851 )

Non-controlling interest

    51,861     46,906  

Total shareholders' equity

    99,880     103,090  

Total capitalization

  $ 210,815     214,025  

(1)
On October 31, 2013, we entered into a Senior Secured Credit Facility for a $75 million term loan, which matures on October 31, 2018. The Senior Secured Credit Facility includes an additional $165.0 million delayed draw term loan commitment, which, if unused, expires 18 months after October 31, 2013; otherwise the amounts outstanding expire on October 31, 2018. The Senior Secured Credit Facility also includes a $10.0 million revolving commitment that terminates on October 31, 2018. See "Description of Indebtedness."

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ORGANIZATIONAL STRUCTURE

Organizational Structure

        Adeptus Health Inc. was incorporated as a Delaware corporation in March 2014 for the purpose of conducting our initial public offering, which was completed in June 2014. Adeptus Health Inc. is a holding company and its sole material asset is a controlling equity interest in Adeptus Health LLC. As the sole managing member of Adeptus Health LLC, Adeptus Health Inc. operates and controls all of the business and affairs of Adeptus Health LLC and, through Adeptus Health LLC and its subsidiaries, conducts our business. Adeptus Health Inc. owns 100% of the voting rights of Adeptus Health LLC, and therefore has control over Adeptus Health LLC. Adeptus Health Inc. consolidates Adeptus Health LLC and its subsidiaries in its consolidated financial statements. Adeptus Health Inc. reports a noncontrolling interest related to the LLC Units held by certain of the owners of Adeptus Health LLC prior to the consummation of our initial public offering, which we collectively refer to as the Pre-IPO Owners, including funds affiliated with our Sponsor, a fund affiliated with our founder and certain members of management and our board of directors, which we refer to collectively as the Post-IPO Unit Holders, in its consolidated statements of financial condition, operations, cash flows and comprehensive income (loss).

        Our organizational structure allows the Post-IPO Unit Holders that hold LLC Units to retain their equity ownership in Adeptus Health LLC, an entity that is classified as a partnership for United States federal income tax purposes, in the form of LLC Units. Investors in this offering as well as in our initial public offering, by contrast, hold their equity ownership in Adeptus Health Inc., a domestic corporation for United States federal income tax purposes, in the form of shares of Class A common stock. Adeptus Health Inc. incurs United States federal, state and local income taxes on its share of any taxable income of Adeptus Health LLC.

        In connection with the initial public offering, SCP III AIV THREE-FCER Conduit, L.P., one of the Pre-IPO Owners and an affiliate of our Sponsor, which we refer to as the Merged Owner, received shares of Class A common stock in connection with the merger of SCP III AIV THREE-FCER Blocker, Inc. with Adeptus Health Inc.

        In connection with the Reorganization Transactions described below, we amended and restated our certificate of incorporation to authorize two classes of common stock: Class A common stock and Class B common stock. The Post-IPO Unit Holders hold LLC Units along with Class B common stock. The shares of Class B common stock, which were issued concurrently with the Class A common stock, have no economic rights, but each allows the holder to exercise voting power at Adeptus Health Inc., the managing member of Adeptus Health LLC, and correspond to such holder's economic interest in Adeptus Health LLC. Pursuant to our amended and restated certificate of incorporation, each holder of Class B common stock is entitled to one vote for each share of Class B common stock held by such holder. Holders of Class B common stock have the right to exchange LLC Units (together with a corresponding number of shares of our Class B common stock) for shares of Class A common stock of Adeptus Health Inc. pursuant to the exchange procedures described below. Shares of Class B common stock have no right to receive dividends or a distribution on the liquidation or winding up of Adeptus Health Inc., do not share in the earnings of Adeptus Health Inc., have no earnings allocable to such class and will generally not be transferable other than in connection with an exchange of LLC Units for Class A common stock.

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        The diagram below depicts our organizational structure immediately following this offering, assuming no exercise by the underwriters of their option to purchase up to 300,000 additional shares of Class A common stock from us and the selling stockholder.

GRAPHIC

Reorganization Transactions

        In connection with our initial public offering, we completed the transactions described below, which we collectively refer to in this prospectus as the "Reorganization Transactions."

Reclassification and Amendment and Restatement of the Limited Liability Company Agreement of Adeptus Health LLC

        As part of the Reorganization Transactions, the limited liability company agreement of Adeptus Health LLC was amended and restated to, among other things, modify its capital structure by creating a single new class of LLC Units. We refer to this as the "Reclassification."

        Pursuant to the Amended and Restated Limited Liability Company Agreement, Adeptus Health Inc. became the sole managing member of Adeptus Health LLC. Adeptus Health Inc. has the right to determine when distributions will be made to the members of Adeptus Health LLC and the amount of any such distributions. If Adeptus Health Inc. authorizes a distribution, such distribution will be made to the members of Adeptus Health LLC pro rata in accordance with the percentages of their respective LLC Units.

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        The holders of LLC Units in Adeptus Health LLC, including Adeptus Health Inc., incur U.S. federal, state and local income taxes on their share of any taxable income of Adeptus Health LLC. Net profits and net losses of Adeptus Health LLC are generally allocated to its members (including Adeptus Health Inc.) pro rata in accordance with the percentages of their respective LLC Units, except as otherwise required by law. In accordance with the Amended and Restated Limited Liability Company Agreement, Adeptus Health LLC is required, subject to certain limitations, to make pro rata cash distributions to the holders of LLC Units for purposes of funding their tax obligations based on the taxable income of Adeptus Health LLC. Generally, these tax distributions are computed based on our estimate of the taxable income of Adeptus Health LLC multiplied by an assumed tax rate equal to the highest marginal effective rate applicable to either an individual or a corporation resident in either California or New York, New York (taking into account the nondeductibility of certain expenses and the character of our income).

Merger with Adeptus Health Inc.

        In connection with the initial public offering and the Reorganization Transactions, SCP III AIV THREE-FCER Blocker, Inc., one of our Pre-IPO Owners, merged with Adeptus Health Inc. As a result, Adeptus Health Inc. acquired 4,474,107 LLC Units (or 21.8% of the economic interest in Adeptus Health LLC) owned by the Merged Owner, and the Merged Owner received 4,474,107 shares of our Class A common stock.

Offering

        At the time of the consummation of this offering, Adeptus Health Inc. intends to purchase, for cash,            LLC Units from certain of the Post-IPO Unit Holders at a purchase price per unit equal to the offering price per share of Class A common stock in this offering net of underwriting discounts and commissions and fees associated with this transaction. If the underwriters exercise in full their option to purchase additional shares of Class A common stock, we intend to purchase, for cash, an aggregate of                outstanding LLC Units from certain of the Post-IPO Unit Holders for an aggregate of $                 million at a purchase price per unit equal to the initial public offering price per share of Class A common stock in this offering net of underwriting discounts and commissions.

Exchange Procedures

        Pursuant to the Amended and Restated Limited Liability Company Agreement, the Post-IPO Unit Holders (or certain permitted transferees thereof) have the right (subject to the terms of the Amended and Restated Limited Liability Company Agreement) to exchange their vested LLC Units (together with a corresponding number of shares of our Class B common stock) for shares of our Class A common stock on a one-for-one basis, subject to customary adjustments for stock splits, stock dividends and reclassifications. The exchange provisions, however, provide that a Post-IPO Unit Holder will not have the right to exchange LLC Units if Adeptus Health Inc. determines that such exchange would be prohibited by law or regulation. As a holder exchanges LLC Units for shares of Class A common stock, the number of LLC Units held by Adeptus Health Inc. will correspondingly increase as it acquires the exchanged LLC Units.

        The purchase of LLC Units with the proceeds from this offering and any other exchanges are expected to result in increases in the tax basis of the assets of Adeptus Health LLC that otherwise would not have been available. The tax basis of the assets of Adeptus Health LLC was also increased upon the acquisition of an interest in such assets in 2011 by funds affiliated with our Sponsor, and upon the deemed transfer (for U.S. federal income tax purposes) of LLC Units to Adeptus Health Inc. in connection with our initial public offering, and will be increased upon the transfer of LLC Units to Adeptus Health Inc. in connection with this offering. These increases in tax basis may reduce the amount of tax that Adeptus Health Inc. would otherwise be required to pay in the future. These

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increases in tax basis may also decrease gains (or increase losses) on future dispositions of certain assets to the extent tax basis is allocated to those assets. In connection with our initial public offering we entered a tax receivable agreement with the Post-IPO Unit Holders and the Merged Owner that provides for the payment by Adeptus Health Inc. to the Post-IPO Unit Holders and the Merged Owner of 85% of the amount of the benefits, if any, that Adeptus Health Inc. is deemed to realize as a result of these increases in tax basis and certain other tax benefits related to our entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. These payment obligations are obligations of Adeptus Health Inc. and not of Adeptus Health LLC.

Voting Power and Ownership Following this Offering

        Following this offering:

    Adeptus Health Inc. will hold                     LLC Units, representing        % of the economic interest in Adeptus Health LLC (or                     LLC Units, representing        % of the economic interest in Adeptus Health LLC, if the underwriters exercise in full their option to purchase additional shares of Class A common stock). That interest will be allocated as follows:

    public stockholders will collectively own                    shares of our Class A common stock, representing         % of the economic interest in Adeptus Health LLC through Adeptus Health Inc. (or                    shares of Class A common stock, representing        % of the economic interest in Adeptus Health LLC through Adeptus Health Inc., if the underwriters exercise in full their option to purchase additional shares of Class A common stock), as well as representing an equal percentage of the voting power in Adeptus Health Inc.; and

    the Merged Owner will own                    shares of our Class A common stock, representing        % of the economic interest in Adeptus Health LLC through Adeptus Health Inc. (or                shares of Class A common stock, representing        % of the economic interest in Adeptus Health LLC through Adeptus Health Inc., if the underwriters exercise in full their option to purchase additional shares of Class A common stock), as well as representing an equal percentage of the voting power in Adeptus Health Inc.; and

    the Post-IPO Unit Holders will hold                     LLC Units, representing        % of the economic interest in Adeptus Health LLC (or                     LLC Units, representing        % of the economic interest in Adeptus Health LLC, if the underwriters exercise in full their option to purchase additional shares of Class A common stock), and will hold an equal number of shares of Class B common stock representing an equivalent percentage of the voting power in Adeptus Health Inc.

        Funds affiliated with our Sponsor, including the Merged Owner through its holdings of our Class A common stock and certain Post-IPO Unit Holders through their holdings of LLC Units and our Class B common stock, will collectively own        % of the economic interest in Adeptus Health LLC (or        % of the economic interest in Adeptus Health LLC, if the underwriters exercise in full their option to purchase additional shares of Class A common stock), as well as an equal percentage of the voting power in Adeptus Health Inc.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

        The following pro forma consolidated balance sheet as of December 31, 2014 and statement of operations for the year ended December 31, 2014, present our consolidated financial position and consolidated results of operations to give pro forma effect to the transactions identified below as if all such events had been completed as of (i) January 1, 2014, with respect to the unaudited pro forma consolidated statement of operations and (ii) December 31, 2014, with respect to the unaudited pro forma consolidated balance sheet, excluding our initial public offering and the Reorganization Transactions, which are reflected in our historical results as of December 31, 2014.

        The unaudited pro forma consolidated financial statements give effect to the Reorganization Transactions as described in "Organizational Structure" and the completion of our initial public offering on June 30, 2014. In addition, the adjustments to the pro forma statements of operations and balance sheet data also give effect to our pro forma adjustments for this offering, including:

    the sale of shares of Class A common stock by us in this offering at a public offering price per share of $63.78 (the last reported sale price of our Class A common stock on April 24, 2015), after deducting the underwriting discounts and commissions and estimated offering expenses payable by us in connection with this offering;

    the application of the approximately $             million in net proceeds from this offering to purchase from the Post-IPO Unit Holders                     LLC Units (and the cancellation of the corresponding shares of Class B common stock); and

    the recording of a deferred tax asset as a result of the increase in tax basis that is expected to result from the purchase by us of an aggregate of         LLC Units held by the Post-IPO Unit Holders and the liability that is expected to be incurred as a result under the tax receivable agreement that requires us to pay 85% of such benefits to the Post-IPO Unit Holders selling in this offering.

        The pro forma financial statements are based upon available information and certain assumptions that management believes are reasonable, factually supportable, directly attributable to either the Reorganization Transactions or this offering, and, in connection with pro forma adjustments related to the statements of operations, expected to have a continuing impact on our results of operations.

        We believe that the pro forma consolidated financial statements provide a helpful perspective to better understand our results of operations and our financial position. The unaudited pro forma financial statements do not purport to represent what our results of operations or financial position would have been had this offering actually occurred on the date or as of the date specified, nor do they purport to project our results of operations for any future period. The unaudited pro forma financial statements and accompanying notes should be read together with the matters described under the headings "Use of Proceeds" and "Organizational Structure" in this prospectus and under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as with our audited consolidated financial statements and related notes, in our Annual Report.

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Unaudited Pro Forma Consolidated Statements of Operations for the Year Ended December 31, 2014

(dollars in thousands, except per share data)
  Adeptus
Health Inc.
  SCP III AIV
THREE-FCER
Blocker, Inc.(1)
  Reorganization
and IPO
Adjustments
  As Adjusted
Before
Offering
  Offering
Adjustments
  Pro Forma
Adeptus
Health Inc.
 

Statement of Operations Data:

                                     

Revenue

                                     

Patient service revenue

  $ 243,298   $   $   $ 243,298   $   $ 243,298  

Provision for bad debt

    (32,624 )           (32,624 )       (32,624 )

Net patient service revenue

    210,674             210,674         210,674  

Management and contract services revenue

    20                 20           20  

Total net operating revenue

    210,694                 210,694           210,694  

Equity in net loss of unconsolidated joint venture

    (900 )               (900 )         (900 )

Operating expenses:

                                     

Salaries, wages and benefits

    136,498             136,498         136,498  

General and administrative

    37,604             37,604         37,604  

Other operating expenses

    27,329             27,329         27,329  

(Gain) loss from the disposal or impairment of assets

    (42 )           (42 )       (42 )

Depreciation and amortization

    15,037             15,037         15,037  

Total operating expenses

    216,426             216,426         216,426  

(Loss) income from operations

    (6,632 )           (6,632 )       (6,632 )

Other (expense) income:

                                     

Interest expense

    (11,966 )           (11,966 )       (11,966 )

Unrealized gain on investment

        5,633     (5,633) (2)            

Total other (expense)

    (11,966 )   5,633     (5,633 )   (11,966 )         (11,966 )

(Loss) income before (benefit) provision for income taxes

    (18,598 )   5,633     (5,633 )   (18,598 )         (18,598 )

(Benefit) provision for income taxes

    (1,326 )   1,945     (2,894) (3)   (2,275 )   (438) (5)   (2,713 )

Net (loss) income

    (17,272 ) $ 3,688     (2,739 )   (16,323 )   438     (15,885 )

Less: Net (loss) income attributable to non-controlling interest

    (13,921 )         3,777 (4)   (10,144 )   1,316 (6)   (8,828 )

Net loss attributable to Adeptus Health Inc. 

  $ (3,351 )       $ (6,516 ) $ (6,179 )   (878 )   (7,057 )

Net loss per share of Class A common stock:

                                     

Basic

  $ (0.34 )                         $ (0.63) (7)

Diluted

  $ (0.34 )                         $ (0.63) (7)

Weighted average shares of Class A common stock:

                                     

Basic

    9,845,016                             11,216,675 (7)

Diluted

    9,845,016                             11,216,675 (7)

(1)
Represents operations of this entity through March 31, 2014, the last date for which financial statements were available prior to the merger of this entity with Adeptus Health Inc. See "Organizational Structure—Reorganization Transactions—Merger with Adeptus Health Inc."

(2)
Reflects the adjustment to remove SCP III AIV THREE-FCER Blocker, Inc.'s unrealized gains on investment in First Choice ER, LLC.

(3)
Following the Reorganization Transactions and the completion of our initial public offering, we became subject to U.S. federal income taxes, in addition to state and local taxes, with respect to our allocable share of net taxable income of Adeptus Health Inc. Prior to these events, the holders of LLC Units were allocated 100% of the losses of Adeptus Health LLC. Subsequent to these events, U.S. federal income taxes were only applicable to the proportion

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    of Adeptus Health Inc. held by holders of our Class A common stock (47.7%). This adjustment reflects the impact of U.S. federal income taxes being allocated to holders of our Class A common stock for the entire period.

(4)
Following the Reorganization Transactions and the completion of our initial public offering, holders of our Class A common stock owned less than 100% of the economic interest in Adeptus Health Inc. Immediately following these events, the non-controlling interest was 52.3%. Net loss attributable to non-controlling interest represents 52.3% ($10.1 million) of loss before provision for income taxes ($18.6 million), net of its portion of state and local taxes.

(5)
As noted in Note (3) above, U.S. federal income taxes are only applicable to the proportion of Adeptus Health Inc. held by holders of our Class A common stock (54.5%, giving effect to this offering). This adjustment reflects the impact of U.S. federal income taxes being allocated to the holders of our Class A common stock following this offering for the entire period.

(6)
Following this offering, the holders of our Class A common stock will continue to own less than 100% of the economic interest in Adeptus Health Inc. Immediately following this offering, the non-controlling interest will be 45.5%. Net loss attributable to non-controlling interest represents 45.5% ($8.8 million) of loss before provision for income taxes ($18.6 million), net of its portion of state and local taxes.

(7)
The basic and diluted pro forma net loss per share of Class A common stock represents net loss attributable to Adeptus Health Inc. divided by the combination of the                shares owned by the Merged Owner, the 5,635,000 shares previously held by the public and the 2,000,000 shares sold in this offering.

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Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2014

(dollars in thousands)
  Adeptus
Health Inc.
  Offering
Adjustments
  Pro Forma
Adeptus Health Inc.
 

Assets:

                   

Current assets

                   

Cash

  $ 2,002   $ (500) (1) $ 1,502  

Restricted cash

    4,795         4,795  

Accounts receivable, less allowance for doubtful accounts of $13,068 and $5,295, respectively

    37,422         37,422  

Other receivables and current assets

    17,137         17,137  

Medical supplies inventory

    4,287         4,287  

Total current assets

    65,643     (500 )   65,143  

Property and equipment, net

    93,892         93,892  

Investment in unconsolidated joint venture

    2,100         2,100  

Deposits

    1,772         1,772  

Deferred tax assets

    34,084     42,299 (2)   76,383  

Intangibles, net

    20,015         20,015  

Goodwill

    61,009         61,009  

Other long-term assets

    4,303         4,303  

Total assets

  $ 282,818   $ 41,799   $ 324,617  

Liabilities and shareholders' equity:

                   

Current liabilities

                   

Accounts payable and accrued expenses

  $ 25,420   $   $ 25,420  

Accrued compensation

    13,521         13,521  

Current maturities of long-term debt

    1,816         1,816  

Current maturities of capital lease obligations

    81         81  

Deferred rent

    607         607  

Total current liabilities

    41,445         41,445  

Long-term debt, less current maturities

    104,982         104,982  

Payable to related parties pursuant to tax receivable agreement

    30,039     38,589 (2)   68,628  

Capital lease obligations, less current maturities

    4,056         4,056  

Deferred rent

    2,416         2,416  

Total liabilities

    182,938     38,589     221,527  

Commitments and contingencies

                   

Shareholders' equity

                   

Preferred stock, par value $0.01 per share; 10,000,000 shares authorized and zero shares issued and outstanding at December 31, 2014

             

Class A common stock, par value $0.01 per share; 50,000,000 shares authorized, 9,845,016 shares issued and outstanding at December 31, 2014

    98     1 (2)   99  

Class B common stock, par value $0.01 per share; 20,000,000 shares authorized 10,781,153 shares issued and outstanding at December 31, 2014

    108     (1 )(3)   107  

Additional paid-in capital

    51,238     8,665 (2)(4)   59,903  

Accumulated other comprehensive loss

    (74 )       (74 )

Accumulated deficit

    (3,351 )   (500 )   (3,851 )

Non-controlling interest

    51,861     (4,955) (4)   46,906  

Total shareholders' equity

    99,880     3,210     103,090  

Total liabilities and shareholders' equity

  $ 282,818     41,799     324,617  

(1)
This adjustment reflects the estimated offering expenses required to be paid by the Company pursuant to the Registration Rights Agreement. The Company will not retain any of the net proceeds from the offering. See "Use of Proceeds."

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(2)
Reflects adjustments to give effect to the tax receivable agreement and other adjustments based on the following assumptions:

We will record an increase of $42.3 million in deferred tax assets (or $         million if the underwriters exercise in full their option to purchase additional shares of Class A common stock) for the estimated income tax effects of the increase in the tax basis of the assets owned by Adeptus Health Inc. and the impact of the tax receivable agreement based on current federal and state tax rates;

We will record 85% of the estimated realizable tax benefit as an increase of $38.6 million (or $         million if the underwriters exercise in full their option to purchase additional shares of Class A common stock) as payable to related parties pursuant to the tax receivable agreement; and

We will record estimated deferred tax assets of $31.0 million pursuant to temporary differences between the historical cost basis and tax basis of Adeptus Health Inc.'s assets and liabilities as the result of this offering.

The amounts to be recorded for both the deferred tax assets and the liability for our obligations under the tax receivable agreement are based on our estimates. All of the effects of changes in any of our estimates after the date of the purchase will be included in net income. Similarly, the effect of subsequent changes in the enacted tax rates will be included in net income.

(3)
Represents the conversion of Class B common stock to Class A common stock as a result of this offering.

(4)
As described under the heading "Organizational Structure," the holders of our Class A common stock will continue to own less than 100% of the economic interest in Adeptus Health Inc. following this offering, but Adeptus Health Inc. will continue to have 100% of the voting power and control over the management of Adeptus Health LLC. As a result, we will continue to consolidate the financial results of Adeptus Health LLC and will record an amount as non-controlling interest on our consolidated balance sheet. The adjustment reflects the impact of this offering on the non-controlling interest ownership.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

        The following tables set forth the selected historical consolidated financial and other data as of the dates and for the periods indicated. The selected consolidated statements of operations data presented below for the fiscal years ended December 31, 2014, 2013 and 2012 and the consolidated balance sheet data presented below as of December 31, 2014 and 2013 have been derived from our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. The consolidated balance sheet data as of December 31, 2012 has been derived from our audited consolidated financial statements not included or incorporated by reference in this prospectus.

        The following selected historical consolidated financial data should be read in conjunction with the matters discussed under the headings "Use of Proceeds," "Organizational Structure," "Unaudited Pro Forma Financial Information" and "Capitalization" in this prospectus and under the headings "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," as well as with our audited consolidated financial statements and related notes, in our Annual Report. The selected consolidated financial data in this section is not intended to replace the financial statements and is qualified in its entirety by the consolidated financial statements and the related notes thereto included or incorporated by reference herein.

 
  Year ended December 31,  
(dollars in thousands, except per share data)
  2014   2013   2012  

Statement of Operations Data:

                   

Revenue:

                   

Patient service revenue

  $ 243,298   $ 114,960   $ 80,977  

Provision for bad debt

    (32,624 )   (12,077 )   (8,376 )

Net patient service revenue

    210,674     102,883     72,601  

Management and contract services revenue

    20          

Total net operating revenue

    210,694     102,883     72,601  

Equity in net loss of unconsolidated joint venture

    (900 )        

Operating expenses:

                   

Salaries, wages and benefits

    136,498     65,244     41,754  

General and administrative

    37,604     17,436     12,805  

Other operating expenses

    27,329     11,185     7,493  

(Gain) loss from the disposal or impairment of assets

    (42 )   207     652  

Depreciation and amortization

    15,037     7,920     4,640  

Total operating expenses

    216,426     101,992     67,344  

(Loss) income from operations

    (6,632 )   891     5,257  

Other (expense) income:

                   

Interest expense

    (11,966 )   (2,827 )   (1,056 )

Change in fair market value of derivatives

        112     (533 )

Write-off of deferred loan costs

        (440 )    

Total other (expense)

    (11,966 )   (3,155 )   (1,589 )

(Loss) income before (benefit) provision for income taxes

    (18,598 )   (2,264 )   3,668  

(Benefit) provision for income taxes

    (1,326 )   720     467  

Net (loss) income

    (17,272 )   (2,984 )   3,201  

Less: Net (loss) income attributable to non-controlling interest

    (13,921 )   (2,984 )   3,201  

Net loss attributable to Adeptus Health Inc. 

    (3,351 )        

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  Year ended December 31,  
(dollars in thousands, except per share data)
  2014   2013   2012  

Net loss per share of Class A common stock:

                   

Basic

  $ (0.34 )        

Diluted

  $ (0.34 )        

Weighted average shares of Class A common stock:

                   

Basic

    9,845,016          

Diluted

    9,845,016          

Consolidated Balance Sheet Data:

                   

Cash

  $ 2,002   $ 11,495   $ 3,455  

Total assets

    282,818     183,292     120,367  

Total debt and capital lease obligations

    110,935     79,411     23,604  

Shareholders'/Owners' equity

    99,880     78,651     82,734  

Cash Flow Data:

                   

Cash flows provided by (used in):

                   

Operating activities

  $ (24,698 ) $ 6,872   $ 11,408  

Investing activities

    (49,448 )   (44,647 )   (15,537 )

Financing activities

  $ 64,653     45,815     2,820  

Other Financial Data:

                   

Adjusted EBITDA(1)

  $ 28,200   $ 16,010   $ 13,689  

Same-store revenue(2)

    85,629     70,641     64,506  

Capital expenditures

    47,429     46,048     11,504  

Other Operational Data:

                   

Patient volume (number of patient visits)

    146,058     77,044     58,434  

Number of facilities

    55     26     14  

(1)
We define Adjusted EBITDA as net income before interest, taxes, depreciation, and amortization, further adjusted to eliminate the impact of certain additional items, including advisory services paid to our Sponsor, facility preopening expenses, management recruiting expenses, stock compensation expense, costs associated with our public offerings and other non-recurring costs. Adjusted EBITDA is included or incorporated by reference herein because it is a key metric used by management to assess our financial performance. We use Adjusted EBITDA to supplement GAAP measures of performance in order to evaluate the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures. Adjusted EBITDA is also frequently used by analysts, investors and other interested parties to evaluate companies in our industry.

Adjusted EBITDA is a non-GAAP measure of our financial performance and should not be considered as an alternative to net income (loss) as a measure of financial performance, or any other performance measure derived in accordance with GAAP, nor should it be construed as an inference that our future results will be unaffected by unusual or other items. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments in this presentation, such as preopening expenses, stock compensation expense, and other adjustments. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management's discretionary use, as it does not reflect certain cash requirements such as tax payments, debt service requirements, capital expenditures, facility openings and certain other cash costs that may recur in the future. Adjusted EBITDA contains certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. Management compensates for these limitations by supplementally relying on our GAAP results in addition to using Adjusted EBITDA. Our presentation of Adjusted EBITDA is not

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    necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.

    The following table sets forth a reconciliation of our Adjusted EBITDA to net income (loss) using data derived from our consolidated financial statements for the periods indicated:

 
  Year ended December 31,  
(dollars in thousands)
  2014   2013   2012  

Net (loss) income

  $ (17,272 ) $ (2,984 ) $ 3,201  

Depreciation and amortization

    15,037     7,920     4,640  

Interest expense(a)

    11,966     3,155     1,589  

(Benefit) provision for income taxes

    (1,326 )   720     467  

Advisory Services Agreement fees and expenses(b)

    293     559     553  

Preopening expenses(c)

    10,550     3,977     497  

Management recruiting expenses(d)

    376     719     970  

Stock compensation expense(e)

    1,015     586     253  

Initial public offering costs(f)

    5,157          

Other(g)

    2,404     1,358     1,519  

Total adjustments

    45,472     18,994     10,488  

Adjusted EBITDA

  $ 28,200   $ 16,010   $ 13,689  

(a)
Consists of interest expense and fees of $11.9 million, $2.8 million, and $1.1 million for the years ended December 31, 2014, 2013 and 2012, respectively, a gain in fair market value of derivatives of $0.1 million for the year ended December 31, 2013, a loss in fair market value of derivatives of $0.5 million for the year ended December 31, 2012, and a write-off of deferred loan costs of $0.4 million for the year ended December 31, 2013.

(b)
Consists of management fees and expenses paid to a significant shareholder under our Advisory Services Agreement. The Advisory Services Agreement was terminated in connection with the consummation of our initial public offering in June 2014.

(c)
Includes labor, marketing costs and occupancy costs prior to opening a facility and the equity in loss of our unconsolidated joint venture in 2014.

(d)
Third-party costs and fees involved in recruiting our management team.

(e)
Stock compensation expense associated with grants of management incentive units.

(f)
Consists of costs incurred in conjunction with our initial public offering, including $2.4 million in bonuses for certain members of management, $2.3 million in costs related to the termination of our Advisory Services Agreement and $0.5 million of other offering costs.

(g)
For the year ended December 31, 2014, we incurred costs to develop long-term strategic goals and objectives totaling $1.7 million, real-estate development costs associated with potential real estate projects that were terminated totaling $0.6 million and board fees and travel expenses paid to members of the board of directors totaling $0.1 million. For the year ended December 31, 2013, we incurred costs to develop long-term strategic goals and objectives totaling approximately $0.5 million, real-estate development costs associated with potential real estate projects that were terminated totaling $0.4 million, board fees and travel expenses paid to members of the board of directors totaling $0.2 million and $0.25 million of termination costs paid to the former CEO. For the year ended December 31, 2012, we incurred terminated real-estate development costs totaling

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    $0.5 million, legal costs primarily associated with real estate development and litigation for violation of our trademark totaling $0.8 million and board fees and travel expenses paid to members of the board of directors totaling approximately $0.2 million.

(2)
We begin including revenue for a new facility as same store revenue from the first day of the 16th full fiscal month following the facility's opening, which is when we believe same store comparison becomes meaningful. When a facility is relocated, we continue to include revenue from that facility in same store revenue. Same store revenue allows us to evaluate how our facility base is performing by measuring the change in period over period net revenue in facilities that have been open for 15 months or more. Various factors affect same store revenue, including outbreaks of illnesses, changes in marketing and competition.

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SELLING STOCKHOLDERS

        The following table sets forth information regarding the beneficial ownership of our common stock as of April 24, 2015 by (1) each person known to us to beneficially own more than 5% of our voting securities and whose ownership will be reduced as a result of the offering, (2) the selling stockholder, (3) each of our directors, (4) each of our named executive officers and (5) all directors and executive officers as a group.

        The number of shares of Class A common stock outstanding and percentage of beneficial ownership before this offering set forth below are based on the number of shares issued and outstanding immediately prior to the consummation of this offering. The number of shares of Class A common stock and percentage of beneficial ownership after the consummation of this offering set forth below are based on the number of shares to be issued and outstanding immediately after the consummation of this offering.

        Beneficial ownership is determined in accordance with the rules of the SEC. In accordance with the rules of the SEC, beneficial ownership includes voting or investment power with respect to securities and includes shares issuable pursuant to exchange or conversion rights that are exercisable within 60 days of the date of this prospectus, including such rights of holders of LLC Units (together with a corresponding number of shares of our Class B common stock) since they are exchangeable into shares of our Class A common stock at any time).

        To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock.

 
  Class A Common Stock Beneficially Owned(2)   Combined Voting Power(3)(4)(5)  
 
  Class A
Common
Stock
Beneficially
Owned Prior
to the
Offering(2)
  Shares of
Class A
Common
Stock
Offered(2)
  Shares of
Class A
Common
Stock
Subject to
Underwriters'
Option(2)
  After the
Offering
Assuming
Underwriters'
Option is
Not Exercised
  After the
Offering
Assuming
Underwriters'
Option is
Exercised
in Full
  Prior to
the
Offering
  After the
Offering
Assuming
Underwriters'
Option is
Not
Exercised
  After the
Offering
Assuming
Underwriters'
Option is
Exercised
in Full
 
Name of Beneficial Owner(1)
  Number   Number   Number   Number    
  %   %   %  

Funds affiliated with Sterling Partners(5)

    9,755,080                  (6)               47.1 %            

5-N Investments, LLC

    1,747,778                             8.4 %            

Named Executive Officers:

                                                 

Thomas S. Hall

    849,297                             4.1 %            

Graham B. Cherrington

    202,288                             1.0 %            

Timothy L. Fielding

    133,657                             *              

Directors:

                                                 

Richard Covert

    1,749,483                             8.4 %            

Daniel W. Rosenberg

    9,755,080                  (6)               47.1 %            

Gregory W. Scott

    31,919                             *              

Ronald L. Taylor

    83,918                             *              

Jeffery S. Vender

    58,057                             *              

Daniel J. Hosler

    9,755,080                  (6)               47.1 %            

Steven V. Napolitano

    3,409                             *              

Directors and executive officers as a group (13 persons)

    13,056,502                             63.0 %            

*
Less than 1 percent of common stock outstanding.

(1)
Unless otherwise indicated below, the address of each beneficial owner in the table above is c/o Adeptus Health Inc., 2941 Lake Vista Drive, Lewisville, Texas 75067. The address for funds affiliated with Sterling Partners is Sterling Partners, 401 North Michigan Avenue, Suite 3300, Chicago, Illinois 60611.

(2)
Subject to the exchange provisions of the Amended and Restated Limited Liability Company Agreement, each LLC Unit (together with a corresponding number of shares of our Class B common stock) held by the Post-IPO Unit Holders are exchangeable for shares of our Class A common stock on a one-for-one basis. See "Organizational Structure." Beneficial ownership of LLC Units has also been reflected as beneficial ownership of shares of our Class A common stock for which such LLC Units may be exchanged.

(3)
If the underwriters' option to purchase additional shares is exercised in full, the selling stockholder will sell an additional            shares of Class A common stock in this offering and its percentage of combined voting power of Adeptus Health Inc. after this offering will be            %.

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(4)
Represents percentage of voting power of the Class A common stock and Class B common stock of Adeptus Health Inc. voting together as a single class. See "Description of Capital Stock—Common Stock."

(5)
According to the Schedule 13G filed on February 13, 2015 by funds affiliated with Sterling Partners and according to information known to the Company. Represents (a) 4,160,521 shares of Class A common stock held by SCP III AIV THREE-FCER Conduit, L.P. ("Sterling AIV Conduit"), as to which Sterling AIV Conduit has sole voting and dispositive power, (b) 5,591,149 shares of Class B common stock (and a corresponding number of LLC Units) held by SCP III AIV THREE-FCER, L.P. ("Sterling AIV") convertible into shares of Class A common stock, as to which Sterling AIV has sole voting and dispositive power and (c) an aggregate of 3,410 shares of Class A common stock granted to certain designees of funds affiliated with Sterling Partners, Messrs. Hosler and Rosenberg, which shares are held on behalf of Sterling Fund Management, LLC, which acts as an advisor to Sterling AIV Conduit and Sterling AIV. Sterling Capital Partners III, LLC is the general partner of SC Partners III, L.P., which is the general partner of each of Sterling AIV Conduit and Sterling AIV and, as a result, each of Sterling Capital Partners III, LLC and SC Partners III, L.P. may be deemed to beneficially own the securities beneficially owned by each of Sterling AIV Conduit and Sterling AIV. Steven M. Taslitz, Merrick M. Elfman, Douglas L. Becker, Eric D. Becker and R. Christopher Hoehn-Saric, as the managers of Sterling Capital Partners III, LLC and the managers of the general partner of the sole owner of Sterling Fund Management, LLC, may be deemed to beneficially own the securities held by Sterling AIV Conduit and Sterling AIV and held on behalf of Sterling Fund Management LLC. Sterling AIV Conduit is the selling stockholder in this offering.

(6)
Of the                shares of Class A common stock subject to the underwriters' option,                 will be sold by the selling stockholder and                will be sold by the Company, with the proceeds used to purchase an equivalent number of LLC Units from certain of our Post-IPO Unit Holders.

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DESCRIPTION OF INDEBTEDNESS

Senior Secured Credit Facility

        On October 31, 2013, First Choice ER, LLC, certain of its subsidiaries, Fifth Street Finance Corp., as administrative agent and L/C Arranger, and the lenders from time to time party thereto, entered into a Senior Secured Credit Facility for a $75.0 million term loan which matures on October 31, 2018. The Senior Secured Credit Facility includes an additional $165.0 million delayed draw term loan commitment, which, if unused, terminates on April 30, 2015, and a $10.0 million revolving commitment that terminates on October 31, 2018.

        On March 31, 2014, we amended the Senior Secured Credit Facility to, among other things, increase the maximum aggregate amount permitted to be funded by MPT under the Initial MPT Agreement to $255,000,000.

        On June 11, 2014, we entered into a second amendment to the Senior Secured Credit Facility to, among other things, provide for a delayed draw term loan in an aggregate principal amount of up to $75,000,000, up to $60,000,000 in principal amount of which will be used to make specified distributions and up to $10,000,000 in principal amount of which will be used to repay certain revolving loans.

        As of December 31, 2014, we had $80.2 million and approximately $4.0 million available under the delayed draw term commitment and the revolving commitment, respectively, subject to certain debt covenants.

Interest Rate and Payments Generally

        Borrowings under the Senior Secured Credit Facility bear interest, at our option, at a rate equal to an applicable margin over (a) a base rate determined by reference to the highest of (1) the prime rate, (2) the federal funds effective rate plus 0.50% and (3) LIBOR for an interest period of one month plus 1%, or (b) LIBOR for the applicable interest period. The margin for the Senior Secured Credit Facility is 6.50% in the case of base rate loans and 7.50% in the case of LIBOR loans. The Senior Secured Credit Facility includes an unused line fee of 0.50% per annum on the revolving commitment and delayed draw term loan commitment, and a draw fee of 1.0% of the principal amount of each borrowing on the delayed draw term loan. The original principal amount of the term loan will be repaid in consecutive quarterly installments of $0.5 million on the last day of each fiscal quarter commencing with the fiscal quarter ending December 31, 2015 and escalating to $0.9 million for each fiscal quarter ending after December 31, 2016. If drawn, the delayed draw term loan will be repaid in consecutive quarterly installments in an amount based on the repayment calculation contained in the Senior Secured Credit Facility on the last day of each fiscal quarter commencing with the fiscal quarter ending December 31, 2015. We will repay the aggregate principal amount of all revolving loans outstanding on the maturity date, October 31, 2018.

Prepayments and Reduction of Commitments

        The Senior Secured Credit Facility requires us to prepay loans, subject to certain exceptions and reinvestment rights, in an amount equal to 100% of the aggregate net cash proceeds of asset dispositions, recovery events, debt issuances, equity issuances and extraordinary receipts received or contributed to First Choice ER, LLC or its subsidiaries. We are also required by the Senior Secured Credit Facility to prepay loans in an amount equal to 50% of excess cash flow (or if our leverage ratio is less than 3.00 to 1.00, 25% of excess cash flow) less any optional repayments of term loans (and revolving loans if the commitment is reduced by a corresponding amount) during the relevant year. A customary prepayment is also required to the extent credit exposure under the Senior Secured Credit Facility exceeds the commitments thereunder. From time to time and at any time, we may also

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voluntarily request to prepay any loans under the Senior Secured Credit Facility following specified notification periods.

        Term loans (including delayed draw term loans) are subject to prepayment premiums with respect to any voluntary prepayment, any mandatory prepayment resulting from an incurrence of indebtedness not permitted by the Senior Secured Credit Facility or any other mandatory prepayment if the events giving rise to such mandatory prepayment constitute or result in an event of default or upon acceleration of the obligations under the Senior Secured Credit Facility. The prepayment premium is equal to: (a) 2.00% of the amount prepaid if such prepayment occurs after the closing of the Senior Secured Credit Facility and on or prior to the first anniversary thereafter, (b) 1.00% of the amount prepaid if such prepayment occurs after the first anniversary after the closing of the Senior Secured Credit Facility and on or prior to the second anniversary thereof, and (c) 0.00% of the amount prepaid if such prepayment occurs thereafter; provided, that notwithstanding the foregoing, if any such prepayment occurs in connection with a Change of Control, the applicable Prepayment Premium shall only be: (a) 1.00% of the amount prepaid if such prepayment occurs after the closing of the Senior Secured Credit Facility and on or prior to the second anniversary thereof, and (b) 0.00% of the amount prepaid if such prepayment occurs on or after the second anniversary of the Closing Date; provided further, that solely with respect to each delayed draw term loan, whether before or after an event of default or upon acceleration of the obligations under the Senior Secured Credit Facility, the applicable prepayment premium shall be equal to: (a) 2.00% of the amount prepaid if such prepayment occurs after the date such delayed draw term loan is made and on or prior to the first anniversary of the date such delayed draw term loan is made, (b) 1.00% of the amount prepaid if such prepayment occurs after the first anniversary of the date such delayed draw term loan is made and on or prior to the second anniversary of the date such delayed draw term loan is made, and (c) 0.00% of the amount prepaid if such prepayment occurs on or after the second anniversary of the date such delayed draw term loan is made.

Guarantees and Security

        The obligations under the Senior Secured Credit Facility are irrevocably and unconditionally guaranteed by, subject to certain exceptions, Adeptus Health LLC and its existing and future domestic subsidiaries. In addition, and subject to certain exceptions and qualifications, the Senior Secured Credit Facility is secured by a first priority lien over substantially all the assets of Adeptus Health LLC, First Choice ER, LLC and the guarantors.

Certain Covenants and Events of Default

        The Senior Secured Credit Facility contains a number of significant negative covenants. Such negative covenants, among other things and subject to certain exceptions, restrict First Choice ER, LLC and its subsidiaries' ability to:

    incur additional indebtedness, make guarantees and enter into hedging agreements;

    create liens on assets;

    enter into sale and leaseback transactions;

    engage in mergers or consolidations;

    transfer assets;

    pay dividends and distributions;

    change the nature of our business;

    make investments, loans and advances, including acquisitions;

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    engage in certain transactions with affiliates;

    amend certain material agreements, including the MPT Agreements and organizational documents;

    enter into certain joint ventures;

    enter into certain restrictive agreements; and

    make certain changes to our accounting practices.

        In addition, the Senior Secured Credit Facility contains financial covenants that, among other things, require us to maintain:

    a consolidated leverage ratio of at most 7.00 to 1.00 (decreasing to 3.50 to 1.00 as of December 31, 2016 and thereafter);

    a consolidated interest charge coverage ratio of at least 2.00 to 1.00 (increasing to 2.75 to 1.00 as of June 30, 2015 and thereafter); and

    a consolidated capital expenditures amount ranging from $30.0 million (for the fiscal year ended December 31, 2014) to $15.0 million (for the fiscal year ended December 31, 2015 and thereafter).

        The financial covenant calculations are based on First Choice ER, LLC and its subsidiaries as a consolidated group. In addition, the Senior Secured Credit Facility includes certain limitations on intercompany indebtedness.

        In addition, our Senior Secured Credit Facility contains customary representations and warranties, affirmative covenants and events of default. If an event of default occurs, the lenders will be entitled to take a number of actions, including the acceleration of amounts due under the Senior Secured Credit Facility and all actions permitted to be taken by a secured creditor.

        As of December 31, 2014, we were in compliance with all covenant requirements.

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DESCRIPTION OF CAPITAL STOCK

        The following description of our capital stock is a summary and is qualified in its entirety by reference to our amended and restated certificate of incorporation and amended and restated by-laws, the forms of which are incorporated by reference as exhibits to the registration statement of which this prospectus forms a part, and by applicable law.

        Our authorized capital stock consists of 50,000,000 shares of Class A common stock, par value $0.01 per share, 20,000,000 shares of Class B common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock. Immediately following the completion of this offering, there are expected to be outstanding                  shares of Class A common stock and                  shares of Class B common stock.

        Unless our board of directors determines otherwise, we will issue all shares of our capital stock in uncertificated form.

Common Stock

        Holders of shares of our Class A common stock and Class B common stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except as otherwise required by applicable law. The holders of our common stock vote to elect our directors by a plurality of the votes cast. On all other matters other than those specified in our amended and restated certificate of incorporation and amended and restated by-laws, where a 662/3% vote of the then outstanding shares of our common stock is required, the affirmative vote of a majority in voting power of shares present at a meeting of the holders of our common stock is required.

Class A Common Stock

        Holders of shares of our Class A common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders.

        Holders of shares of our Class A common stock are entitled to receive dividends when and if declared by our board of directors out of funds legally available therefor, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock.

        Upon our dissolution or liquidation or the sale of all or substantially all of our assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of shares of our Class A common stock will be entitled to receive our remaining assets available for distribution.

        Holders of shares of our Class A common stock do not have preemptive, subscription or conversion rights. There are no redemption or sinking fund provisions applicable to our Class A common stock. Subject to the transfer restrictions set forth in the Amended and Restated Limited Liability Company Agreement, the Post-IPO Unit Holders may exchange their vested LLC Units (together with a corresponding number of shares of our vested Class B common stock) for shares of our Class A common stock on a one-for-one basis, subject to customary adjustments for stock splits, stock dividends and reclassifications.

Class B Common Stock

        Holders of shares of Class B common stock shall be entitled to one vote for each share of record on all matters submitted to a vote of stockholders.

        Holders of our Class B common stock do not have any right to receive dividends or to receive a distribution upon a liquidation or winding up of Adeptus Health Inc. However, if Adeptus Health LLC

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makes distributions to Adeptus Health Inc., the other holders of LLC Units, including the Post-IPO Unit Holders, will be entitled to receive distributions pro rata in accordance with the percentages of their respective LLC Units.

        Holders of shares of our Class B common stock do not have preemptive, subscription or, except as described below, conversion rights. There are no redemption or sinking fund provisions applicable to our Class B common stock. Shares of Class B common stock will generally not be transferable other than in connection with an exchange of LLC Units for Class A common stock.

        Holders of shares of Class B common stock have the right to exchange their vested LLC Units (together with a corresponding number of shares of our vested Class B common stock) for shares of our Class A common stock on a one-for-one basis.

Preferred Stock

        We do not currently have any preferred stock outstanding. However, our amended and restated certificate of incorporation authorizes our board of directors to establish one or more series of preferred stock (including convertible preferred stock). Unless required by law or by any stock exchange, the authorized shares of preferred stock are available for issuance without further action by you. Our board of directors is able to determine, with respect to any series of preferred stock, the terms and rights of that series, including:

    the designation of the series;

    the number of shares of the series, which our board of directors may, except where otherwise provided in the preferred stock designation, increase or decrease, but not below the number of shares then outstanding;

    whether dividends, if any, will be cumulative or non-cumulative and the dividend rate of the series;

    the dates at which dividends, if any, will be payable;

    the redemption or repurchase rights and price or prices, if any, for shares of the series and any applicable restrictions;

    the terms and amounts of any sinking fund provided for the purchase or redemption of shares of the series;

    the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the affairs of our company;

    whether the shares of the series will be convertible into shares of any other class or series, or any other security, of our company or any other entity, and, if so, the specification of the other class or series or other security, the conversion price or prices or rate or rates, any rate adjustments, the date or dates as of which the shares will be convertible and all other terms and conditions upon which the conversion may be made;

    restrictions on the issuance of shares of the same series or of any other class or series; and

    the voting rights, if any, of the holders of the series.

        We could issue a series of preferred stock that could, depending on the terms of the series, impede or discourage an acquisition attempt or other transaction that some, or a majority, of you might believe to be in your best interests or in which you might receive a premium for your shares of Class A common stock over the market price of the shares of Class A common stock.

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Authorized but Unissued Capital Stock

        Delaware law does not require stockholder approval for any issuance of authorized shares. However, the listing requirements of the NYSE, which would apply so long as the shares of Class A common stock remains listed on the NYSE, require stockholder approval of certain issuances equal to or exceeding 20% of the then outstanding voting power or the then outstanding number of shares of Class A common stock. These additional shares may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions.

        One of the effects of the existence of unissued and unreserved common stock or preferred stock may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of our company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive the stockholders of opportunities to sell their shares at prices higher than prevailing market prices.

Anti-Takeover Effects of Our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws and Certain Provisions of Delaware Law.

Undesignated Preferred Stock

        The ability to authorize undesignated preferred stock makes it possible for our board of directors to issue preferred stock with super majority voting, special approval, dividend or other rights or preferences on a discriminatory basis that could impede the success of any attempt to acquire us or otherwise effect a change in control of us. These and other provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control or management of our company.

Requirements for Advance Notification of Stockholder Meetings, Nominations and Proposals

        Our amended and restated by-laws provide that special meetings of the stockholders may be called only by or at the direction of a majority of the board of directors, the chairman of our board of directors or chief executive officer. Our amended and restated by-laws prohibit the conduct of any business at a special meeting other than as specified in the notice for such meeting. These provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control or management of our company.

        Our amended and restated by-laws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors. In order for any matter to be "properly brought" before a meeting, a stockholder will have to comply with advance notice requirements and provide us with certain information. Additionally, vacancies and newly created directorships may be filled only by a vote of a majority of the directors then in office, even though less than a quorum, and not by the stockholders. Our amended and restated by-laws allow the presiding officer at a meeting of the stockholders to adopt rules and regulations for the conduct of meetings which may have the effect of precluding the conduct of certain business at a meeting if the rules and regulations are not followed. These provisions may also defer, delay or discourage a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company.

Amendment of By-laws

        Our amended and restated certificate of incorporation provides that the board of directors is expressly authorized to make, alter or repeal our amended and restated by-laws and that our

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stockholders may only amend our amended and restated by-laws with the approval of the majority of all of the outstanding shares of our capital stock entitled to vote.

No Cumulative Voting

        The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless our amended and restated certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation does not expressly provide for cumulative voting.

Stockholder Action by Written Consent

        Pursuant to Section 228 of the DGCL, any action required to be taken at any annual or special meeting of the stockholders of a company may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of our stock entitled to vote thereon were present and voted, unless the company's certificate of incorporation provides otherwise.

Delaware Anti-Takeover Statute

        We have opted out of Section 203 of the DGCL. Section 203 provides that, subject to certain exceptions specified in the law, a publicly-held Delaware corporation shall not engage in certain "business combinations" with any "interested stockholder" for a three-year period after the date of the transaction in which the person became an interested stockholder. These provisions generally prohibit or delay the accomplishment of mergers, assets or stock sales or other takeover or change-in-control attempts that are not approved by a company's board of directors.

        However, our amended and restated certificate of incorporation and by-laws provide that in the event our Sponsor ceases to beneficially own at least 5% of the total voting power of all the then outstanding shares of our capital stock, we will automatically become subject to Section 203 of the DGCL. In general, Section 203 prohibits a publicly-held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder unless:

    prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;

    upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (1) shares owned by persons who are directors and also officers and (2) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

    on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 662/3% of the outstanding voting stock which is not owned by the interested stockholder.

        Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation's outstanding voting stock. If

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Section 203 were to apply to us, we expect that it would have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. In such event, we would also anticipate that Section 203 could discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

        Under certain circumstances, Section 203 makes it more difficult for a person who would be an "interested stockholder" to effect various business combinations with a corporation for a three-year period. The provisions of Section 203 may encourage companies interested in acquiring our company to negotiate in advance with our board of directors because the stockholder approval requirement would be avoided if our board of directors approves either the business combination or the transaction that results in the stockholder becoming an interested stockholder. These provisions also may make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.

Choice of Forum

        Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by our directors, officers, employees or agents, (iii) any action asserting a claim against us arising under the Delaware General Corporation Law, the amended and restated certificate of incorporation and the amended and restated by-laws or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. It is possible that a court could rule that this provision is not applicable or is unenforceable. We may consent in writing to alternative forums. Stockholders will be deemed to have notice of and consented to this provision of our amended and restated certificate of incorporation.

Transfer Agent and Registrar

        Computershare Trust Company, N.A., is the transfer agent and registrar for our Class A common stock.

Listing

        Our Class A common stock is listed on the NYSE under the symbol "ADPT."

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SHARES ELIGIBLE FOR FUTURE SALE

        The sale of substantial amounts of our Class A common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of our Class A common stock.

        Upon completion of this offering, we will have a total of                  shares of our Class A common stock outstanding, or                  shares assuming the underwriters exercise in full their option to purchase additional shares. Of these shares,                  , or                  assuming the underwriters exercise in full their option to purchase additional shares of Class A common stock, will be freely tradable without restriction or further registration under the Securities Act by persons other than our "affiliates." Under the Securities Act, an "affiliate" of a company is a person that directly or indirectly controls, is controlled by or is under common control with that company.

        In addition, upon consummation of this offering, the Merged Owner will beneficially own                  shares of our Class A common stock and the Post-IPO Unit Holders will beneficially own                   LLC Units in Adeptus Health LLC. Pursuant to the terms of the Amended and Restated Limited Liability Company Agreement and our amended and restated certificate of incorporation, the Post-IPO Unit Holders will be able, from time, to time exchange their vested LLC Units (together with a corresponding number of shares of our vested Class B common stock) for shares of our Class A common stock on a one-for-one basis, subject to customary adjustments for stock splits, stock dividends and reclassifications.

        Shares of our Class A common stock held by the Merged Owner are considered "restricted securities," as defined in Rule 144. As a result, absent registration under the Securities Act or compliance with Rule 144 thereunder or an exemption therefrom, these shares of Class A common stock are not freely transferable to the public. In connection with our initial public offering, we entered into a registration rights agreement with the Pre-IPO Unit Holders, including the Merged Owner, pursuant to which we granted the Pre-IPO Unit Holders registration rights that would require us to register under the Securities Act the resale of these shares of Class A common stock (including shares of our Class A common stock received in exchange for a corresponding number of LLC Units and shares of Class B common stock). Such securities registered under any registration statement will be available for sale in the open market unless restrictions apply.

        In addition, on June 24, 2014, we filed a registration statement on Form S-8 under the Securities Act registering 1,033,500 shares of Class A common stock to be issued or reserved for issuance under our 2014 Omnibus Incentive Plan. Accordingly, shares registered under such registration statement will be available for sale in the open market, unless such shares are subject to vesting restrictions with us or lock-up restriction described below.

Rule 144

        In general, under Rule 144, as currently in effect, a person who is not deemed to be our affiliate for purposes of the Securities Act or to have been one of our affiliates at any time during the three months preceding a sale and who has beneficially owned the shares of our Class A common stock proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares of our Class A common stock without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares of our Class A common stock proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person is entitled to sell those shares of our Class A common stock without complying with any of the requirements of Rule 144. In general, under Rule 144 as currently in effect, our affiliates or persons selling Class A common stock on behalf of our affiliates are entitled to sell, within any three-month period, a number of shares that does not exceed the greater

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of (1) 1% of the number of shares of our Class A common stock then outstanding and (2) the average weekly trading volume of the shares of our Class A common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale. Sales under Rule 144 by our affiliates or persons selling Class A common stock on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

Rule 701

        In general, under Rule 701 under the Securities Act, an employee, consultant or advisor who acquired shares of our Class A common stock from us prior to our initial public offering in connection with a compensatory stock or option plan or other written agreement relating to compensation is eligible to resell those shares in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period restriction, contained in Rule 144.

Lock-Up Agreements

        We, our executive officers, directors and certain other holders of our common stock, including the selling stockholder, will agree not to sell or transfer any of our Class A common stock or securities convertible into, exchangeable for, exercisable for or repayable with our Class A common stock, for 90 days after the date of this prospectus without first obtaining the written consent of certain of the underwriters, subject to customary exceptions. The lock-up agreements do not preclude holders of LLC Units from exchanging such units (together with a corresponding number of shares of our Class B common stock) for shares of our Class A common stock or for the Company to file a registration statement relating to the resale by those exchanging holders of such shares, provided that shares of Class A common stock acquired in connection with any such exchanges will be subject to the restrictions provided for in the lock-up agreements.

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CERTAIN MATERIAL UNITED STATES FEDERAL INCOME AND ESTATE
TAX CONSEQUENCES TO NON-U.S. HOLDERS

        The following is a summary of certain material United States federal income and estate tax consequences to non-U.S. holders, defined below, of the purchase, ownership and disposition of shares of our Class A common stock as of the date hereof. Except where noted, this summary deals only with shares of Class A common stock purchased in this offering that are held as capital assets by a non-U.S. holder.

        Except as modified for estate tax purposes, a "non-U.S. holder" means a beneficial owner of shares of our Class A common stock that, for United States federal income tax purposes, is not any of the following:

    an individual who is a citizen or resident of the United States;

    a corporation (or any other entity treated as a corporation for United States federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

    an estate the income of which is subject to United States federal income taxation regardless of its source; or

    a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.

        This summary is based upon provisions of the United States Internal Revenue Code of 1986, as amended, or the Code, applicable United States Treasury regulations, rulings and judicial decisions, all as of the date hereof. Those authorities are subject to different interpretations and may be changed, perhaps retroactively, so as to result in United States federal income and estate tax consequences different from those summarized below. This summary does not address all aspects of United States federal income and estate taxes and does not deal with foreign, state, local, alternative minimum or other tax considerations that may be relevant to non-U.S. holders in light of their particular circumstances. In addition, this summary does not represent a detailed description of the United States federal income and estate tax consequences applicable to you if you are subject to special treatment under the United States federal income tax laws (including if you are a United States expatriate, financial institution, insurance company, tax-exempt organization, trader, broker or dealer in securities, "controlled foreign corporation," "passive foreign investment company," a partnership or other pass-through entity for United States federal income tax purposes (or an investor in such a pass-through entity)), a person who acquired shares of our Class A common stock as compensation or otherwise in connection with the performance of services, or a person who has acquired shares of our Class A common stock as part of a straddle, hedge, conversion transaction or other integrated investment). We cannot assure you that a change in law will not alter significantly the tax considerations that we describe in this summary.

        We have not and will not seek any rulings from the Internal Revenue Service, or the IRS, regarding the matters discussed below. There can be no assurance that the IRS will not take positions concerning the tax consequences of the purchase, ownership or disposition of shares of our Class A common stock that are different from those discussed below.

        If any entity or arrangement treated as a partnership for United States federal income tax purposes holds shares of our Class A common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding shares of our Class A common stock, you should consult your tax advisors.

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        If you are considering the purchase of shares of our Class A common stock, you should consult your own tax advisors concerning the particular United States federal income and estate tax consequences to you of the ownership and disposition of the shares of Class A common stock, as well as the consequences to you arising under the laws of any other applicable taxing jurisdiction in light of your particular circumstances.

Dividends

        Cash distributions on shares of our Class A common stock will constitute dividends for United States federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under United States federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, they will constitute a return of capital and will first reduce your tax basis in our Class A common stock (determined on a share by share basis), but not below zero, and then will be treated as gain from the sale of stock.

        Dividends paid to a non-U.S. holder generally will be subject to withholding of United States federal income tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States (and, if required by an applicable income tax treaty, are attributable to a United States permanent establishment) generally will not be subject to such withholding tax, provided certain certification and disclosure requirements are satisfied (including the provision of a properly completed IRS form W-8ECI or other applicable forms). Instead, such dividends generally will be subject to United States federal income tax on a net income basis in the same manner as if the non-U.S. holder were a United States person as defined under the Code. A corporate non-U.S. holder may be subject to an additional "branch profits tax" at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty) on earnings and profits attributable to such dividends that are effectively connected with its United States trade or business (and, if an income tax treaty applies, are attributable to its United States permanent establishment).

        A non U.S. holder of shares of our Class A common stock who wishes to claim the benefit of an applicable treaty rate and avoid backup withholding, as discussed below, for dividends will be required (a) to complete IRS Form W 8BEN or W-8BEN-E (or other applicable form) and certify under penalty of perjury that such holder is not a United States person as defined under the Code and is eligible for treaty benefits or (b) if shares of our Class A common stock are held through certain foreign intermediaries, to satisfy the relevant certification requirements of applicable United States Treasury regulations. Special certification and other requirements apply to certain non U.S. holders that are pass through entities rather than corporations or individuals.

        A non-U.S. holder of shares of our Class A common stock eligible for a reduced rate of United States withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.

Gain on Disposition of Class A Common Stock

        Subject to discussions below of the backup withholding tax and "FATCA" legislation, any gain realized by a non-U.S. holder on the disposition of shares of our Class A common stock generally will not be subject to United States federal income tax unless:

    the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a United States permanent establishment of the non-U.S. holder);

    the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or

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    we are or have been a "United States real property holding corporation" for United States federal income tax purposes.

        In the case of a non-U.S. holder described in the first bullet point above, any gain will be subject to United States federal income tax on a net income basis generally in the same manner as if the non-U.S. holder were a United States person as defined under the Code, and a non-U.S. holder that is a foreign corporation may also be subject to the branch profits tax equal to 30% of its effectively connected earnings and profits attributable to such gain (or, if an income tax treaty applies, at such lower rate as may be specified by the treaty on its gains attributable to its United States permanent establishment). Except as otherwise provided by an applicable income tax treaty, an individual non-U.S. holder described in the second bullet point above will be subject to a 30% tax on any gain derived from the sale, which may be offset by certain United States source capital losses, even though the individual is not considered a resident of the United States under the Code.

        We do not believe we are, and we do not expect to become, a "United States real property holding corporation" for United States federal income tax purposes. If we are or become a "United States real property holding corporation," so long as shares of our Class A common stock continues to be regularly traded on an established securities market, only a non-U.S. holder who holds or held (at any time during the shorter of the five year period preceding the date of disposition or the holder's holding period) more than 5% of shares of our Class A common stock will be subject to United States federal income tax on the disposition of shares of our Class A common stock.

Federal Estate Tax

        Shares of our Class A common stock that are owned (or treated as owned) by an individual who is not a citizen or resident of the United States (as specially defined for United States federal estate tax purposes) at the time of death will be included in such individual's gross estate for United States federal estate tax purposes, unless an applicable estate or other tax treaty provides otherwise, and, therefore, may be subject to United States federal estate tax.

Information Reporting and Backup Withholding

        We must report annually to the IRS and to each non-U.S. holder the amount of dividends paid to such holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. holder resides under the provisions of an applicable income tax treaty or agreement.

        A non-U.S. holder will be subject to backup withholding for dividends paid to such holder unless such holder certifies under penalty of perjury that it is not a United States person as defined under the Code (and the payor does not have actual knowledge or reason to know that such holder is a United States person as defined under the Code), or such holder otherwise establishes an exemption.

        Information reporting and, depending on the circumstances, backup withholding will apply to the proceeds of a sale of shares of our Class A common stock within the United States or conducted through certain United States-related financial intermediaries, unless the beneficial owner certifies under penalty of perjury that it is not a United States person as defined under the Code (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person as defined under the Code), or such owner otherwise establishes an exemption.

        Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder's United States federal income tax liability provided the required information is timely furnished to the IRS.

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Additional FATCA Withholding Requirements

        Under Sections 1471 through 1474 of the Code (such Sections commonly referred to as "FATCA"), a 30% United States federal withholding tax may apply to any dividends paid on shares of our Class A common stock and, for a disposition of our common stock occurring after December 31, 2016, the gross proceeds from such disposition, in each case paid to (i) a "foreign financial institution" (as specifically defined in the Code) which does not provide sufficient documentation, typically on IRS Form W-8BEN-E, evidencing either (x) an exemption from FATCA, or (y) its compliance (or deemed compliance) with FATCA (which may alternatively be in the form of compliance with an intergovernmental agreement with the United States) in a manner which avoids withholding, or (ii) a "non-financial foreign entity" (as specifically defined in the Code) which does not provide sufficient documentation, typically on IRS Form W-8BEN-E, evidencing either (x) an exemption from FATCA, or (y) adequate information regarding certain substantial United States beneficial owners of such entity (if any). If a dividend payment is both subject to withholding under FATCA and subject to the withholding tax discussed above under the heading "—Dividends," the withholding under FATCA may be credited against, and therefore reduce, such other withholding tax. You should consult your own tax advisor regarding these requirements and whether they may be relevant to your ownership and disposition of shares of our Class A common stock.

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UNDERWRITING

        Subject to the terms and conditions of the underwriting agreement, the underwriters named below, through their representative Goldman, Sachs & Co., have severally agreed to purchase the following respective number of shares from us:

Underwriter
  Number of
Shares

Goldman, Sachs & Co

   

Total

  2,000,000

        The underwriting agreement provides that the obligations of the several underwriters to purchase the shares offered hereby are subject to certain conditions precedent and that the underwriters will purchase all of the shares, other than those covered by the option to purchase additional shares described below, if any are purchased.

        Shares sold by the underwriters to the public will initially be offered at the price to the public set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $            per share from the price to the public. After the initial offering of the shares, the representative may change the offering price and the other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters' right to reject any order in whole or in part.

        The underwriters have an option to buy up to an additional                        shares in aggregate from us (up to                        shares) and the selling stockholder (up to                         shares) to cover sales by the underwriters of a greater number of shares than the total number set forth in the table above. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.

        The following tables show the per share and total underwriting discounts and commissions to be paid by us to the underwriters. Such amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase                        additional shares.

Paid by the Company

 
  No
Exercise
  Full
Exercise
 

Per Share

  $                    $                   

Total

  $                    $                   

Paid by the Selling Stockholder

 
  No
Exercise
  Full
Exercise
 

Per Share

  $                    $                   

Total

  $                    $                   

        The Company estimates that its share of the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $                , including up to $                payable to the underwriters for reimbursement of certain FINRA-related fees and expenses of counsel to the underwriters.

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        Adeptus Health Inc. and the selling stockholder have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act.

        Adeptus Health Inc., its executive officers and directors and certain other holders of our common stock, including the selling stockholder, have agreed, subject to certain specified exceptions, not to offer, sell, contract to sell or otherwise dispose of, or enter into any transaction that is designed to, or could be expected to, result in the disposition of any shares of the common stock or other securities convertible into or exchangeable or exercisable for shares of the common stock or derivatives of common stock prior to this offering or common stock issuable upon exercise of options or warrants during the period from the date of this prospectus continuing through the date 90 days after the date of this prospectus, except with the prior written consent of the representative.

        The underwriters may make a market in the shares after completion of the offering, but will not be obligated to do so and may discontinue any market-making activities at any time without notice. No assurance can be given as to the liquidity of the trading market for the shares or that an active public market for the shares will develop.

        In connection with the offering and any subsequent market-making activities, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include stabilizing transactions, which consist of various bids for or purchases of shares of common stock made by the underwriters in the open market prior to the completion of the offering, or other purchases. In addition, the underwriters may engage in short sales and purchases to cover positions created by short sales in connection with any market-making activities. Short sales would involve the sale by the underwriters of a greater number of securities than they then hold, and must be closed out by purchasing those securities in the open market. Stabilizing transactions and purchases to cover a short position, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of the common stock, and may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the stock exchange on which our shares are listed, in the over-the-counter market or otherwise.

Relationships

        The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Certain of the underwriters and their respective affiliates have, from time to time, provided, and may in the future provide, various investment banking and financial advisory services to Adeptus Health Inc. for which they received or will receive customary fees and expenses. An affiliate of one of the underwriters has issued letters of credit on behalf of one of our directors and one non-Sponsor stockholder.

        In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investments and securities activities may involve our securities and instruments. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.

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        To the extent that any underwriter that is not a U.S. registered broker-dealer intends to effect any sales of the shares in the United States, it will do so through one or more U.S. registered broker-dealers as permitted by FINRA regulations. The underwriters do not expect sales to discretionary accounts to exceed five percent of the total number of shares offered.

Notice to Prospective Investors in the European Economic Area

        In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), each underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an offer of shares to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of shares to the public in that Relevant Member State at any time:

    (a)
    to legal entities which are qualified investors as defined in the Prospectus Directive;

    (b)
    to fewer than 100, or, if the Relevant Member State has implemented the relevant provisions of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer; or

    (c)
    in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of shares shall require the Issuer or the representative for any such offer to publish a prospectus pursuant to Article 3 of the Prospectus Directive.

        For the purposes of this provision, the expression an "offer of shares to the public" in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.

Notice to Prospective Investors in the United Kingdom

        Each underwriter has represented, warranted and agreed that:

    (a)
    it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, or the FSMA, received by it in connection with the issue or sale of the shares in circumstances in which Section 21(1) of the FSMA would not apply to the Issuer; and

    (b)
    it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom.

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Notice to Prospective Investors in Hong Kong

        The shares may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), (ii) to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a "prospectus" within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Notice to Prospective Investors in Singapore

        This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA, (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

        Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.

Notice to Prospective Investors in Japan

        The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

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Notice to Prospective Investors in the Dubai International Financial Centre

        This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority, or DFSA. This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.

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LEGAL MATTERS

        The validity of the shares of Class A common stock offered by this prospectus will be passed upon for us by Simpson Thacher & Bartlett LLP, New York, New York. Certain legal matters relating to this offering will be passed upon for the underwriters by Cleary Gottlieb Steen & Hamilton LLP.


EXPERTS

        The consolidated financial statements of Adeptus Health Inc. and its subsidiaries as of December 31, 2014 and 2013, and for each of the years in the three-year period ended December 31, 2014, have been incorporated by reference herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

        The financial statements of the SCP III AIV THREE-FCER Blocker, Inc. as of December 31, 2013 and 2012 and for the years then ended appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.


CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        On October 22, 2013, the board of directors engaged KPMG LLP, or KPMG, as the independent registered public accounting firm of First Choice ER, LLC and its consolidated subsidiaries. Concurrent with this appointment, we dismissed Grant Thornton LLP, or Grant Thornton, effective October 22, 2013. The decision to change our principal independent registered public accounting firm was approved by our audit committee. Grant Thornton's report on the financial statements of First Choice ER, LLC and its consolidated subsidiaries for the year ended December 31, 2012 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. There were (i) no disagreements with Grant Thornton on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Grant Thornton, would have caused Grant Thornton to make reference to the subject matter of the disagreements in connection with its reports and (ii) no reportable events of the type listed in paragraphs (A) through (D) of Item 304(a)(1)(v) of Regulation S-K issued by the SEC, in connection with the audit of the financial statements of First Choice ER, LLC and its consolidated subsidiaries for the 2012 period audited by Grant Thornton through the replacement of Grant Thornton with KPMG.

        Neither we nor anyone acting on our behalf consulted with KPMG at any time prior to their retention by us with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the financial statements of First Choice ER, LLC and its consolidated subsidiaries, and neither a written report nor oral advice was provided that KPMG concluded was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue or (ii) any matter that was the subject of a disagreement or a reportable event (as such terms are defined in Item 304(a)(1)(iv) and (v), respectively, of Regulation S-K).


INCORPORATION BY REFERENCE

        The SEC allows us to incorporate certain information in this prospectus by reference to other documents that we file with them. This means that we can disclose information to you for purposes of this prospectus by referring you to other documents on file with the SEC. We incorporate in this prospectus by reference our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 that we filed with the SEC on February 27, 2015 and our Current Reports on Form 8-K that we filed

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with the SEC on February 26, 2015, April 21, 2015 and April 23, 2015 (Item 1.01). The information incorporated by reference is an important part of this prospectus.

        We will provide a copy of these filings (including certain exhibits that are specifically incorporated by reference therein) to each person, including any beneficial owner, to whom a prospectus is delivered. You may request these documents, at no cost, by writing or telephoning us at the following address:

Adeptus Health Inc.
2941 Lake Vista Drive
Lewisville, Texas 75067
Telephone: (972) 899-6666

        Copies of certain information filed by us with the SEC, including our Annual Report, are also available on our website at ir.adeptushealth.com. Information contained on our website or that can be accessed through our website is not incorporated by reference herein.


WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the Class A common stock offered in this prospectus. This prospectus, filed as part of the registration statement, together with the information incorporated by reference herein, does not contain all of the information set forth in the registration statement and its exhibits and schedules, portions of which have been omitted as permitted by the rules and regulations of the Securities and Exchange Commission. For further information about us and our Class A common stock, we refer you to the registration statement and to its exhibits and schedules. Statements made in or incorporated by reference herein about the contents of any contract, agreement or other document are not necessarily complete and, in each instance, we refer you to the copy of such contract, agreement or document filed as an exhibit to the registration statement, with each such statement being qualified in all respects by reference to the document to which it refers. Anyone may inspect the registration statement and its exhibits and schedules without charge at the public reference facilities the Securities and Exchange Commission maintains at 100 F Street, N.E., Washington, D.C. 20549. You may obtain copies of all or any part of these materials from the Securities and Exchange Commission upon the payment of certain fees prescribed by the Securities and Exchange Commission. You may obtain further information about the operation of the Securities and Exchange Commission's Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. You may also inspect these reports and other information without charge at a website maintained by the Securities and Exchange Commission. The address of this site is http://www.sec.gov.

        In addition, we are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and as a result, file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. You will be able to inspect and copy these reports, proxy statements and other information at the public reference facilities maintained by the Securities and Exchange Commission at the address noted above or inspect them without charge at the Securities and Exchange Commission's website.

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INDEX TO FINANCIAL STATEMENTS

SCP III AIV THREE-FCER Blocker, Inc.

       

Report of Independent Auditors

    F-2  

Statements of Financial Position as of December 31, 2012 and 2013

    F-3  

Schedule of Investment as of December 31, 2012

    F-4  

Schedule of Investment as of December 31, 2013

    F-5  

Statements of Operations for the years ended December 31, 2012 and 2013

    F-6  

Statements of Changes in Stockholder's Equity for the years ended December 31, 2012 and 2013

    F-7  

Statements of Cash Flows for the years ended December 31, 2012 and 2013

    F-8  

Notes to the Financial Statements for the years ended December 31, 2012 and 2013

    F-9  

Statements of Financial Position as of December 31, 2013 and March 31, 2014 (unaudited)

    F-16  

Schedule of Investment as of December 31, 2013

    F-17  

Unaudited Schedule of Investment as of March 31, 2014

    F-18  

Unaudited Statements of Operations for the for the three months ended March 31, 2013 and 2014

    F-19  

Unaudited Statement of Changes in Stockholder's Equity for the three months ended March 31, 2014

    F-20  

Unaudited Statements of Cash Flows for the three months ended March 31, 2013 and 2014

    F-21  

Notes to the Unaudited Financial Statements for the three months ended March 31, 2013 and 2014

    F-22  

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REPORT OF INDEPENDENT AUDITORS

Board of Directors
SCP III AIV THREE-FCER Blocker, Inc.

        We have audited the accompanying financial statements of SCP III AIV THREE-FCER Blocker, Inc. (the Company), which comprise the statements of financial position, including the schedules of investment, as of December 31, 2012 and 2013, and the related statements of operations, changes in stockholder's equity, and cash flows for the years then ended, and the related notes to the financial statements.

Management's Responsibility for the Financial Statements

        Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

Auditor's Responsibility

        Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

        An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

        We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SCP III AIV THREE-FCER Blocker, Inc. at December 31, 2012 and 2013, and the results of its operations, changes in its stockholder's equity, and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Baltimore, MD
March 14, 2014

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SCP III AIV THREE-FCER Blocker, Inc.

STATEMENTS OF FINANCIAL POSITION

(In thousands, except share amounts)

 
  December 31,
2012
  December 31,
2013
 

ASSETS

             

Investment, at fair value (cost of $25,538 and $27,369 at December 31, 2012 and 2013 respectively)

  $ 35,311   $ 67,075  

Cash and cash equivalents

    167      

Other assets

    65     52  

Total assets

  $ 35,543   $ 67,127  

LIABILITIES AND STOCKHOLDER'S EQUITY

             

Deferred tax liability

  $ 3,436   $ 13,974  

Other liabilities

    244     78  

Total liabilities

    3,680     14,052  

Commitments and contingencies

         

Stockholder's Equity

             

Common stock, $.01 par value, 100 shares authorized, 100 shares issued and outstanding at December 31, 2012 and 2013

         

Additional paid-in capital:

             

Paid-in capital in excess of par—common stock

    25,538     27,369  

Retained earnings

    6,325     25,706  

Total stockholder's equity

    31,863     53,075  

Total liabilities and stockholder's equity

  $ 35,543   $ 67,127  

   

See notes to financial statements.

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SCP III AIV THREE-FCER Blocker, Inc.

SCHEDULE OF INVESTMENT

December 31, 2012

(In thousands)

 
  Location   Cost   Fair Value   Unrealized
Appreciation
 

Healthcare services (111% of Stockholder's equity)

                       

SCP III AIV THREE-FCER, LP

  Baltimore, MD                    

42.49% Partnership Interest

      $ 25,538   $ 35,311   $ 9,773  

Total investment

      $ 25,538   $ 35,311   $ 9,773  

   

See notes to financial statements.

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SCP III AIV THREE-FCER Blocker, Inc.

SCHEDULE OF INVESTMENT

December 31, 2013

(In thousands)

 
  Location   Cost   Fair Value   Unrealized
Appreciation
 

Healthcare services (126% of Stockholder's equity)

                       

SCP III AIV THREE-FCER, LP

  Baltimore, MD                    

42.49% Partnership Interest

      $ 27,369   $ 67,075   $ 39,706  

Total investment

      $ 27,369   $ 67,075   $ 39,706  

   

See notes to financial statements.

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SCP III AIV THREE-FCER Blocker, Inc.

STATEMENTS OF OPERATIONS

(In thousands)

 
  Year Ended
December 31,
 
 
  2012   2013  

Expenses

             

Other

    1      

Net investment loss

    1      

Unrealized gains on investment

             

Change in unrealized appreciation of investment

    9,949     29,933  

Income before taxes

  $ 9,948   $ 29,933  

Provision for income taxes

    (3,520 )   (10,552 )

Net income

  $ 6,428   $ 19,381  

   

See notes to financial statements.

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SCP III AIV THREE-FCER Blocker, Inc.

STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY

(In thousands)

 
  Common Stock
$.001 Par value
  Paid-in Capital
In Excess of Par
  (Accumulated
Deficit)
Retained
Earnings
  Total
Stockholder's
Equity
 

Stockholder's Equity at December 31, 2011

  $   $ 25,495   $ (103 ) $ 25,392  

Contributed capital

        43         43  

Net income

            6,428     6,428  

Stockholder's Equity at December 31, 2012

  $   $ 25,538   $ 6,325   $ 31,863  

Contributed capital

        1,831         1,831  

Net income

            19,381     19,381  

Stockholder's Equity at December 31, 2013

  $   $ 27,369   $ 25,706   $ 53,075  

   

See notes to financial statements.

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SCP III AIV THREE-FCER Blocker, Inc.

STATEMENTS OF CASH FLOWS

(In thousands)

 
  Year Ended
December 31
 
 
  2012   2013  

Cash flows from operating activities

             

Net income

  $ 6,428   $ 19,381  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

             

Change in unrealized appreciation of investment

    (9,949 )   (29,933 )

Change in deferred taxes

    3,520     10,538  

Purchases of investment

    (43 )   (1,831 )

Change in other assets

    (65 )   13  

Change in other liabilities

    233     (166 )

Net cash provided by (used in) operating activities

    124     (1,998 )

Cash flows from financing activities

             

Contributions received

    43     1,831  

Net cash provided by financing activities

    43     1,831  

Net change in cash and cash equivalents

    167     (167 )

Cash and cash equivalents at beginning of period

        167  

Cash and cash equivalents at end of period

  $ 167   $  

   

See notes to financial statements.

F-8


Table of Contents


SCP III AIV THREE-FCER Blocker, Inc.

NOTES TO FINANCIAL STATEMENTS

(Amounts in Thousands)

December 31, 2012 and 2013

1. ORGANIZATION

        SCP III AIV THREE-FCER Blocker, Inc. (the Company), a Delaware corporation, was formed by the General Partner of Sterling Capital Partners III, LP and commenced operations on September 9, 2011 for the purpose of acquiring an indirect ownership interest in First Choice ER, LLC through its ownership interest in SCP III AIV THREE-FCER, LP. The Company will continue indefinitely, unless sooner dissolved by its stockholders or by operation of law. The Company is wholly-owned by SCP III AIV THREE-FCER Conduit, LP.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

        The financial statements of the Company are prepared on the accrual basis of accounting in accordance with United States generally accepted accounting principles (U.S. GAAP). Management has determined that the Company is an investment company for the purposes of financial reporting. U.S. GAAP for an investment company requires investments to be recorded at their estimated fair value. The unrealized gain and/or loss in the fair value of the investment is recognized on a current basis in the statements of operations.

Capital Contributions

        Capital contributions are made to the Company as needed by SCP III AIV THREE-FCER Conduit, LP. At December 31, 2012 and 2013, the Company had received aggregate capital contributions of $25,538 and $27,369, respectively.

Use of Estimates

        The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. As explained below, the financial statements include a portfolio investment whose value has been estimated by the Company in the absence of a readily ascertainable market value. Because of the inherent uncertainty of valuation, this estimated value may differ significantly from the value that would have been used had a ready market for the investment existed, and it is reasonably possible that the difference could be material.

Recent Accounting Pronouncements

        In June 2013, the FASB issued Accounting Standards Update (ASU) 2013-08, Financial Services—Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements (ASU 2013-08). ASU 2013-08 provides additional guidance on the criteria used in defining an investment company under US GAAP. It also sets forth certain measurement and disclosure requirements. Under the new standard the typical characteristics of an investment company will be: (i) it has more than one investment and more than one investor, (ii) it has investors that are not related parties of the entity or the investment manager, (iii) it has ownership interests in the form of equity or partnership interests, and (iv) it manages substantially all of its investments on a fair value

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Table of Contents


SCP III AIV THREE-FCER Blocker, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

(Amounts in Thousands)

December 31, 2012 and 2013

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

basis. The standard also reaffirms that a non-controlling interest in another investment company should be measured at fair value instead of the equity method. It also includes additional disclosure requirements for an entity to disclose the fact that it is an investment company, and to provide information about changes, if any, in its status as an investment company. Finally, an entity will also need to include disclosures around financial support that has been provided or is contractually required to be provided to any of its investees. The requirements of the standard are effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013, with early application prohibited. The Company does not expect the adoption of this guidance to change the status of the Company as an investment company or have a material impact on the Company's financial statements.

Cash and Cash Equivalents

        Cash and cash equivalents may consist of cash, bank repurchase agreements, or U.S. government money market funds with maturities of three months or less from the date of acquisition.

Investment

        The Company accounts for its investment at fair value in accordance with ASC 820, Fair Value Measurement (ASC 820). ASC 820 defines fair value, establishes a framework for measuring fair value in GAAP, and requires certain disclosures about fair value measurements. This standard clarifies that fair value is the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date.

        This standard establishes a hierarchal disclosure framework, which prioritizes and ranks the level of observability of market prices used in measuring investments at fair value. Observability of market prices used for inputs is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices, or for which fair value can be measured from actively quoted prices, generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

        Investments measured and reported at fair value are classified and disclosed in one of the following categories.

    Level I—Pricing inputs are quoted prices available in active markets for identical investments as of the reporting date. The type of investments included in Level I include unrestricted securities listed in active markets.

    Level II—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Investments that are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities for which restrictions transfer to a buyer upon sale of the security and certain over-the-counter derivatives.

    Level III—Pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs into the determination of fair

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SCP III AIV THREE-FCER Blocker, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

(Amounts in Thousands)

December 31, 2012 and 2013

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      value require significant management judgment or estimation. Investments that are included in this category generally include investments in private companies like First Choice ER, LLC.

        In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

        The following table summarizes the valuation of the Company's investment by the above fair value hierarchy levels as of December 31, 2012 (in thousands):

 
  Total   Level I   Level II   Level III  

Non-publicly traded investment

  $ 35,311   $   $   $ 35,311  

        The following table summarizes the valuation of the Company's investment by the above fair value hierarchy levels as of December 31, 2013 (in thousands):

 
  Total   Level I   Level II   Level III  

Non-publicly traded investment

  $ 67,075   $   $   $ 67,075  

        The Company accounts for transfers between hierarchy levels as of the beginning of the period. No transfers occurred during the years ended December 31, 2013 or 2012. The valuation of non-publicly traded investments requires significant judgment by the Company due to the absence of quoted market values, inherent lack of liquidity and the long-term nature of such assets. Investments in non-public entities are valued initially based upon the estimated exit price. The exit price reflects the exit values as evidenced by financing and sales transactions with third parties which the Company believes to be a better indication of fair value.

        In determining the fair value of the Company's portfolio investment that falls within Level III of the fair value hierarch, the Company may utilize the following valuation techniques:

            (1)   Market Approach.    The market approach uses direct comparisons, i.e. publicly-traded comparable companies and both private and public mergers and acquisitions, to other enterprises and their equity securities to estimate the fair value of privately issued securities. The market approach bases the fair value measurement on what other similar enterprises or comparable transactions indicate the value to be. Under this approach, investments by unrelated parties in comparable equity securities of the subject enterprise or transactions in comparable equity securities of comparable enterprises are considered in the valuation. Financial and non-financial metrics may be used in conjunction with the market approach to determine the fair value of the privately issued securities of the portfolio company. In applying a method based on market valuations, the valuation considers any significant value-creating milestone events that differ between the comparables. An example of a difference between public and private enterprises is the lower marketability, in general, of the securities of a private enterprise as compared with those of a public enterprise. In valuing privately issued securities, valuations are generally adjusted for that

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Table of Contents


SCP III AIV THREE-FCER Blocker, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

(Amounts in Thousands)

December 31, 2012 and 2013

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

    difference by using a marketability discount, or discount for lack of marketability. When analyzing public market comparables, a control premium is often used in determining the value of enterprises for which the Company has control over the ability to sell the company.

            (2)   Income Approach.    The income approach simulates how market participants would formulate their decisions to buy or sell securities on the basic assumption that value emanates from expectations of future income and cash flows. The income approach differs from the market approach in that whereas the market approach is based on marketplace prices and assumptions, in many cases the income approach is based on entity-specific assumptions. The method most commonly used in applying the income approach is the discounted cash flow (DCF) method. The DCF method requires estimation of future economic benefits and the application of an appropriate discount rate to equate them to a single present value. The future economic benefits to be discounted are generally a stream of periodic cash flows attributable to the asset being valued.

        In addition, a variety of additional factors are reviewed by management, including, but not limited to, financing and sales transactions with third parties; future expectations of the particular investment; changes in market outlook; the third-party financing environment; developments concerning the company to which such securities relate subsequent to the acquisition of such securities; any financial statements and projections of such company provided to the Company; price/earnings ratios; cash flow multiples; equity/sales ratios; or other appropriate financial measures of publicly-traded companies within the same industry. Valuations are adjusted to account for company-specific issues, the lack of liquidity inherent in a non-public investment and the fact that comparable public companies are not identical to the companies being valued. Specifically, investments in private companies that are valued based on measures of publicly traded companies are discounted for illiquidity. Portfolio investments for which no active public market exists are valued at fair value determined in good faith by the Company and approved by a valuation committee, based on all relevant factors.

        If an active public market exists for a portfolio investment, published market values are used to determine fair value. Restricted investments in publicly held companies where a regulatory or contractual sales restriction would pass to the security owner may be valued at a discount from the market price, depending upon the circumstances of the restriction.

        The following table summarizes quantitative information about the Company's Level III inputs as of December 31, 2012 (in thousands):

Investment
  Fair Value   Valuation Technique  
Unobservable Inputs
  Weighted
Average
 

Healthcare services

  $ 35,311   Market approach  

EBITDA multiple

    7.68x  

           

Discount to multiples of comparable companies

    10 %

           

Control premium

    30 %

  $ 35,311   Total Level III investment        

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Table of Contents


SCP III AIV THREE-FCER Blocker, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

(Amounts in Thousands)

December 31, 2012 and 2013

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

        The following table summarizes quantitative information about the Company's Level III inputs as of December 31, 2013 (in thousands):

Investment
  Fair Value   Valuation Technique  
Unobservable Inputs
  Weighted Average  

Healthcare services

  $ 67,075   Market approach  

EBITDA multiple

    9.15x  

           

Discount to multiples of comparable companies

    5 %

           

Control premium

    20 %

  $ 67,075   Total Level III investment        

        The changes in the Portfolio Investment measured at fair value for which the Company has used Level III inputs to determine fair value are as follows (in thousands):

 
  2012   2013  

Beginning balance at January 1

  $ 25,319   $ 35,311  

Purchases and issuances

    43     1,831  

Total unrealized gain included in earnings

    9,949     29,933  

Ending balance at December 31

  $ 35,311   $ 67,075  

Change in unrealized appreciation included in earnings related to investment still held at reporting date

  $ 9,949   $ 29,933  

        Realized gains recorded for Level III Portfolio Investments are reported in net realized gains on portfolio investment, while unrealized gains and losses are reported in change in unrealized appreciation/(depreciation) on portfolio investment in the statement of operations.

Investment Income and Net Realized Gain or Loss on Portfolio Investments

        Investment income which includes interest income from cash, cash equivalents and portfolio investments is recorded when earned or, when income is collectible over an extended period and no reasonable basis exists for estimating collectability, when received.

        Net realized gain or loss on portfolio investments represents the difference between the proceeds received and the average cost of the specific investment sold or otherwise disposed.

Income Taxes

        The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the carrying amount of assets and liabilities used for financial reporting purposes and the amounts used for tax purposes using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on

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Table of Contents


SCP III AIV THREE-FCER Blocker, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

(Amounts in Thousands)

December 31, 2012 and 2013

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

3. TAXES

        Income tax expense is comprised of (in thousands):

 
  Year Ended
December 31,
 
 
  2012   2013  

Current:

             

Federal

  $   $ 14  

State

         

        14  

Deferred:

             

Federal

    3,520     10,435  

State

        103  

  $ 3,520   $ 10,538  

        The provision for deferred income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory Federal income tax rate (35%) to pretax income as a result of the following:

 
  Year Ended
December 31,
 
 
  2012   2013  

Federal tax rate

    35.00 %   35.00 %

State tax rate

    0.00 %   0.24 %

Permanent differences

    0.39 %   0.00 %

Credits and other

    –0.01 %   0.01 %

Valuation allowance

    0.00 %   0.00 %

Total effective rate

    35.38 %   35.25 %

        At December 31, 2012 and 2013, the Company had a deferred tax liability due to unrealized appreciation on the portfolio investment of $3,436, and $13,974, respectively.

        The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related

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Table of Contents


SCP III AIV THREE-FCER Blocker, Inc.

NOTES TO FINANCIAL STATEMENTS (Continued)

(Amounts in Thousands)

December 31, 2012 and 2013

3. TAXES (Continued)

tax authority. Based upon review of the Company's tax filings, Management has determined that there are no material unrecognized tax benefits as of December 31, 2013.

        The Company is subject to examination by the Internal Revenue Service and various state tax authorities. The tax years subject to examination by jurisdiction are 2010 through 2013. The Company is not currently under Internal Revenue Service or state audit.

4. FINANCIAL HIGHLIGHTS

        ASC 946 requires disclosure of certain financial highlights by investment companies, including expenses to average net assets, investment income (loss) to average net assets, and internal rate of return.

 
  Year Ended
December 31
 
 
  2012   2013  

Operating expenses to average net assets

    0 %   0 %

Net investment income (loss) to average net assets

    0 %   0 %

        The internal rate of return (IRR) from inception of the Company was 37.2% through December 31, 2013; 20.9% through December 31, 2012; and (2.4%) through December 31, 2011.

        IRR was computed based on cash inflows, cash outflows and ending stockholder's equity. Because of a variety of methods to calculate IRR, it is important to recognize potential differences between the Company's calculation and any other IRR calculations performed under different methodologies.

5. SUBSEQUENT EVENTS

        The Company evaluated subsequent events through March 14, 2014, representing the date at which the financial statements were available to be issued. Based upon the Company's review, no subsequent events requiring disclosures were identified.

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SCP III AIV THREE-FCER Blocker, Inc.

Statements of Financial Position

(in thousands, except share amounts)

 
  December 31,
2013
  March 31,
2014
 
 
   
  (unaudited)
 

ASSETS

             

Investment, at fair value (cost of $27,369 at December 31, 2013 and March 31, 2014)

  $ 67,075   $ 72,708  

Cash and cash equivalents

         

Other assets

    52     41  

Total assets

  $ 67,127   $ 72,749  

LIABILITIES AND STOCKHOLDER'S EQUITY

             

Deferred tax liability

  $ 13,974   $ 15,890  

Other liabilities

    78     96  

Total liabilities

    14,052     15,986  

Commitments and contingencies

         

Stockholder's Equity

             

Common stock, $.01 par value, 100 shares authorized, 100 shares issued and outstanding at March 31, 2014 and December 31, 2013

         

Additional paid-in capital:

             

Paid-in capital in excess of par—common stock

    27,369     27,369  

Retained earnings

    25,706     29,394  

Total stockholder's equity

    53,075     56,763  

Total liabilities and stockholder's equity

  $ 67,127   $ 72,749  

   

See notes to financial statements.

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SCP III AIV THREE-FCER Blocker, Inc.

Schedule of Investment

December 31, 2013

(in thousands)

 
  Location   Cost   Fair
Value
  Unrealized
Appreciation
 

Healthcare services (126% of Stockholder's equity)

                       

SCP III AIV THREE-FCER, LP

  Baltimore, MD                    

42.49% Partnership Interest

      $ 27,369   $ 67,075   $ 39,706  

Total investment

      $ 27,369   $ 67,075   $ 39,706  

   

See notes to financial statements.

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SCP III AIV THREE-FCER Blocker, Inc.

Schedule of Investment (unaudited)

March 31, 2014

(in thousands)

 
  Location   Cost   Fair
Value
  Unrealized
Appreciation
 

Healthcare services (128% of Stockholder's equity)

                       

SCP III AIV THREE-FCER, LP

  Baltimore, MD                    

42.49% Partnership Interest

      $ 27,369   $ 72,708   $ 45,339  

Total investment

      $ 27,369   $ 72,708   $ 45,339  

   

See notes to financial statements.

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SCP III AIV THREE-FCER Blocker, Inc.

Statements of Operations (unaudited)

(in thousands)

 
  Three Months
Ended March 31
 
 
  2013   2014  

Expenses

             

Other

  $   $  

Net investment income (loss)

         

Unrealized gains on investment

             

Change in unrealized appreciation of investment

    1,658     5,633  

Income before taxes

  $ 1,658   $ 5,633  

Provision for income taxes

    (576 )   (1,945 )

Net income

  $ 1,082   $ 3,688  

   

See notes to financial statements

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SCP III AIV THREE-FCER Blocker, Inc.

Statements of Changes in Stockholder's Equity (unaudited)

(in thousands)

 
  Common Stock
$.001 Par value
  Paid-in Capital
In Excess of Par
  Retained
Earnings
  Total
Stockholder's
Equity
 

Stockholder's Equity at December 31, 2013

  $   $ 27,369   $ 25,706   $ 53,075  

Net income

            3,688     3,688  

Stockholder's Equity at March 31, 2014

  $   $ 27,369   $ 29,394   $ 56,763  

   

See notes to financial statements.

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SCP III AIV THREE-FCER Blocker, Inc.

Statements of Cash Flows (unaudited)

(in thousands)

 
  Three Months
Ended March 31
 
 
  2013   2014  

Operating activities

             

Net income

  $ 1,082   $ 3,688  

Adjustments to reconcile net income to net cash (used in) operating activities:

             

Change in unrealized appreciation of investment

    (1,658 )   (5,633 )

Change in deferred taxes

    570     1,916  

Purchases of investment

    (1,831 )    

Change in other assets

    6     11  

Change in other liabilities

    (167 )   18  

Net cash (used in) operating activities

    (1,998 )    

Financing activities

             

Contributions received

    1,831      

Net cash provided by financing activities

    1,831      

Net change in cash and cash equivalents

    (167 )    

Cash and cash equivalents at beginning of period

    167      

Cash and cash equivalents at end of period

  $   $  

   

See notes to financial statements

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SCP III AIV THREE-FCER Blocker, Inc.

Notes to Financial Statements (unaudited)

(Amounts in Thousands)

Three Months Ended March 31, 2014

1. Organization

        SCP III AIV THREE-FCER Blocker, Inc. (the Company), a Delaware corporation, was formed by the General Partner of Sterling Capital Partners III, LP and commenced operations on September 9, 2011 for the purpose of acquiring an indirect ownership interest in Adeptus Health through its ownership interest in SCP III AIV THREE-FCER, LP. The Company will continue indefinitely, unless sooner dissolved by its stockholders or by operation of law. The Company is wholly-owned by SCP III AIV THREE-FCER Conduit, LP.

2. Summary of Significant Accounting Policies

Basis of Accounting

        The interim financial statements of the Company are prepared on the accrual basis of accounting in accordance with United States generally accepted accounting principles (U.S. GAAP). Management has determined that the Company is an investment company for the purposes of financial reporting. U.S. GAAP for an investment company requires investments to be recorded at their estimated fair value. The unrealized gain and/or loss in the fair value of the investment is recognized on a current basis in the statements of operations. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the Company's financial position, results of operations, changes in stockholder's equity and cash flows. The results of operations for the three month periods ended March 31, 2014 and 2013 are not necessarily indicative of the results for a full year or the results for any future periods. These unaudited financial statements should be read in conjunction with the annual audited financial statements and related footnotes of the Company.

Capital Contributions

        Capital contributions are made to the Company as needed by SCP III AIV THREE-FCER Conduit, LP. At March 31, 2014 and December 31, 2013, the Company had received aggregate capital contributions of $27,369.

Use of Estimates

        The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. As explained below, the financial statements include a portfolio investment whose value has been estimated by the Company in the absence of a readily ascertainable market value. Because of the inherent uncertainty of valuation, this estimated value may differ significantly from the value that would have been used had a ready market for the investment existed, and it is reasonably possible that the difference could be material.

Recent Accounting Pronouncements

        In June 2013, the FASB issued Accounting Standards Update (ASU) 2013-08, Financial Services—Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure

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SCP III AIV THREE-FCER Blocker, Inc.

Notes to Financial Statements (unaudited) (Continued)

(Amounts in Thousands)

Three Months Ended March 31, 2014

2. Summary of Significant Accounting Policies (Continued)

Requirements (ASU 2013-08). ASU 2013-08 provides additional guidance on the criteria used in defining an investment company under US GAAP. It also sets forth certain measurement and disclosure requirements. Under the new standard the typical characteristics of an investment company will be: (i) it has more than one investment and more than one investor, (ii) it has investors that are not related parties of the entity or the investment manager, (iii) it has ownership interests in the form of equity or partnership interests, and (iv) it manages substantially all of its investments on a fair value basis. The standard also reaffirms that a non-controlling interest in another investment company should be measured at fair value instead of the equity method. It also includes additional disclosure requirements for an entity to disclose the fact that it is an investment company, and to provide information about changes, if any, in its status as an investment company. Finally, an entity will also need to include disclosures around financial support that has been provided or is contractually required to be provided to any of its investees. The requirements of the standard are effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013, with early application prohibited. The Company adopted ASU 2013-08 on January 1, 2014. The adoption of this guidance did not change the status of the Company as an investment company or have a material impact on the Company's financial statements.

Cash and Cash Equivalents

        Cash and cash equivalents may consist of cash, bank repurchase agreements, or U.S. government money market funds with maturities of three months or less from the date of acquisition.

Investment

        The Company accounts for its investment at fair value in accordance with ASC 820, Fair Value Measurement (ASC 820). ASC 820 defines fair value, establishes a framework for measuring fair value in GAAP, and requires certain disclosures about fair value measurements. This standard clarifies that fair value is the amount that would be exchanged to sell an asset or transfer a liability in an orderly transfer between market participants at the measurement date.

        This standard establishes a hierarchal disclosure framework, which prioritizes and ranks the level of observability of market prices used in measuring investments at fair value. Observability of market prices used for inputs is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices, or for which fair value can be measured from actively quoted prices, generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

        Investments measured and reported at fair value are classified and disclosed in one of the following categories.

    Level I—Pricing inputs are quoted prices available in active markets for identical investments as of the reporting date. The type of investments included in Level I include unrestricted securities listed in active markets.

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SCP III AIV THREE-FCER Blocker, Inc.

Notes to Financial Statements (unaudited) (Continued)

(Amounts in Thousands)

Three Months Ended March 31, 2014

2. Summary of Significant Accounting Policies (Continued)

    Level II—Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Investments that are generally included in this category include corporate bonds and loans, less liquid and restricted equity securities for which restrictions transfer to a buyer upon sale of the security and certain over-the-counter derivatives.

    Level III—Pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. Investments that are included in this category generally include investments in private companies.

        In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

        The following table summarizes the valuation of the Company's investment by the above fair value hierarchy levels as of March 31, 2014 (in thousands):

 
  Total   Level I   Level II   Level III  

Non-publicly traded investment

  $ 72,708   $   $   $ 72,708  

        The following table summarizes the valuation of the Company's investment by the above fair value hierarchy levels as of December 31, 2013 (in thousands):

 
  Total   Level I   Level II   Level III  

Non-publicly traded investment

  $ 67,075   $   $   $ 67,075  

        The Company accounts for transfers between hierarchy levels as of the beginning of the period. No transfers occurred during the three months ended March 31, 2014. The valuation of non-publicly traded investments requires significant judgment by the Company due to the absence of quoted market values, inherent lack of liquidity and the long-term nature of such assets. Investments in non-public entities are valued initially based upon the estimated exit price. The exit price reflects the exit values as evidenced by financing and sales transactions with third parties which the Company believes to be a better indication of fair value.

        In determining the fair value of the Company's portfolio investment that falls within Level III of the fair value hierarch, the Company may utilize the following valuation techniques:

        (1)    Market Approach.    The market approach uses direct comparisons, i.e. publicly-traded comparable companies and both private and public mergers and acquisitions, to other enterprises and their equity securities to estimate the fair value of privately issued securities. The market approach bases the fair value measurement on what other similar enterprises or comparable transactions indicate the value to be. Under this approach, investments by unrelated parties in comparable equity securities of the subject enterprise or transactions in comparable equity securities of comparable enterprises are

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SCP III AIV THREE-FCER Blocker, Inc.

Notes to Financial Statements (unaudited) (Continued)

(Amounts in Thousands)

Three Months Ended March 31, 2014

2. Summary of Significant Accounting Policies (Continued)

considered in the valuation. Financial and non-financial metrics may be used in conjunction with the market approach to determine the fair value of the privately issued securities of the portfolio company. In applying a method based on market valuations, the valuation considers any significant value-creating milestone events that differ between the comparables. An example of a difference between public and private enterprises is the lower marketability, in general, of the securities of a private enterprise as compared with those of a public enterprise. In valuing privately issued securities, valuations are generally adjusted for that difference by using a marketability discount, or discount for lack of marketability. When analyzing public market comparables, a control premium is often used in determining the value of enterprises for which the Company has control over the ability to sell the company.

        (2)    Income Approach.    The income approach simulates how market participants would formulate their decisions to buy or sell securities on the basic assumption that value emanates from expectations of future income and cash flows. The income approach differs from the market approach in that whereas the market approach is based on marketplace prices and assumptions, in many cases the income approach is based on entity-specific assumptions. The method most commonly used in applying the income approach is the discounted cash flow (DCF) method. The DCF method requires estimation of future economic benefits and the application of an appropriate discount rate to equate them to a single present value. The future economic benefits to be discounted are generally a stream of periodic cash flows attributable to the asset being valued.

        In addition, a variety of additional factors are reviewed by management, including, but not limited to, financing and sales transactions with third parties; future expectations of the particular investment; changes in market outlook; the third-party financing environment; developments concerning the company to which such securities relate subsequent to the acquisition of such securities; any financial statements and projections of such company provided to the Company; price/earnings ratios; cash flow multiples; equity/sales ratios; or other appropriate financial measures of publicly-traded companies within the same industry. Valuations are adjusted to account for company-specific issues, the lack of liquidity inherent in a non-public investment and the fact that comparable public companies are not identical to the companies being valued. Specifically, investments in private companies that are valued based on measures of publicly traded companies are discounted for illiquidity. Portfolio investments for which no active public market exists are valued at fair value determined in good faith by the Company and approved by a valuation committee, based on all relevant factors.

        If an active public market exists for a portfolio investment, published market values are used to determine fair value. Restricted investments in publicly held companies where a regulatory or contractual sales restriction would pass to the security owner may be valued at a discount from the market price, depending upon the circumstances of the restriction.

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SCP III AIV THREE-FCER Blocker, Inc.

Notes to Financial Statements (unaudited) (Continued)

(Amounts in Thousands)

Three Months Ended March 31, 2014

2. Summary of Significant Accounting Policies (Continued)

        The following table summarizes quantitative information about the Company's Level III inputs as of March 31, 2014 (in thousands):

Investment
  Fair
Value
  Valuation
Technique
 
Unobservable Inputs
  Weighted
Average
 

Healthcare services

  $ 72,708   Market approach  

EBITDA multiple

    11.5x  

           

Discount to multiples of comparable companies

    15 %

           

Control premium

    20 %

  $ 72,708   Total Level III investment        

        The following table summarizes quantitative information about the Company's Level III inputs as of December 31, 2013 (in thousands):

Investment
  Fair
Value
  Valuation
Technique
 
Unobservable Inputs
  Weighted
Average
 

Healthcare services

  $ 67,075   Market approach  

EBITDA multiple

    9.15x  

           

Discount to multiples of comparable companies

    5 %

           

Control premium

    20 %

  $ 67,075   Total Level III investment        

        The changes in the Portfolio Investment measured at fair value for which the Company has used Level III inputs to determine fair value are as follows (in thousands):

 
  Three Months
Ended March 31
 
 
  2014   2013  

Beginning balance at January 1

  $ 67,075   $ 35,311  

Purchases and issuances

        1,831  

Change in unrealized appreciation

    5,633     1,658  

Ending balance at March 31

  $ 72,708   $ 38,800  

Change in unrealized appreciation included in earnings related to investment still held at reporting date

  $ 5,633   $ 1,658  

        Realized gains recorded for Level III Portfolio Investments are reported in net realized gains on portfolio investment, while unrealized gains and losses are reported in change in unrealized appreciation/(depreciation) on portfolio investment in the statements of operations.

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SCP III AIV THREE-FCER Blocker, Inc.

Notes to Financial Statements (unaudited) (Continued)

(Amounts in Thousands)

Three Months Ended March 31, 2014

2. Summary of Significant Accounting Policies (Continued)

Investment Income and Net Realized Gain or Loss on Portfolio Investments

        Investment income which includes interest income from cash, cash equivalents and portfolio investments is recorded when earned or, when income is collectible over an extended period and no reasonable basis exists for estimating collectability, when received.

        Net realized gain or loss on portfolio investments represents the difference between the proceeds received and the average cost of the specific investment sold or otherwise disposed.

Income Taxes

        The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the carrying amount of assets and liabilities used for financial reporting purposes and the amounts used for tax purposes using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

3. Taxes

        Income tax expense is comprised of (in thousands):

 
  Three Months
Ended March 31
 
 
  2014   2013  

Current:

             

Federal

  $ 29   $ 6  

State

         

    29     6  

Deferred:

             

Federal

    1,943     570  

State

    (27 )    

  $ 1,916   $ 570  

        For both the three month periods ending March 31, 2014 and 2013, the provision for income taxes approximated the amount of income tax determined by applying the applicable U.S. statutory Federal income tax rate (35%) to pretax income.

        At March 31, 2014 and December 31, 2013, the Company had a deferred tax liability due to unrealized appreciation on the portfolio investment of $15,890, and $13,974, respectively.

        The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that the tax

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SCP III AIV THREE-FCER Blocker, Inc.

Notes to Financial Statements (unaudited) (Continued)

(Amounts in Thousands)

Three Months Ended March 31, 2014

3. Taxes (Continued)

positions will be sustained based on the technical merits of the position and (2) those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related tax authority. Based upon review of the Company's tax filings, Management has determined that there are no material unrecognized tax benefits as of March 31, 2014.

        The Company is subject to examination by the Internal Revenue Service and various state tax authorities. The tax years subject to examination by jurisdiction are 2010 through 2013. The Company is not currently under Internal Revenue Service or state audit.

4. Financial Highlights

        ASC 946 requires disclosure of certain financial highlights by investment companies, including expenses to average net assets, investment income (loss) to average net assets, and internal rate of return.

 
  Three Months
Ended
March 31
 
 
  2014   2013  

Operating expenses to average net assets

    0 %   0 %

Net investment income (loss) to average net asset

    0 %   0 %

        The internal rate of return (IRR) from inception of the Company was 36.5% through March 31, 2014; 19.6% through March 31, 2013; and 37.2% through December 31, 2013.

        IRR was computed based on cash inflows, cash outflows and ending stockholder's equity. Because of a variety of methods to calculate IRR, it is important to recognize potential differences between the Company's calculation and any other IRR calculations performed under different methodologies.

5. Subsequent Events

        The Company evaluated subsequent events through April 22, 2014, representing the date at which the financial statements were available to be issued. Based upon the Company's review, no subsequent events requiring disclosures were identified.

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2,000,000 Shares

Adeptus Health Inc.

Class A Common Stock



LOGO



Goldman, Sachs & Co.



   


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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.    Other Expenses of Issuance and Distribution.

        The following table sets forth the expenses payable by Adeptus Health Inc. expected to be incurred in connection with the issuance and distribution of Class A common stock being registered hereby (other than underwriting discounts and commissions). All of such expenses are estimates, except for the Securities and Exchange Commission, or the SEC, registration fee, the Financial Industry Regulatory Authority, or FINRA, filing fee and listing fee.

SEC registration fee

  $ 14,025.81  

FINRA filing fee

  $ 18,606.00  

Listing fee

      *

Printing fees and expenses

      *

Legal fees and expenses

      *

Blue sky fees and expenses

      *

Registrar and transfer agent fees

      *

Accounting fees and expenses

      *

Miscellaneous expenses

      *

Total

      *

*
To be included by amendment

Item 14.    Indemnification of Directors and Officers.

        Section 145 of the DGCL provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, in which such person is made a party by reason of the fact that the person is or was a director, officer, employee or agent of the corporation (other than an action by or in the right of the corporation—a "derivative action"), if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with the defense or settlement of such action, and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation's by-laws, disinterested director vote, stockholder vote, agreement or otherwise.

        Our amended and restated certificate of incorporation will provide that no director shall be liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation on liability is not permitted under the DGCL, as now in effect or as amended. Currently, Section 102(b)(7) of the DGCL requires that liability be imposed for the following:

    any breach of the director's duty of loyalty to our company or our stockholders;

    any act or omission not in good faith or which involved intentional misconduct or a knowing violation of law;

    unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; and

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    any transaction from which the director derived an improper personal benefit.

        Our amended and restated certificate of incorporation and amended and restated by-laws will provide that, to the fullest extent authorized or permitted by the DGCL, as now in effect or as amended, we will indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that such person, or a person of whom he or she is the legal representative, is or was our director or officer, or by reason of the fact that our director or officer is or was serving, at our request, as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans maintained or sponsored by us. We will indemnify such persons against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action if such person acted in good faith and in a manner reasonably believed to be in our best interests and, with respect to any criminal proceeding, had no reason to believe such person's conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses (including attorneys' fees) incurred in connection with the defense or settlement of such actions, and court approval is required before there can be any indemnification where the person seeking indemnification has been found liable to us. Any amendment of this provision will not reduce our indemnification obligations relating to actions taken before an amendment.

        We have obtained policies that insure our directors and officers and those of our subsidiaries against certain liabilities they may incur in their capacity as directors and officers. Under these policies, the insurer, on our behalf, may also pay amounts for which we have granted indemnification to the directors or officers.

Item 15.    Recent Sales of Unregistered Securities.

        The registrant was incorporated in March 2014 and issued 100 shares of its common stock to its sole stockholder for an aggregate consideration of $1.00. The securities described above were issued in reliance on the exemption contained in Section 4(a)(2) of the Securities Act on the basis that the transaction did not involve a public offering. No underwriters were involved in that sale.

        In connection with our initial public offering, we effected a series of transactions occurring at various times prior to and/or concurrently with the closing of the initial public offering that resulted in a reorganization of our business (the "Reorganization Transactions"). In connection with the Reorganization Transactions, we issued 4,474,107 shares of Class A common stock and 10,741,839 shares of Class B common stock to affiliates of Sterling Partners, a significant stockholder, certain members of management and other pre-existing owners of the Company. The shares were issued pursuant to Section 4(a)(2) of the Securities Act. For a description of the transactions pursuant to which the shares were issued, see the information under the heading "Organizational Structure."

Item 16.    Exhibits and Financial Statement Schedules.

Exhibit No.   Description
  1.1 * Form of Underwriting Agreement.

 

3.1

 

Amended and Restated Certificate of Incorporation of Adeptus Health Inc. (incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

3.2

 

Amended and Restated By-laws of Adeptus Health Inc., dated June 25, 2014 (incorporated by reference to Exhibit 3.2 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

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Exhibit No.   Description
  4.1   Stockholders' Agreement, dated as of June 25, 2014, among Adeptus Health Inc. and the other stockholders named therein (incorporated by reference to Exhibit 4.1 filed with the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

5.1

*

Opinion of Simpson Thacher & Bartlett LLP as to the legality of the Class A common stock.

 

10.1

 

Amended and Restated Limited Liability Company Agreement of Adeptus Health LLC, dated June 24, 2014 (incorporated by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.2

 

Registration Rights Agreement, dated as of June 25, 2014, by and among the Company and the stockholders named therein (incorporated by reference to Exhibit 10.2 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.3

 

Tax Receivable Agreement, dated as of June 25, 2014, among Adeptus Health Inc. and the other parties named therein (incorporated by reference to Exhibit 10.3 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.4

 

Agreement and Plan of Merger, dated as of June 24, 2014, by and among Adeptus Health Inc., SCP III AIV THREE-FCER Blocker, Inc. and SCP III AIV THREE-FCER Conduit, L.P. (incorporated by reference to Exhibit 10.5 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.5

 

Senior Secured Credit Facility, dated as of October 31, 2013, among First Choice ER, LLC, the subsidiaries identified therein, Fifth Street Finance Corp., as Administrative Agent and L/C Arranger, and the other lenders party thereto. (incorporated by reference to Exhibit 10.3 of the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on May 21, 2014).

 

10.6

 

Amendment to Credit Agreement, dated as of March 31, 2014, among First Choice ER, LLC and Fifth Street Finance Corp. (incorporated by reference to Exhibit 10.18 of Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

 

10.7

 

Second Amendment to Credit Agreement and First Amendment to Security and Pledge Agreement, dated as of June 11, 2014, among First Choice ER, LLC and Fifth Street Finance Corp. (incorporated by reference to Exhibit 10.19 of Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

 

10.8

 

Master Funding and Development Agreement, dated as of June 11, 2013, between MPT Operating Partnership, L.P. and First Choice ER, LLC. (portions of this exhibit have been omitted pursuant to a request for confidential treatment) (incorporated by reference to Exhibit 10.4 of the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

 

10.9

 

Master Funding and Development Agreement, dated as of July 29, 2014, between MPT Operating Partnership, L.P. and First Choice ER, LLC. (portions of this exhibit have been omitted pursuant to a request for confidential treatment) (incorporated by reference to Exhibit 10.13 of the Registrant's Quarterly Report on Form 10-Q (File No. 001-36520) filed with the SEC on August 8, 2014).

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Exhibit No.   Description
  10.10   Amendment to Master Funding and Development Agreement, dated as of April 20, 2015, between MPT Operating Partnership, L.P., Adeptus Health LLC and the other signatories party thereto.

 

10.11

 

Advisory Services Agreement, dated as of September 30, 2011, between Sterling Fund Management, LLC and First Choice ER, LLC. (incorporated by reference to Exhibit 10.5 of the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on May 21, 2014).

 

10.12

 

Termination Agreement with respect to the Advisory Services Agreement, dated as of June 24, 2014, between Sterling Fund Management, LLC and First Choice ER, LLC. (incorporated by reference to Exhibit 10.4 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.13

 

Employment Agreement by and between First Choice ER, LLC and Thomas Hall, dated March 12, 2012 (incorporated by reference to Exhibit 10.8 of Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

 

10.14

 

Amendment to Employment Agreement by and between First Choice ER, LLC and Thomas Hall, dated June 24, 2014. (incorporated by reference to Exhibit 10.6 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.15

 

Employment Agreement by and between First Choice ER, LLC and Timothy Fielding, dated January 16, 2013 (incorporated by reference to Exhibit 10.9 of Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

 

10.16

 

Amendment to Employment Agreement by and between First Choice ER, LLC and Timothy Fielding, dated June 24, 2014 (incorporated by reference to Exhibit 10.7 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.17

 

Employment Agreement by and between First Choice ER, LLC and Graham Cherrington, dated May 29, 2012 (incorporated by reference to Exhibit 10.10 of Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

 

10.18

 

Amendment to Employment Agreement by and between First Choice ER, LLC and Graham Cherrington, dated June 24, 2014 (incorporated by reference to Exhibit 10.8 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.19

 

Form of Amended and Restated Restricted Units Agreement (incorporated by reference to Exhibit 10.14 of Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

 

10.20

 

Adeptus Health Inc. 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.9 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.21

 

Form of Restricted Stock Grant Notice and Restricted Stock Agreement for Executives. (incorporated by reference to Exhibit 10.20 of the Registrant's Annual Report on Form 10-K (File No. 001-36520) filed with the SEC on February 27, 2015).

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Exhibit No.   Description
  10.22   Form of Restricted Stock Grant Notice and Restricted Stock Agreement for Non-Employee Directors. (incorporated by reference to Exhibit 10.21 of the Registrant's Annual Report on Form 10-K (File No. 001-36520) filed with the SEC on February 27, 2015).

 

10.23

 

Form of Chairman of the Board Agreement between Adeptus Health Inc. and Richard Covert (incorporated by reference to Exhibit 10.17 of Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

 

16.1

 

Letter regarding change in certifying accountant.

 

21.1

 

Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 of our Annual Report on Form 10-K (File No. 001-36520) filed with the SEC on February 27, 2015).

 

23.1

 

Consent of KPMG LLP (with respect to the financial statements of Adeptus Health Inc.).

 

23.2

 

Consent of Ernst & Young LLP (with respect to the financial statements of SCP III AIV THREE-FCER Blocker, Inc.).

 

23.3

 

Consent of Simpson Thacher & Bartlett LLP (included in Exhibit 5.1 to this Registration Statement).

 

24.1

 

Powers of Attorney (included in the signature page to this Registration Statement).

*
To be filed by amendment

Item 17.    Undertakings.

        Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

        The undersigned registrant hereby undertakes that:

              (i)  for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and

             (ii)  for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Lewisville, Texas, on April 27, 2015.

  Adeptus Health Inc.

 

By:

 

/s/ THOMAS S. HALL


      Name:   Thomas S. Hall

      Title:   Chairman of the Board and Chief Executive Officer


POWER OF ATTORNEY

        The undersigned directors and officers of Adeptus Health Inc. hereby constitute and appoint Thomas S. Hall, Graham B. Cherrrington and Timothy L. Fielding and each of them, any of whom may act without joinder of the other, the individual's true and lawful attorneys-in fact and agents, with full power of substitution and resubstitution, for the person and in his or her name, place and stead, in any and all capacities, to sign this Registration Statement and any or all amendments, including post-effective amendments to the Registration Statement, including a prospectus or an amended prospectus therein and any Registration Statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act, and all other documents in connection therewith to be filed with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact as agents or any of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement and power of attorney have been signed by the following persons in the capacities indicated on April 27, 2015.

Signature
 
Capacity

 

 

 
/s/ THOMAS S. HALL

Thomas S. Hall
  Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

/s/ TIMOTHY L. FIELDING

Timothy L. Fielding

 

Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer)

/s/ GRAHAM B. CHERRINGTON

Graham B. Cherrington

 

President and Chief Operating Officer

/s/ RICHARD COVERT

Richard Covert

 

Vice-Chairman of the Board and Director

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Signature
 
Capacity

 

 

 
/s/ DANIEL W. ROSENBERG

Daniel W. Rosenberg
  Director

/s/ GREGORY W. SCOTT

Gregory W. Scott

 

Director

/s/ RONALD L. TAYLOR

Ronald L. Taylor

 

Director

/s/ JEFFERY S. VENDER

Jeffery S. Vender

 

Director

/s/ DANIEL J. HOSLER

Daniel J. Hosler

 

Director

/s/ STEVEN V. NAPOLITANO

Steven V. Napolitano

 

Director

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EXHIBIT INDEX

Exhibit No.
  Description
  1.1 * Form of Underwriting Agreement.

 

3.1

 

Amended and Restated Certificate of Incorporation of Adeptus Health Inc. (incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

3.2

 

Amended and Restated By-laws of Adeptus Health Inc., dated June 25, 2014 (incorporated by reference to Exhibit 3.2 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

4.1

 

Stockholders' Agreement, dated as of June 25, 2014, among Adeptus Health Inc. and the other stockholders named therein (incorporated by reference to Exhibit 4.1 filed with the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

5.1

*

Opinion of Simpson Thacher & Bartlett LLP as to the legality of the Class A common stock.

 

10.1

 

Amended and Restated Limited Liability Company Agreement of Adeptus Health LLC, dated June 24, 2014 (incorporated by reference to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.2

 

Registration Rights Agreement, dated as of June 25, 2014, by and among the Company and the stockholders named therein (incorporated by reference to Exhibit 10.2 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.3

 

Tax Receivable Agreement, dated as of June 25, 2014, among Adeptus Health Inc. and the other parties named therein (incorporated by reference to Exhibit 10.3 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.4

 

Agreement and Plan of Merger, dated as of June 24, 2014, by and among Adeptus Health Inc., SCP III AIV THREE-FCER Blocker, Inc. and SCP III AIV THREE-FCER Conduit, L.P. (incorporated by reference to Exhibit 10.5 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.5

 

Senior Secured Credit Facility, dated as of October 31, 2013, among First Choice ER, LLC, the subsidiaries identified therein, Fifth Street Finance Corp., as Administrative Agent and L/C Arranger, and the other lenders party thereto. (incorporated by reference to Exhibit 10.3 of the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on May 21, 2014).

 

10.6

 

Amendment to Credit Agreement, dated as of March 31, 2014, among First Choice ER, LLC and Fifth Street Finance Corp. (incorporated by reference to Exhibit 10.18 of Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

 

10.7

 

Second Amendment to Credit Agreement and First Amendment to Security and Pledge Agreement, dated as of June 11, 2014, among First Choice ER, LLC and Fifth Street Finance Corp. (incorporated by reference to Exhibit 10.19 of Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

Table of Contents

Exhibit No.
  Description
  10.8   Master Funding and Development Agreement, dated as of June 11, 2013, between MPT Operating Partnership, L.P. and First Choice ER, LLC. (portions of this exhibit have been omitted pursuant to a request for confidential treatment) (incorporated by reference to Exhibit 10.4 of the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

 

10.9

 

Master Funding and Development Agreement, dated as of July 29, 2014, between MPT Operating Partnership, L.P. and First Choice ER, LLC. (portions of this exhibit have been omitted pursuant to a request for confidential treatment) (incorporated by reference to Exhibit 10.13 of the Registrant's Quarterly Report on Form 10-Q (File No. 001-36520) filed with the SEC on August 8, 2014).

 

10.10

 

Amendment to Master Funding and Development Agreement, dated as of April 20, 2015, between MPT Operating Partnership, L.P., Adeptus Health LLC and the other signatories party thereto.

 

10.11

 

Advisory Services Agreement, dated as of September 30, 2011, between Sterling Fund Management, LLC and First Choice ER, LLC. (incorporated by reference to Exhibit 10.5 of the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on May 21, 2014).

 

10.12

 

Termination Agreement with respect to the Advisory Services Agreement, dated as of June 24, 2014, between Sterling Fund Management, LLC and First Choice ER, LLC. (incorporated by reference to Exhibit 10.4 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.13

 

Employment Agreement by and between First Choice ER, LLC and Thomas Hall, dated March 12, 2012 (incorporated by reference to Exhibit 10.8 of Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

 

10.14

 

Amendment to Employment Agreement by and between First Choice ER, LLC and Thomas Hall, dated June 24, 2014. (incorporated by reference to Exhibit 10.6 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.15

 

Employment Agreement by and between First Choice ER, LLC and Timothy Fielding, dated January 16, 2013 (incorporated by reference to Exhibit 10.9 of Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

 

10.16

 

Amendment to Employment Agreement by and between First Choice ER, LLC and Timothy Fielding, dated June 24, 2014 (incorporated by reference to Exhibit 10.7 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.17

 

Employment Agreement by and between First Choice ER, LLC and Graham Cherrington, dated May 29, 2012 (incorporated by reference to Exhibit 10.10 of Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

 

10.18

 

Amendment to Employment Agreement by and between First Choice ER, LLC and Graham Cherrington, dated June 24, 2014 (incorporated by reference to Exhibit 10.8 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

Table of Contents

Exhibit No.
  Description
  10.19   Form of Amended and Restated Restricted Units Agreement (incorporated by reference to Exhibit 10.14 of Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

 

10.20

 

Adeptus Health Inc. 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.9 of the Registrant's Current Report on Form 8-K (File No. 001-36520) filed with the SEC on June 30, 2014).

 

10.21

 

Form of Restricted Stock Grant Notice and Restricted Stock Agreement for Executives. (incorporated by reference to Exhibit l0.20 of the Registrant's Annual Report on Form 10-K (File No. 001-36520) filed with the SEC on February 27, 2015).

 

10.22

 

Form of Restricted Stock Grant Notice and Restricted Stock Agreement for Non-Employee Directors. (incorporated by reference to Exhibit l0.21 of the Registrant's Annual Report on Form 10-K (File No. 001-36520) filed with the SEC on February 27, 2015).

 

10.23

 

Form of Chairman of the Board Agreement between Adeptus Health Inc. and Richard Covert (incorporated by reference to Exhibit 10.17 of Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (File No. 333-196142) filed with the SEC on June 12, 2014).

 

16.1

 

Letter regarding change in certifying accountant.

 

21.1

 

Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 of our Annual Report on Form 10-K (File No. 001-36520) filed with the SEC on February 27, 2015).

 

23.1

 

Consent of KPMG LLP (with respect to the financial statements of Adeptus Health Inc.).

 

23.2

 

Consent of Ernst & Young LLP (with respect to the financial statements of SCP III AIV THREE-FCER Blocker, Inc.).

 

23.3

 

Consent of Simpson Thacher & Bartlett LLP (included in Exhibit 5.1 to this Registration Statement).

 

24.1

 

Powers of Attorney (included in the signature page to this Registration Statement).

*
To be filed by amendment