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



Form 10-K



(Mark One)    

ý

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

or

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                  

Commission file number: 333-170812



21ST CENTURY ONCOLOGY HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)



Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
  26-1747745
(I.R.S. Employer
Identification No.)

2270 Colonial Boulevard
Fort Myers, Florida

(Address Of Principal Executive Offices)

 

33907
(Zip Code)

(239) 931-7275
(Registrant's Telephone Number, Including Area Code)



         Securities registered pursuant to Section 12(b) of the Act: None

         Securities registered pursuant to Section 12(g) of the Act: None



         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o    No ý

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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. (Check one):

Large accelerated filer o

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

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

         None of the voting or non-voting common equity of the registrant is held by a non-affiliate of the registrant. There is no publicly traded market for any class of common equity of the registrant.

         As of March 1, 2014, there were 1,028 shares of the registrant's common stock, $0.01 par value per share, issued and outstanding, all of which are 100% owned by 21st Century Oncology Investments, LLC.

         DOCUMENTS INCORPORATED BY REFERENCE: None.

   


Table of Contents


TABLE OF CONTENTS

PART I            

Item 1.

  Business     4  

Item 1A.

  Risk Factors     42  

Item 1B.

  Unresolved Staff Comments     64  

Item 2.

  Properties     64  

Item 3.

  Legal Proceedings     65  

Item 4.

  Mine Safety Disclosures     65  
PART II            

Item 5.

  Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities     66  

Item 6.

  Selected Financial Data     68  

Item 7.

  Management's Discussion and Analysis of Financial Condition and Results of Operations     70  

Item 7A.

  Quantitative and Qualitative Disclosures about Market Risk     112  

Item 8.

  Financial Statements and Supplementary Data     113  

Item 9.

  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure     113  

Item 9A.

  Controls and Procedures     114  

Item 9B.

  Other Information     116  
PART III            

Item 10.

  Directors, Executive Officers and Corporate Governance     117  

Item 11.

  Executive Compensation     125  

Item 12.

  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters     137  

Item 13.

  Certain Relationships and Related Party Transactions, and Directors Independence     138  

Item 14.

  Principal Accounting Fees and Services     145  
PART IV            

Item 15.

  Exhibits and Financial Statement Schedules     146  

Index to Consolidated and Combined Financial Statements

   
F-1
 

SIGNATURES

 

 

 

 
EXHIBIT INDEX        

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FORWARD LOOKING STATEMENTS

        Some of the information set forth in this Annual Report on Form 10-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. We may make other written and oral communications from time to time that contain such statements. Forward-looking statements, including statements as to industry trends, future expectations and other matters that do not relate strictly to historical facts are based on certain assumptions by management. These statement are often identified by the use of words such as "may," "will," "expect," "plans," "believe," "anticipate," "project," "intend," "could," "estimate," or "continue," "may increase," "may fluctuate," and similar expressions or variations, and are based on the beliefs and assumptions of our management based on information then currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, among others, the risks discussed herein under the heading "Risk Factors." We caution readers to carefully consider such factors. Further, such forward-looking statements speak only as of the date on which such statements are made and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date of such statements.

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PART I

Item 1.    Business

        References in this Annual Report on Form 10-K to "we", "us", "our" and "the Company" are references to 21st Century Oncology Holdings, Inc. (formerly known as Radiation Therapy Services Holdings, Inc.) and its subsidiaries, consolidated professional corporations and associations and unconsolidated affiliates, unless the context requires otherwise or unless indicated otherwise. References in this Annual Report on Form 10-K to "Parent" and "21CH" are references to 21st Century Oncology Holdings, Inc. and not to its subsidiaries, consolidated professional corporations and associations and unconsolidated affiliates. References in this Annual Report on Form 10-K to "21C" are references to 21st Century Oncology, Inc. (formerly known as Radiation Therapy Services, Inc.), 21CH's direct subsidiary. References in this Annual Report on Form 10-K to "our treatment centers" refer to owned, managed and hospital based treatment centers.


Our Company

        We are the leading global, physician-led provider of integrated cancer care ("ICC") services. Our physicians provide comprehensive, academic quality, cost-effective coordinated care for cancer patients in personal and convenient community settings (our "ICC model"). We believe we offer a powerful value proposition to patients, hospital systems, payers and risk-taking physician groups by delivering high quality care and first rate clinical outcomes at lower overall costs through outpatient settings, clinical excellence, physician coordination and scaled efficiency.

        We operate the largest integrated network of cancer treatment centers and affiliated physicians in the world which, as of December 31, 2013, was comprised of approximately 671 community-based physicians in the fields of radiation oncology, medical oncology, breast, gynecological and general surgery, urology and primary care. Our physicians provide medical services at approximately 304 locations, including our 163 radiation therapy centers, of which 41 operate in partnership with health systems. Our cancer treatment centers in the United States are operated predominantly under the 21st Century Oncology brand and are strategically clustered in 31 local markets in 16 states. Our 33 international treatment centers in six Latin American markets are operated under the 21st Century Oncology brand or a local brand and, in many cases, are operated with local minority partners, including hospitals. We hold market leading positions in the majority of our local markets.

        Our operating philosophy is to provide academic center level care to cancer patients in a community setting. To act on this philosophy, we employ or affiliate with leading physicians and provide them with the advanced medical technology necessary to achieve optimal clinical outcomes across a full spectrum of oncologic disease in each local market. In support of our physicians and technologies, we also develop and invest in medical management software, training programs for our staff and business enterprise systems to allow for rapid diffusion of clinical initiatives and continuous quality and performance improvement. In addition, we maintain strong clinical research relationships with multiple academic centers of excellence and cooperative research groups, gaining access to cutting edge treatments and making them available to our patients often years in advance of their commercial introduction to the marketplace. As a result, we attract and retain talented physician leaders by providing opportunities to work in a stimulating clinical environment offering superior end-to-end resources and designed to deliver high quality patient care.

        Our Company was founded in 1983 by a group of physicians that came together to deliver academic level quality radiation therapy at the community level. With significant investment in clinical programs, operating infrastructure and business systems, we expanded our delivery of sophisticated radiation therapy services domestically and then globally. Given the changing healthcare landscape, increased focus on lower cost, higher quality care and potential for value-based reimbursement, we built a more complete and integrated cancer care platform to better meet the needs of patients,

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physicians and payers. As a result, we proactively broadened our provision of care to include a full spectrum of cancer care services by employing and affiliating with physicians in the related specialties of medical oncology, breast, gynecological and general surgery, urology and primary care. This innovative approach to cancer care through our ICC model enables us to collaborate across our physician base, integrate services and payments for related medical needs and disseminate best practices. We believe this results in better cancer care to patients, a stronger presence in each market we serve and the ability to capitalize on changes and developments in the payment and delivery landscape.

        We have demonstrated an ability to grow our business through various environments, and we believe our business is poised for accelerated success given the current industry focus on delivering high quality care in a lower cost setting. The key components of our business model include:

    Differentiated Scale—We are approximately 3.3 times larger than our next largest competitor, based on average treatments per day, which differentiates us with key stakeholders. Domestically, we have over 21,000 cases and perform over 500,000 treatments on an annual basis. As a result of our scale, we believe we have a higher level of efficiency and clinical and operational sophistication that health systems seek in partners and payers seek for nationwide or innovative contracts. In addition, our scale makes us the destination of choice for acquisition candidates and physicians pursuing alignment with larger enterprises.

    Integrated Cancer Care Model—Developed to further penetrate existing markets and provide for enhanced clinical care, we believe our ICC model positions us as a key partner for payers, physicians and hospital systems today and to become an important part of any clinical enterprise of the future that seeks superior outcomes at predictable and affordable costs.

    Health System Partnerships—Capitalizes on the trend of health systems leveraging partners to improve their oncology service offering and help manage the strategic, operational and financial challenges stemming from healthcare reform. These challenges include the pressure to contain healthcare costs, align with key physician resources and manage competitive demands for capital.

    Collaborative Payment Arrangements—Proactively developed multiple coordinated and collaborative relationships with key payers and other industry participants to create alternative payment mechanisms to reduce cost and improve quality. For example, we developed and implemented the nation's first bundled payment radiation therapy program with a national private payer, and we are continually in discussions with payers to develop additional mutually beneficial payment arrangements. We also led the formation of an industry group to coordinate providers into a unified and collaborative relationship in order to work with both commercial and government payers on approaches to transition to bundled payments for an episode of care based on evidence-based pathways.

        In addition to our demonstrated success in varied environments, we have capitalized on the strength and breadth of our platform to develop new growth opportunities. Examples of such initiatives include our entry into and growth in international markets and our development and monetization of unique value-added services.

    Entry Into and Expansion in International Markets—In 2011, we acquired and partnered with the highly sophisticated management team of Medical Developers, LLC ("MDLLC") the largest company in Latin America dedicated to radiation therapy. This investment was very attractive due to the increasing demand in that market for cancer treatment services created by a significantly underserved patient population, increased detection, a growing middle-class and expanded insurance access. MDLLC provides us the opportunity for enhanced growth rates, diversified payment sources, leveraging of best practices into a new global market and efficient equipment utilization.

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    Value-Added Services—Developed new revenue sources by leveraging our internally developed capabilities and resources including technology, clinical protocols, physician breadth and expertise and care management services. This provides incremental high-margin diversifying revenue lines for us and often serves as an entry point for new geographies and customer relationships. For example, our CarePoint service line leverages our cancer care management capabilities to provide a range of solutions up to and including comprehensive oncology care management solutions to insurers or other entities that are financially responsible for the health of defined populations. This provides us a new source of revenue and CarePoint contracts may serve as an entry point for new markets for our cancer treatment services.

        We have grown through a combination of organic, internally developed ("de novo"), acquisition and joint venture opportunities and innovative payer and hospital system relationships. We believe these major avenues for growth will become increasingly attractive as our scale, sophistication and clinical capabilities continue to distinguish us from our competition. As a result, we will continue to employ or affiliate with quality physicians, acquire freestanding radiation oncology centers and partner with leading health systems and payers as a result of the superior value proposition we provide each of these constituents:

    Physicians—We believe physicians choose to join us because of our physician-focused culture, best-in-class clinical and research platform focused on oncology and affiliations with leading academic programs, as well as the ability to enhance income. Physician income is typically enhanced at the Company due to the breadth of our services, our focus on technology, the benefits of our ICC model and our scale and our effective business office capabilities.

    Freestanding Centers—Independent radiation businesses choose to join us because mounting pressures on their businesses make affiliation with a scaled and sophisticated partner beneficial. After acquiring a center, we typically upgrade existing equipment and technologies, implement our proprietary treatment and delivery tools, leverage our effective business office capabilities, develop ICC relationships and enable access to our contracts, all of which should dramatically improve the financial performance of the acquired center.

    Health Systems—We believe health systems choose to partner with us due to our shared operating philosophy, enhanced patient care and access, strong physician leadership and ICC approach, all of which lead to a superior ability to attract and retain key specialists. We provide a flexible approach to health system partnerships which can include joint ventures, management agreements, hospital-based and/or freestanding locations and fully outsourced relationships.

    Payers—We believe payers choose to partner with us as a result of our evidence-based clinical pathways, strong and integrated local market presence and ability to coordinate patient care in the most appropriate setting with lower cost and transparent pricing. We have leading market share in most of our local markets, and we seek to employ or affiliate with the highest quality physicians in all cancer related specialties. In addition, we track and measure clinical data to both evaluate treatment effectiveness and innovate new paradigms for payment methodologies.

        For the year ended December 31, 2013, we generated total revenues of $736.5 million. During this time period, 87.7% of our net revenue was derived from our integrated operations in North America, and 12.3% of our net revenue was derived from our operations in Latin America.

        In October 2013, we closed on our acquisition of OnCure Holdings, Inc. ("OnCure"), which comprises 33 radiation therapy centers and 11 radiation oncology physician groups in Florida, California and Indiana (the "OnCure Acquisition"). This level of revenue represents a 15% increase in our revenue for the year ended December 31, 2012. In addition, on February 10, 2014, we completed our investment in Florida-based SFRO Holdings, LLC ("SFRO"), acquiring 65% of the equity interests

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in SFRO, increasing the number of our radiation therapy treatment centers by 21 and adding 88 additional ICC and radiation oncology physicians (the "SFRO Joint Venture"). OnCure and SFRO are expected to add approximately 694 and 591 average treatments per day, respectively, increasing our total treatments per day to approximately 4,750.

        We were incorporated on October 9, 2007 under the name Radiation Therapy Services Holdings, Inc. and currently exist as a Delaware Corporation. On December 5, 2013, we changed our name to 21st Century Oncology Holdings, Inc. Our business was originally formed in 1983. We were acquired in 2008 pursuant to the Merger by affiliates of Vestar Capital Partners ("Vestar"). Our principal executive office is located at 2270 Colonial Boulevard, Fort Myers, Florida 33907 and our telephone number is (239) 931-7275. The address of our main website is www.21co.com.


Industry Trends

        Cancer treatment is an important, large and growing market globally. We operate in the $290 billion global cancer care market, of which the domestic market comprises approximately $125 billion, as of 2010. Cancer is the second leading cause of death in the United States and globally. According to the most recent data available from the World Health Organization, global cancer prevalence includes approximately 29 million cases with approximately 13 million new cases and approximately 8 million cancer-related deaths per year. In addition to the scale of the current addressable market, cancer incidence in the United States is estimated to grow at an approximately 2% rate annually through 2030, with an outsized proportion of treatments occurring in outpatient settings which are expected to grow at approximately 31% compared to approximately 3% for inpatient services, from 2013 to 2023. As the population ages, the number of U.S. cancer diagnoses is expected to continue to increase, as approximately 77% of all cancers diagnosed from 2006 to 2010 were in persons 55 years of age and older. Additionally, since 2006, the percentage of cancer cases addressed by radiation has grown from approximately 55% to nearly two-thirds.

        We believe we are well-positioned to benefit from other major trends currently affecting the healthcare services markets in which we compete, including:

Focus on Cost Containment in Healthcare

        Rising healthcare costs have continued to strain federal, state and local, as well as employer and patient budgets. In addition, domestic cancer costs are projected to grow from $125 billion in 2010 to $207 billion by 2020, and oncology is typically one of the top two largest cost categories for health plans. Efficient management of cancer care across the patient continuum through utilizing more efficient outpatient settings, which can cost approximately 14% less for commercial payers than other alternatives, and coordination across medical disciplines represents a significant opportunity to contain and reduce overall healthcare costs while improving quality and outcomes. In addition, newly developed health insurance exchanges may ultimately present a significant opportunity for us, as payers look to contract with high quality, low cost providers in local markets, like us. We believe we are well positioned to benefit from this trend as the largest provider of lower cost, convenient and high clinical quality cancer care service in outpatient settings. This will also be of increased importance as patients have an increased responsibility for their healthcare costs.

Shift Towards Coordinated Care

        Recent healthcare legislation, continued cost pressures on payers, and the increase in the number of patients with complex conditions will likely create significant opportunities for cost-effective, sophisticated providers that can offer coordinated, integrated care delivery. Private payers are increasingly moving toward narrow networks and directing patients to the most coordinated and cost-effective providers of care. Additionally, certain health reform initiatives promote the transition

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from traditional fee-for-service payment models to more "value-based" or "capitated" payment models where overall outcomes and census management are more important success factors than the number of procedures delivered. These trends require improved care coordination and communication throughout an episode of care to enable providers to analyze patient data and identify more effective treatment protocols that ultimately improve outcomes and reduce costs. To meet these goals, we have authored and maintain a set of best clinical practice guidelines for each of the major cancer diagnoses. The guidelines are based on widely recognized consensus expert group statements and supporting medical literature and serve as the foundation of our efforts to achieve a consistently high level of care throughout our Company. Our physicians interact with the guidelines in real-time and at the point of care through use of our online treatment prescription and medical record systems in order to help guide their clinical decisions toward the most appropriate and effective medical management for their patient.

        We have an established history of offering high quality, cost effective integrated services and developing the related infrastructure to ensure coordinated care across specialists. We believe we are well positioned for the changing delivery landscape where payers are searching for partners to help manage medical costs without sacrificing care.

Dynamics Impacting Health Systems

        Many hospitals and health systems recognize the strategic, operational and financial challenges stemming from healthcare reform, the burgeoning efforts to contain healthcare costs, and growing consumer preference for treatment in more comfortable community care settings. In response, many health systems are developing strategies to reduce operating costs, align with physicians, create additional service lines, expand their geographic footprint and service locations and prepare for new value-based payment models. A growing number of health systems are entering into strategic partnerships with select provider organizations in order to achieve these goals. Provider organizations, such as ours, can often provide a high degree of specialization, more efficient outpatient facilities, best practices learned from a nationwide network, scaled operating systems, and financial capital to help healthcare systems meet their goals. We currently have 41 radiation oncology centers in strategic operational partnerships with health systems where we provide a variety of services that leverage our capabilities to support their communities.

Continued Provider Consolidation Driven by Changing Environment

        Consolidation among healthcare providers, including facility operators and clinicians, is expected to continue due to increasing cost pressure and greater complexities as well as requirements imposed by new payment, reporting and delivery systems. Independent physicians are increasingly becoming employed by hospitals or affiliated with larger group practices like ours. For instance since 2010, we have expanded our physician base by 183%. In addition, recent reimbursement cuts in our industry, coupled with the high cost of technology and the necessity of coordination of care, have contributed to a more rapid pace of consolidation relative to prior years. As the largest global, physician-led provider of integrated cancer care, we believe we are well positioned to be an acquisition partner of choice due to our well developed business model, economies of scale and efficient technology utilization. We believe our ability to create value through accretive acquisitions at attractive valuations and increase physician efficiency in both the United States and globally creates a significant opportunity to leverage our core competencies while further expanding our global footprint. We expect that the current operating environment will continue to produce an attractive pipeline of accretive acquisitions and physician employment and affiliation opportunities in existing and adjacent markets.

        The radiation therapy and related physician specialist landscape is highly fragmented. In 2013, there were approximately 2,350 locations providing radiation therapy in the United States, of which approximately 1,100 were freestanding, or non-hospital based, treatment centers. Approximately 25% of

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freestanding treatment centers are affiliated with the largest three provider networks, with the Company holding approximately 13% of the freestanding market. It is estimated that there are approximately 793,000 physicians in the United States today, of which 36% remain independent as compared to well over 50% a decade ago. The Latin American radiation therapy market is similarly fragmented with most competition coming primarily from hospitals and some smaller local groups. In Argentina, we are the largest radiation therapy provider, with particularly strong market positions in Buenos Aires, Cordoba, La Plata and Mendoza. In the majority of other Latin American markets that we serve, we are the number one or number two provider.


Service and Treatment Offerings

        Beginning from a foundation of high-quality radiation therapy centers, we have subsequently developed a clinically integrated network of multiple medical disciplines in order to provide a comprehensive set of cancer care services for our patients. In many markets, we employ medical oncologists, breast surgeons, colorectal surgeons, urologists, gynecologic oncologists and other medical professionals whose surgical and medical skills complement our legacy radiation oncology services to complete the end-to-end care of the cancer patient. By leveraging our clinical data management systems, best practices clinical pathway models and clinical performance metrics developed and refined over many years on the radiation therapy side of the business, we have been able to achieve effective care coordination among these other disciplines and an overall level of medical practice comparable to that observed at the best academic cancer centers in the US.

        What is particularly unique to our model is its ability to provide a high level of comprehensive and coordinated cancer care in the community setting. Many of our competitors in our markets instead consist of single-specialty practices offering more fragmented care. Further differentiating from our competitors is our capacity in each market to provide a complete selection of advanced radiotherapy services that may otherwise be locally unavailable. In addition, we provide support services including psychological and nutritional counseling as well as transportation assistance (consistent with regulatory guidelines).

        Resulting from our radiotherapy and medical management expertise, we were recently selected as the developer and managing partner of the first proton beam therapy center in New York. Our partners include five of the largest cancer care programs at key local academic institutions including Memorial Sloan-Kettering, Mt. Sinai, Continuum and Montefiore. We anticipate the proton center to be operational in late 2016. In addition, we have started beta testing adaptive radiotherapy, a sophisticated technology that allows for near real-time adaptation of radiation dose delivery to anatomic changes that occur during a treatment course, and have created an internal development group to focus on refining and commercializing both of this future critical technology.

        Broadly speaking, there are two categories of radiation therapy. External beam therapy involves directing a high-energy x-ray beam generated from a linear accelerator to a patient's tumor. Radiotherapy equipment varies as some devices are better for treating cancers near the surface of the skin and others are better for treating cancers deeper in the body. A course of external beam radiation therapy typically ranges from 10 to 40 treatments and depends on the total radiation dose necessary to achieve a specific therapeutic goal. Internal radiation therapy, also called brachytherapy, involves the placement of a radiation-emitting element within or adjacent to the patient's tumor. Brachytherapy usually requires an operating room procedure for either permanent insertion of the radiation source in the cancerous organ or insertion of thin plastic catheters in and around the diseased organ to allow for temporary placement of a radiation source after which both the source and the tubes are removed from the body. Internal radiation therapy delivers a higher dose of radiation in a shorter time than is possible with external beam treatments. Internal radiation therapy is typically used for cancers of the prostate, cervix, breast, lung and esophagus.

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        The following table sets forth the forms of radiation therapy treatments and advanced services that we currently offer:

Technologies
  Description

External Beam Therapy

   

Conformal Radiation Therapy

  A process of creating a radiation treatment field that matches precisely the size and shape of the intended target tumor or organ. This customization of the treatment to the diseased tissue allows for better sparing of surrounding healthy, unaffected organs than conventional treatment technologies.

Intensity Modulated Radiation Therapy

 

A process of adjusting the intensity of the radiation beam in addition to shaping the radiation dose to match the size and shape of the treated tumor, resulting in higher degree of precision than conformal therapy. The net clinical result of this technology is the safe delivery of higher, more effective radiation doses to tumors.

Stereotactic Radiosurgery

 

A process of delivering highly precise, high-dose radiation to small tumors. Stereotactic radiosurgery utilizes additional treatment technologies to deliver treatment with greater precision and accuracy than either IMRT or conformal therapy. Historically, stereotactic radiosurgery was used for brain tumors, but recent advancements in imaging and radiation delivery technologies have allowed for expanding applications of this technology to the treatment of extra-cranial cancers.

Internal Radiation Therapy

 

 

High-Dose Rate Brachytherapy

  Enables radiation oncologists to treat cancer by internally delivering high doses of radiation directly to the cancer using temporarily implanted radioactive elements.

Low-Dose Rate Brachytherapy

 

Enables radiation oncologists to treat cancer by internally delivering doses of radiation directly to the cancer over an extended period of time using permanently implanted radioactive elements (such as prostate seed implants).

Advanced Services Used with External Beam Therapies

 

 

Image Guided Radiation Therapy

  Enables radiation oncologists to utilize x-ray imaging at the time of treatment to identify the exact position of the tumor within the patient's body and adjust the radiation beam to that position for better accuracy of treatment delivery.

Gamma Function

 

A proprietary capability that for the first time enables measurement of the actual amount of radiation dose delivered during a treatment. Gamma Function also enables the verification of radiation delivery and the comparison to the physician prescription and treatment plans. Furthermore, it provides the physician with actionable information to adjust for changes in tumor size and location, and ensures immediate feedback for adaption of future treatments as well as for quality assurance.

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Technologies
  Description

Respiratory Gating

 

Coordinates treatment beam activation with the respiratory motion of the patient, thereby permitting accurate delivery of radiation dosage to a tumor that moves with breathing, such as lung and liver cancers.

Operating Technologies Under Development

 

 

Proton Therapy

  Form of radiation treatment that utilizes subatomic particles instead of x-rays and can achieve better radiation sparing of surrounding normal organs.

Adaptive Radiotherapy

 

A novel approach to radiation therapy that is currently under development at the Company and a small number of academic medical centers. Adaptive radiotherapy is a process that will automatically trigger a new treatment plan during the course of therapy in order to adapt to anatomic changes that occur to the tumor. For example, as a tumor shrinks during treatment, adaptive radiotherapy will respond by generating a new treatment plan customized to the smaller tumor and further spare radiation exposure of nearby healthy organs.

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        All of our markets provide external beam treatments and following is a list of the advanced services and treatments that we offer within each of our U.S. local markets as of December 31, 2013:

 
   
   
   
   
   
   
   
  Stereotactic   Brachytherapy
Local market
  Year
Established
  Number of
Centers
  IMRT   3-D   Gamma   Gating   IGRT   Cranial   Extra-
Cranial
  High
Dose
  Low
Dose

Lee County, Florida

    1983     6   ü   ü   ü   ü   ü   ü   ü   ü   ü

Charlotte/Desoto Counties, Florida

    1986     2   ü   ü   ü   ü   ü   ü   ü   ü    

Sarasota/Manatee Counties, Florida

    1992     11   ü   ü   ü   ü   ü   ü   ü   ü    

Collier County, Florida

    1993     4   ü   ü   ü   ü   ü   ü   ü   ü    

Broward County, Florida

    1993     7   ü   ü   ü   ü   ü   ü   ü   ü    

Las Vegas, Nevada

    1997     4   ü   ü   ü   ü   ü   ü   ü   ü   ü

Westchester/Bronx, New York

    1997     3   ü   ü   ü       ü       ü   ü   ü

Mohawk Valley, New York

    1998     2   ü   ü   ü       ü   ü   ü   ü    

Delmarva Peninsula

    1998     2   ü   ü   ü       ü   ü   ü   ü    

Northwest Florida

    2001     3   ü   ü   ü   ü   ü   ü   ü   ü    

Western North Carolina

    2002     10   ü   ü   ü       ü   ü   ü   ü    

Palm Beach County, Florida

    2002     1   ü   ü   ü       ü           ü    

Central Kentucky

    2003     4   ü   ü   ü   ü   ü   ü   ü   ü    

Florida Keys

    2003     1   ü   ü   ü       ü   ü   ü   ü    

Southeastern Alabama

    2003     2   ü   ü   ü   ü   ü   ü   ü   ü    

South New Jersey

    2004     4   ü   ü   ü       ü           ü    

Rhode Island

    2004     3   ü   ü   ü       ü           ü    

Central Arizona

    2005     5   ü   ü   ü   ü   ü   ü   ü   ü   ü

Central Maryland

    2005     6   ü   ü   ü   ü   ü   ü   ü   ü    

Central Massachusetts

    2005     2   ü   ü   ü       ü                

Palm Springs, California

    2005     4   ü   ü   ü   ü   ü   ü   ü   ü   ü

Southern California

    2006     5   ü   ü   ü   ü   ü       ü   ü   ü

Southeastern Michigan

    2006     6   ü   ü   ü   ü   ü   ü   ü   ü    

Miami/Dade County, Florida

    2007     1   ü   ü   ü   ü   ü   ü   ü   ü    

Northern California

    2007     6   ü   ü   ü   ü   ü   ü       ü   ü

Eastern North Carolina

    2007     3   ü   ü   ü       ü       ü   ü    

Northeast Florida

    2008     6   ü   ü   ü       ü       ü        

South Carolina

    2010     1   ü   ü   ü   ü   ü   ü   ü   ü    

Central Florida

    2013     3   ü               ü                

Central California

    2013     9   ü   ü   ü   ü   ü   ü   ü   ü   ü

Indiana

    2013     4   ü   ü   ü   ü   ü   ü   ü   ü    
                                               

Total

          130                                    
                                               
                                               

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        All of our international markets provide external beam treatments and following is a list of the advanced services and treatments that we offer within international markets as of December 31, 2013:

 
   
   
   
   
   
   
   
  Stereotactic   Brachytherapy
International
  Year
Established
  Number of
Centers
  IMRT   3-D   Gamma   Gating   IGRT   Cranial   Extra-
Cranial
  High
Dose
  Low
Dose

Argentina

    2011     25   ü   ü               ü   ü         ü   ü

Costa Rica

    2011     2   ü   ü                                  

Dominican Republic

    2011     2   ü   ü               ü   ü         ü    

El Salvador

    2011     1   ü   ü                                  

Guatemala

    2011     1   ü   ü                   ü              

Mexico

    2011     2   ü   ü               ü                  
                                                     

          33                                          
                                                     
                                                     


Competitive Strengths

        We believe that the underlying industry trends provide for attractive, long-term market growth, and that our leading market position created by our competitive strengths will enable us to grow at a faster rate than the overall radiation therapy market.

Multiple Sources for Self-Sustaining Long-Term Growth

        The radiation therapy market is growing organically due to increases in cancer incidence, increases in the types of cancer addressable with technology and a stable pricing environment. Cancer incidence in the United States is estimated to increase by an approximately 2% rate annually through 2030, with an outsized proportion of treatments occurring in outpatient settings, which are expected to grow at approximately 31% compared to approximately 3% for inpatient services from 2013 to 2023. More precise delivery of radiation treatment has enabled radiation therapy to be utilized for additional types and sites of cancer, which has increased the addressable market for our services. In addition to this addressable market growth, commercial pricing changes have generally been positive as we continue to be relatively attractively priced and Medicare pricing is more stabilized due to the Center for Medicare & Medicaid Services ("CMS") approaching its goal of site neutrality and the industry's development of a meaningful collaborative relationship with CMS. International markets are growing faster than U.S. markets due to a significantly underserved patient population, increased detection, a growing middle-class, expanded insurance access and a stable pricing environment. In addition to underlying positive organic industry growth, we have implemented the following initiatives to accelerate our growth profile which are funded out of internally generated cash flow and selective borrowings:

    Organic Growth Enhancements—We have a strong focus on clinical quality and technology utilization to enable us to be the provider of choice for payers and patients. We strive to make available the most advanced technology to deliver a variety of treatment options to our patients in each local market. In addition to driving enhanced margin, this operating philosophy has enabled us to gain market share due to the technology's influence on our ability to attract and retain the most talented physicians and market a differentiated offering to patients while being lower cost than a hospital setting. In 2010, we implemented a physician liaison program whereby such personnel inform both potential and existing referring physicians about the variety and advanced nature of the radiation therapy services our affiliated radiation oncologists can offer to their patients. The significant number and scale of our recent acquisitions provides us the opportunity to enhance organic growth by deploying technology and our clinical capabilities as well as implementing our ICC model in these markets.

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    Acquisitions—Given our scale and national presence, the fragmented nature of our industry and the trend towards consolidation, we have a strong track record and robust opportunity to capitalize on low-risk acquisitions. These acquisitions are highly synergistic, given the ability to consolidate duplicative infrastructure, implement scaled business processes and improve existing managed care contracts. In addition, the application of our ICC model on acquired companies enables us to drive enhanced organic revenue growth at these acquired centers.

    Health System Partnerships and De Novo Centers—We look to leverage our core competencies to maximize the potential opportunity in each market we serve. We have a strong reputation for high clinical quality, cost effective care and experienced partnerships, which will enable us to continue to capitalize on the trend of increased hospital outsourcing. We leverage our local knowledge to develop new de novo sites to provide further market density. Where appropriate, we leverage our strong relationships with leading health systems to pursue and respond to requests for us to provide a full or partial outsourced solution for their cancer treatment programs.

    Strategic Relationships with Payers—We have developed and continue to explore alternative payment structures, including the first national contract for a bundled payment in cancer care with a national private payer, and other contracting arrangements with key commercial payers. Our initiatives have yielded positive results in preferred provider arrangements and an increased volume of longer dated contracts. As the only national provider of ICC services, we are uniquely positioned in these discussions with public and private payers and believe alignment with payers may provide a new avenue for revenue and profitability growth in the future.

Leading Player in Large and Fragmented Market

        We have 671 community-based physicians and provided approximately 4,150 radiation therapy treatments on average per day for the year ended December 31, 2013 in our 163 treatment centers. We believe this scale makes us the largest provider of cancer care services in the world, substantially larger than our next largest competitor. In addition to our national scale, we maintain a leading market position in the majority of our local markets.

        Our national scale affords us the opportunity to develop systems and processes efficiently and access technology that empowers our physicians to deliver best-in-class care. It also enables us to share and benefit from new approaches and recently developed findings across our network. Furthermore, our scale allows us to recognize benefits in areas such as revenue cycle management, purchasing, recruiting, compliance and quality assurance. Our leading local market shares, coupled with our national scale, strengthen our managed care contracting, our relationships with health systems and our ability to deploy innovative payment models, all of which enable us to capture greater patient census.

        Despite our scale, we estimate that our operations only comprise approximately 6% of the market for radiation therapy services in the United States, and a lower amount internationally, representing a robust opportunity to continue our acquisition growth strategies.

Industry Leading Technology and Clinical Platform

        We have developed what we believe to be a superior clinical, technological and training infrastructure. Our scaled and sophisticated infrastructure allows us to aggregate data for the benefit of research and alternative payment models, rapidly deploy advanced protocols to optimize patient care, recruit and retain best-in-class physicians and access differentiated opportunities. The backbone of our capabilities is our internally-developed Oncology Wide-Area Network ("OWAN") system which provides real-time clinical treatment information and serves as a repository for all of our clinical and patient data. Access to this data provides clinical information to measure quality outcomes while also enabling us to lead the change in industry payment methodologies as demonstrated in our development

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of the only national bundled payment arrangement for radiation therapy with a national private payer. OWAN also allows us to deploy our internally developed, proprietary software tool, Gamma Function, that we use to measure the effectiveness of radiation therapy delivery to our patients.

        Additionally, we run the only fully-accredited, privately-owned radiation therapy and dosimetry schools in the country and have an affiliated physics program with the University of Pennsylvania, which provide us a consistent source of high quality support clinicians. Proprietary technology and high quality support clinicians aid in our recruiting and retaining of best-in-class physicians. Due to our leading technological, clinical and operating capabilities, we have been selected to serve as the Managing and Development Partner of The New York Proton Center being developed in partnership with Memorial Sloan-Kettering Cancer Center, the Mount Sinai Health System (which includes six hospitals in the New York metropolitan area) and Montefiore Medical Center.

Innovative Integrated Approach to Markets

        We hold market leading positions in most of our local markets and have increased our market share by broadening our suite of cancer care services through employing and affiliating with scarce and valuable physicians in the highly specialized fields of medical oncology, breast, gynecological and general surgery, urology and primary care. Our ICC model enables us to manage an entire episode of care for cancer patients, optimize the quality of care, drive patient census and adapt to anticipated changes in payment methodology. The result of this is that, in our domestic markets where we have implemented our ICC model, we have experienced treatments per day growth at a 6% compound annual growth rate, which is in excess of national cancer incidence growth. A specific example of ICC's potential is in Asheville, North Carolina, where we entered into a value added services agreement with a hospital through a de novo deployment. We transitioned Asheville from a pure freestanding radiation oncology model to our ICC model and built a growing and resilient market presence. This has allowed us to achieve an approximately 65% increase in the revenue contribution of that business.

        In addition, our ICC model and local market strength enable us to be a key partner for health systems and payers. We have been able to transition select relationships with local health systems, ranging from fully outsourced cancer care programs to managed service lines, to become a more differentiated cancer care partner. For example, in Broward County, Florida we worked with the hospital to construct a complete outsourcing of their cancer care services. By recruiting physicians, streamlining operations and improving service levels at the hospital based sites we grew average treatments per day by 33% in 12 months and have converted the business from loss making service to stable, predictable and positive cash flow. Furthermore, managed care plans have increasingly directed patients to our coordinated model, and we believe we are well positioned to accept further bundled payment or other capitated arrangements for an episode of cancer care which may develop.

Proven Acquisition Methodology and Track Record

        We have invested heavily in corporate development and infrastructure to take advantage of a fragmented and rapidly consolidating market. Over the past three years ended December 31, 2013, we have acquired 11 companies representing 69 treatment centers. We have an experienced corporate development team that leverages the extensive market knowledge of our capable regional management to proactively identify and prioritize acquisition targets, as well as cost and synergy potential, based on demographics, payer landscape, ICC opportunity and competitive dynamics.

        Our pipeline of potential targets is robust and acquisitions will remain a significant part of our core growth strategy. We believe we have become a preferred acquisition partner in light of the breadth of services and benefits we can offer.

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Strong and Experienced Management Team with Demonstrated Track Record of Performance

        Our senior management team, several of whom are practicing physicians, has extensive public and private sector experience in healthcare. Eleven members of our senior management team have been with us for an average of 16 years and average approximately 19 years in the cancer care industry. These members have been the chief architects behind the Company's growth in revenue from $56.4 million in 1999 to $736.5 million in 2013. In order to capitalize on the opportunities in a consolidating, changing market and leverage our ICC model, we have bolstered our management team with senior level talent in key functional areas such as enterprise management, practice administration, managed care contracting, legal, information technology, acquisition integration and marketing. Management has more than $125 million currently invested in the Company.


Growth Strategy

        Our growth strategy leverages our competitive strengths to provide for long-term enhanced growth.

Capitalize on Organic Growth Opportunities

        The U.S. market for cancer treatment is growing due to the increasing incidence of the disease and a stable reimbursement environment. Over the past 10 years there has been a cumulative Medicare rate change of (15%) for freestanding centers in an effort to achieve site-neutral payments between hospital outpatient and freestanding centers. Today, freestanding centers are reimbursed approximately 11% less than hospital outpatient sites for certain treatments, which suggests that the trend of consistent price declines should end, and we should operate in a more constructive pricing environment in the future. Managed care pricing has been stable to positive for the Company as a result of our proactive contracting strategy whereby we emphasize both our integrated local presence and density while demonstrating our services are 17% less on average than hospital services. In addition, we have been successful in reducing volatility by decoupling our managed care contracts tied to Medicare from 22% in 2010 to 7% in 2013. The international market for cancer treatment is growing at a faster rate due to a lower level of treatment penetration relative to the United States, an increasing diagnosis rate, a growing middle class and expanded insurance access. In addition to this market growth, initiatives contributing to our revenue growth include: technology utilization, expansion of our ICC model, physician recruiting and increased patient flow from managed care plans. We continue to invest capital and resources behind these initiatives at our existing centers to drive long-term, sustainable growth. Evidence of this is our ability to grow at rates above cancer incidence growth in our ICC markets, which are currently only fully established in 18% of our markets. Our year-over-year domestic same market growth, which excludes new market acquisitions, and despite some volatility in the industry related to prostate treatment protocols, has been 1.0%, 2.0%, and 4.3% in each of the last three years ended December 31, 2013, respectively, for average treatments per day. In addition, international treatments per day has grown approximately 8% from 2010 to 2013. As a result, total global treatments per day have grown from approximately 2,992 in 2010 to approximately 4,150 for the twelve months ended December 31, 2013.

Opportunity Resulting from Recently Completed Acquisitions

        Over the year ended December 31, 2013, we completed three material acquisitions resulting in $164 million of acquired revenue which represents 24% of our revenue for the year ended December 31, 2012. We expect the recent acquisition of OnCure and investment in SFRO to contribute significantly to our growth. For OnCure, our largest acquisition to date, which closed on October 25, 2013, we have already implemented cost reductions expected to total approximately $13 million on an annual basis as a result of closing OnCure's headquarters and back office functions and transitioning certain centers from the OnCure management model to our provider model. We expect to achieve incremental cost savings, in addition to realizing substantial revenue synergies from improvements in

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managed care contracting and revenue cycle management, upgrade of technology and equipment at the legacy OnCure centers, implementation of our ICC model and deployment of our Gamma Function in the near future. For example, we expect to deploy our Gamma Function at all existing OnCure centers by the end of 2014, which will likely provide incremental revenue to our business.

        We believe our newest investment in SFRO, which closed on February 10, 2014, is highly synergistic as a result of the contiguous nature of our markets. SFRO is a leading provider of cancer care services, with 21 radiation therapy treatment facilities and 88 physicians, in the Southeast Florida region.

Continue to Pursue Our Acquisition Strategy

        Acquisitions and joint ventures are important parts of our expansion plans, and we have invested in the tools and infrastructure to capitalize on these opportunities to realize low-risk cost synergies and long-term growth. The landscape of radiation therapy and related physician specialists is highly fragmented. In 2013, there were approximately 2,350 locations providing radiation therapy in the United States, of which approximately 1,100 were freestanding, or non-hospital based, treatment centers. Only approximately 25% of freestanding treatment centers are affiliated with the largest three provider networks, with the Company holding approximately 13% of the freestanding market. In a broader trend, it is estimated that there are approximately 793,000 physicians in the United States today, of which 36% remain independent as compared to over 50% a decade ago. The Latin American radiation therapy market is similarly fragmented with most competition coming primarily from hospitals and some smaller local groups.

        For acquisitions, we target centers in our existing markets and new markets that have certificates of need, provide significant market share opportunities and where we can expand our ICC model. The foundation of our acquisition strategy is the implementation of our proven operating model at each of our newly acquired treatment centers. This includes the immediate realization of the benefits of scale and market density we provide, but also includes longer-term growth through our focus on technology and implementation of our ICC model. Our focus includes upgrading existing equipment and technologies, developing ICC relationships, introducing advanced therapies and services, providing clinical expertise and enabling our new physicians and patients to access our broad network of centers, contracts and resources.

Pursue Additional Hospital Partnership Opportunities

        We are focused on expanding our relationships with health systems partners. We believe our investments in the ICC model, new systems and data have uniquely positioned us as a partner of choice to health systems. We believe our current footprint only represents a small portion of this market and, as we gain greater local market scale and penetration of the ICC model, we expect our health system partnership discussions to accelerate. The structure of relationships with heath systems includes: joint ventures, management agreements, professional services agreements and full outsourcing of oncology service lines.

Expand in New and Existing International Markets

        Organic and acquisition growth opportunities for radiation therapy services outside of the United States are driven largely by higher volume growth from strong underlying demographic and healthcare industry trends, an underserved and fragmented market and increased access to and payment for technology in the treatment of cancer. In 2011, we acquired MDLLC, the oldest and largest company in Latin America dedicated to radiation therapy, which has served as a platform for our growth in the region. Since our initial investment in MDLLC in 2009, we acquired seven treatment centers and completed two de novo treatment centers in our international markets. We believe that our

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international operations provide a faster growth opportunity than in the United States, with MDLLC generating $90.9 million of revenues for the year ended December 31, 2013. We continue to pursue de novo centers, acquisitions, joint ventures and hospital partnerships to facilitate expansion in existing and new Latin American markets. Physicians in Latin America frequently use older generation equipment and technologies, such as cobalt machines. There are significant opportunities to transfer modern equipment that is not being utilized in the United States to our Latin American centers, thereby increasing our overall equipment utilization while raising the local market standard of care. This enables us to grow in this market through the deployment of advanced technologies such as intensity-modulated radiation therapy ("IMRT") and image guided radiation therapy ("IGRT"), resulting in higher average revenue per treatment, increased profitability and improved patient care.

        In addition to our strategy in Latin America, we will selectively evaluate and pursue expansion in other international markets to further enhance our growth profile and diversify our revenue.

Generate Additional Sources of Revenue from Value Added Services

        Capitalizing on our network, our long history and the breadth of our products and services, we have developed new value added services that we expect to generate additional sources of high-margin revenue outside the third-party reimbursement system. Examples of these value added services include management of the proton beam therapy project in New York, management of the oncology service line at multiple hospital systems, participation in clinical trials, monetization of our historical data and potential licensing of proprietary technology and clinical pathways. Additionally, we have recently launched CarePoint, a global cancer management solution that leverages our core competencies to provide third-party administrative management services for payers using our proprietary clinical pathways, data analytical capabilities and established provider network.


Operations

        We have 30 years of experience operating radiation treatment centers and over time have increasingly affiliated with physicians and other cancer care specialists. We have developed an integrated operating model, which is comprised of the following key elements:

Treatment Center Operations

        Our treatment centers are designed to deliver high-quality radiation therapy in a patient-friendly environment. A treatment center typically has one or two linear accelerators, with additional rooms for simulators, CT scans, physician offices, film processing and physics functions. In addition, treatment centers include a patient waiting room, dressing rooms, exam rooms and hospitality rooms, all of which are designed to minimize patient discomfort. As of December 31, 2013, in 22 of our treatment centers other cancer care specialists are co-located with our radiation therapy specialists. The remainder of our affiliated or employed non-radiation therapy physicians operate their practice with the relevant technical and clinical resources necessary to their disciplines.

        Cancer patients referred to one of our radiation oncologists are provided with an initial consultation, which includes an evaluation of the patient's condition to determine if radiation therapy is appropriate, followed by a discussion of the effects of the therapy. If radiation therapy is selected as a method of treatment, the medical staff engages in clinical treatment planning. Clinical treatment planning utilizes x-rays, CT imaging, ultrasound, PET imaging and, in many cases, advanced computerized 3-D conformal imaging programs, in order to locate the tumor, determine the best treatment modality and the treatment's optimal radiation dosage, and select the appropriate treatment regimen.

        Our radiation treatment centers typically range from 5,000 to 12,000 square feet, have a radiation oncologist and a staff ranging between ten and 25 people, depending on treatment center capacity and

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patient volume. The typical radiation therapy treatment center staff includes: radiation therapists, who deliver the radiation therapy, medical assistants or medical technicians, an office financial manager, receptionist, transcriptionist, block cutter, file clerk and van driver. In markets where we have more than one treatment center, we can more efficiently provide certain specialists to each treatment center, such as physicists, dosimetrists and engineers who service the treatment centers within that local market.

Standardized Operating Procedures

        We have developed standardized operating procedures for our treatment centers in order to ensure that our professionals are able to operate uniformly and efficiently. Our manuals, policies and procedures are refined and modified as needed to increase productivity and efficiency and to provide for the safety of our employees and patients. We believe that our standard operating procedures facilitate the interaction of physicians, physicists, dosimetrists, radiation therapists and other employees and permit the interchange of employees among our treatment centers. In addition, standardized procedures facilitate the training of new employees. The quality of our operating and related quality assurance procedures has been recognized by the accrediting bodies in our field, namely the American College of Radiology (ACR) and the American College of Radiation Oncology (ACRO).

Coding and Billing

        Coding involves the translation of data from a patient's medical chart to our billing system for submission to third-party payers. Our treatment centers provide radiation therapy services under approximately 60 different professional and technical codes, which determine reimbursement. Our Chief Medical Officer and Chief Compliance Officer along with our certified professional coders work together to establish coding and billing rules and procedures to be utilized at our radiation treatment centers providing consistency across centers. In each treatment center, our certified coders are in charge of executing these rules and procedures with the trained personnel located at each treatment center. To provide an external check on the integrity of the coding process, we conduct internal audits and have also retained the services of a third-party consultant to review and assess our coding procedures and processes on a periodic basis. Billing and collection functions are centrally performed by staff at our executive offices. This allows us to acquire and develop radiation oncology as well as other ICC practices with limited additional resources. Additionally, in an effort to improve collection of patient receivables, we have increased efforts to confirm patient eligibility with payers, verify specific insurance coverage, and facilitate individual payment plans.

Management Information Systems

        We utilize centralized management information systems to closely monitor data related to each treatment center's operations and financial performance. Our management information systems are used to track patient data, physician productivity and coding, as well as billing functions. Our management information systems also provide monthly budget analyses, financial comparisons to prior periods and comparisons among treatment centers, thus enabling management to evaluate the individual and collective performance of our treatment centers. We developed a proprietary image and text retrieval system referred to as the Oncology Wide-Area Network ("OWAN"), which facilitates the storage and review of patient medical charts and films. We periodically review our management information systems for possible refinements and upgrading. Our management information systems personnel install and maintain our system hardware, develop and maintain specialized software and are able to integrate the systems of the practices we acquire.

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Maintenance and Physics Departments

        We have established maintenance and physics departments which implement standardized procedures for the acquisition, installation, calibration, use, maintenance and replacement of our linear accelerators, simulators and related equipment, as well as to the overall operation of our treatment centers. Our engineers, in conjunction with manufacturers' representatives, perform preventive maintenance, repairs and installations of our linear accelerators. This enables our treatment centers to ensure quality, maximize equipment productivity and minimize downtime. In addition, the maintenance department maintains a warehouse of linear accelerator parts in order to provide equipment backup. Our physicists monitor and test the accuracy and integrity of each of our linear accelerators on a regular basis to ensure the safety and effectiveness of patient treatment. This testing also helps ensure that the linear accelerators are uniformly and properly calibrated. Independent machine verifications are done annually using the services provided by the M.D. Anderson Radiation Physics Center to confirm proper calibrations. This allows us to reduce down time, complete preventative maintenance, and improve reliability in a cost effective manner, including in our Latin American operations.

Total Quality Management Program

        We strive to achieve total quality management throughout our organization. Our treatment centers, either directly or in cooperation with the appropriate professional corporation or hospital, have a standardized total quality management program consisting of programs to monitor the design of the individual treatment of the patient via the evaluation of charts by radiation oncologists, physicists, dosimetrists and radiation therapists and for the ongoing validation of radiation therapy equipment. Each of our new radiation oncologists is assigned to a senior radiation oncologist who reviews each patient's course of treatment through the patient's medical chart using our OWAN. Furthermore, the data in our patient database is used to evaluate patient outcomes and to modify treatment patterns as necessary to improve patient care. We also utilize patient questionnaires to monitor patient satisfaction with the care that they receive. Using the data from these questionnaires, as well as third-party data, we assign each of our physicians and centers a patient satisfaction score, which helps us identify opportunities for improvement and better understand best practices within our treatment centers.

Clinical Research

        We believe that a well-managed clinical research program enhances the reputation of our physicians and our ability to recruit new cancer specialists. Our treatment centers participate in national cooperative group trials and we have a full-time, in-house research staff to assure compliance with such trials and to perform related outcome analyses. We maintain a proprietary database of information on over 148,000 patients. The data collected includes tumor characteristics such as stage, histology and grade, radiation treatment parameters, other treatments delivered and complications. This data can be used to conduct research, measure quality outcomes and improve patient care. We have also been able to capitalize on the sale of our data to other related disciplines. These research and outcome studies often are presented at international conferences and published in trade journals. Through 2013, our radiation oncologists have published approximately 775 articles in peer reviewed journals and related periodicals.

Payer Contracting

        In an effort to enhance and improve our relationships with managed care and commercial payers, we have added management resources with experience in payer contracting. As a result, we have been able to improve contract terms and increase payment rates in many cases. In addition, we have developed an episode of care or bundled payment agreement with Humana and are working to develop similar arrangements with other payers. We believe these innovative payment approaches will improve alignment and increase our business opportunities with these payers.

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CarePoint

        CarePoint offers a comprehensive suite of cancer management solutions to insurers, providers, employers and other entities that are financially responsible for the health of defined populations. With proven capabilities to manage medical, radiation and surgical oncology care across the entire continuum of settings, CarePoint represents a unique offering in the health services marketplace. Advanced technology and third-party administrator services, cost management solutions and a focused oncology-specific clinical model enable CarePoint to improve quality and reduce total oncology cost of care for its clients. CarePoint tailors its solutions to the needs of each customer and provides assistance through full-risk transfer, "a la carte" administrative services only packages or hybrid models. Regardless of the engagement model, CarePoint drives clinical and financial results in a provider supportive approach that benefits management firms and other entities are often not able to achieve.

Educational Initiatives

        In 1989, we founded The Radiation Therapy School for Radiation Therapy Technology, which is accredited by the Joint Review Committee on Education in Radiologic Technology. The school trains individuals to become radiation therapists. Upon graduation, students become eligible to take the national registry examination administered by the American Registry of Radiologic Technologists. Radiation therapists are responsible for administering treatments prescribed by radiation oncologists and monitoring patients while under treatment. Since opening in 1989, the school has produced 155 graduates, 79 of whom are currently employed by us.

        Recognizing a growing need for individuals trained in treatment planning, we founded a Training Program for Medical Dosimetry in 2005. As of December 31, 2013, a total of 29 trainees/prospective students have completed or are in the process of completing the program in dosimetry.

        In addition, we have an affiliated physics program with the University of Pennsylvania to provide internship training sites for their Masters and PhD programs in Medical Physics.

Privacy of Medical Information

        We focus on being compliant with regulations under HIPAA, regarding privacy, security and transmission of health information. We have implemented such regulations into our existing systems, standards and policies to ensure compliance.

Compliance Program

        We have a compliance program that is consistent with guidelines issued by the OIG. As part of this compliance program, we adopted a code of ethics and have a full-time compliance officer at the corporate level. Our program includes an anonymous hotline reporting system, compliance training programs, auditing and monitoring programs and a disciplinary system to enforce our code of ethics and other compliance policies. It also includes a process for screening all employees through applicable federal and state databases of sanctioned individuals. Auditing and monitoring activities include claims preparation and submission and also cover issues such as coding, billing, regulatory compliance and financial arrangements with physicians. These areas are also the focus of our specialized training programs.


Treatment Centers

        As of December 31, 2013, we owned, operated and managed 163 treatment centers in our 6 domestic divisions and our international markets of which:

    38 were internally developed;

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    117 were acquired (including two which were transitioned from professional/other to freestanding); and

    Eight are operated under professional and other service arrangements.

        Of the 163 total centers, 41 are operated in partnership with health systems and other clinics and community-based sites. In the United States, 32 of these centers are either based on a hospital campus or affiliated with a hospital system, and in Central and South America, nine of these centers are either based on a hospital campus or affiliated with a hospital system.

Internally Developed

        As of December 31, 2013, we operated 38 internally developed treatment centers located in Alabama, Argentina, Arizona, California, El Salvador, Florida, Massachusetts, Michigan, Nevada, New Jersey, New York and Rhode Island. In 2009, we developed new treatment centers in Hammonton, New Jersey; Indio, California; Fort Myers, Florida; Southbridge, Massachusetts; Gilbert, Arizona; Providence, Rhode Island and Yucca Valley, California and in the first half of 2010, we opened de novo treatment centers in Pembroke Pines, Florida and El Segundo, California. In March 2011, we completed a de novo treatment center in El Salvador and in August 2011, we opened a replacement de novo radiation treatment facility in Alabama. In August 2012, we completed a de novo radiation treatment facility in Argentina. In February 2013, we completed a de novo treatment center in Troy, Michigan and during September 2013, we opened a de novo treatment center in Argentina. Our team is experienced in the design and construction of radiation treatment centers, having developed five treatment centers in the past three years ended December 31, 2013. Our newly developed treatment centers typically achieve positive cash flow within six to fifteen months after opening.

Acquired Treatment Centers

        As of December 31, 2013, we operated 117 acquired treatment centers (including two which were transitioned from professional/other to freestanding) located in Alabama, Arizona, California, Florida, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, South Carolina and West Virginia, including 31 acquired treatment centers in South America, Central America, Mexico and the Caribbean. Since January 1, 2011, we have acquired 69 treatment centers of which 32 were acquired in 2011, two were acquired in 2012, and 35 were acquired in 2013. We plan to continue to enter new markets through the acquisition of established treatment centers from time to time. As part of our ongoing acquisition strategy, we continually evaluate potential acquisition opportunities.

Professional and Other Group Treatment Centers

        As of December 31, 2013, we operated eight of our treatment centers pursuant to professional and other service arrangements. We provide services at all of our professional/other treatment centers pursuant to written agreements with hospitals. A professional corporation owned by certain of our equityholders provides the radiation oncologists for our professional/other treatment centers in Mohawk Valley—New York. In connection with certain of our professional/other treatment center services, we provide technical and administrative services. Professional services in our North Carolina professional/other center are provided by physicians employed by a professional corporation owned by certain of our officers, directors and equityholders. Professional services consist of services provided by radiation oncologists to patients. Technical services consist of the non-professional services provided by us in connection with radiation treatments administered to patients. Administrative services consist of services provided by us to the professional/other center. The contracts under which the professional/other treatment centers are provided service are generally three to seven years with terms for renewal.

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Treatment Center Structure

Alabama, Arizona, Florida, Kentucky, Maryland, New Jersey, Rhode Island, South Carolina and West Virginia Treatment Centers

        In Alabama, Arizona, Florida, Kentucky, Maryland, New Jersey, Rhode Island, South Carolina and West Virginia, we employ or contract with radiation oncologists and other healthcare professionals. Substantially all of our radiation oncologists in these states have employment agreements or other contractual arrangements with us. While we exercise legal control over radiation oncologists we employ, we do not exercise control over, or otherwise influence, their medical judgment or professional decisions. Such radiation oncologists typically receive a base salary, fringe benefits and may be eligible for an incentive performance bonus. In addition to compensation, we provide our radiation oncologists with uniform benefit plans, such as disability, retirement, life and group health insurance and medical malpractice insurance. The radiation oncologists are required to hold a valid license to practice medicine in the jurisdiction in which they practice and, with respect to inpatient or hospital services, to become a member of the medical staff at the contracting hospital with privileges in radiation oncology. We are responsible for billing patients, hospitals and third-party payers for services rendered by our radiation oncologists. Most of our employment agreements prohibit the physician from competing with us within a defined geographic area and prohibit solicitation of our radiation oncologists, other employees or patients for a period of one to two years after termination of employment.

California, Massachusetts, Michigan, Nevada, New York and North Carolina Treatment Centers

        Many states, including California, Massachusetts, Michigan, Nevada, New York and North Carolina prohibit us from employing radiation oncologists. As a result, we operate our treatment centers in such states pursuant to administrative services agreements between professional corporations and our wholly owned subsidiaries. In the states of California, Massachusetts, Michigan, Nevada, New York and North Carolina, our treatment centers are operated as physician office practices. We typically provide technical services to these treatment centers in addition to our administrative services. For the years ended December 31, 2011, 2012 and 2013 approximately 18.0%, 19.4% and 18.4% of our net patient service revenue, respectively, was generated by professional corporations with which we have administrative services agreements. The professional corporations with which we have administrative services agreements in California, Massachusetts, Michigan, Nevada, New York and North Carolina are owned by certain of our directors, physicians and equityholders, who are licensed to practice medicine in the respective state.

        Our administrative services agreements generally obligate us to provide certain treatment centers with equipment, staffing, accounting services, billing and collection services, management, technical and administrative personnel and assistance in managed care contracting. Our administrative services agreements provide for the professional corporations to pay us a monthly service fee, which represents the fair market value of our services. It also provides for the parties to meet annually to reevaluate the value of our services and establish the fair market value. In California, Massachusetts, and Nevada, we are paid a fee based upon a fixed percentage of global revenue. In Michigan, we are paid a fee based upon a fixed percentage of net income. In New York and North Carolina, we are paid a fixed fee per procedure. The terms of our administrative services agreements with professional corporations range from 20 to 25 years and typically renew automatically for additional five-year periods. Under related agreements in certain states, we have the right to designate purchases of shares held by the physician owners of the professional corporations to qualified individuals under certain circumstances.

        Our administrative services agreements contain restrictive covenants that preclude the professional corporations from hiring another management services organization for some period after termination. The professional corporations are parties to employment agreements with the radiation oncologists.

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The terms of these employment agreements typically range from three to five years depending on the physician's experience.

        As a result of the OnCure Acquisition, in several markets we rely on physician practices to provide our services. Following our acquisition of OnCure, we assumed the MSAs previously in place between OnCure and most of its managed practices, which excluded certain of the MSAs that were rejected in the OnCure bankruptcy proceeding, with all but five of the affected centers becoming either a direct Company provider or placed under a new MSA with a practice that was previously affiliated with us. Under the MSAs, OnCure provides the necessary medical and office equipment, clinical and operating staff (other than physicians) and office space and leasehold improvements, as well as general management and billing/collection services, in exchange for a management fee based on a percentage of the practice's revenues or EBITDA. The MSAs generally run for a term of ten years or longer with either party having the right to renew. Upon the termination or expiration of an MSA, OnCure retains the ownership of the office space and medical and office equipment, as well as the right to operate the center with a different medical provider. While there are certain reciprocal non-compete obligations, such obligations generally terminate upon the termination of the MSA.


Networking

        Our radiation oncologists are primarily referred to patients by: primary care physicians, medical oncologists, surgical oncologists, urologists, pulmonologists, neurosurgeons and other physicians within the medical community. Our radiation oncologists are expected to actively develop their referral base by establishing strong clinical relationships with referring physicians. Our radiation oncologists develop these relationships by describing the variety and advanced nature of the therapies offered at our treatment centers, by providing seminars on advanced treatment procedures and by involving the referring physicians in those advanced treatment procedures. Patient referrals to our radiation oncologists also are influenced by managed care organizations with which we actively pursue contractual agreements.

        In 2010, we implemented a physician liaison program whereby such personnel inform both potential and existing referring physicians about the variety and advanced nature of the radiation therapy services our affiliated radiation oncologists can offer to their patients. Our physician liaison program has grown from three physician liaisons in 2010 to 31 as of December 31, 2013.


Employees

        As of December 31, 2013, we employed approximately 3,880 employees, including approximately 777 employees in our international markets. As of December 31, 2013, we were affiliated with 156 radiation oncologists in the United States that were employed or under contract with us or our affiliated professional corporations. We do not employ any radiation oncologists in California, Massachusetts, Michigan, Nevada, New York or North Carolina due to the laws and regulations in effect in these states. None of our employees in our domestic markets are a party to a collective bargaining agreement and we consider our relationships with our employees to be good. Approximately 410 employees in our international markets are covered by a collective bargaining agreement with the Health Care Providers Union corresponding to the agreement N° 108/75. The agreement does not have a fixed term, although payment increase is negotiated every year by the labor union. There currently is a nationwide shortage of radiation oncologists and other medical support personnel, which makes recruiting and retaining these employees difficult. We provide competitive wages and benefits and offer our employees a professional work environment that we believe helps us recruit and retain the staff we need to operate and manage our treatment centers. In addition to our radiation oncologists, we currently employ in the United States, 124 urologists, 35 surgeons and surgical oncologists, 25 medical oncologists and seven gynecological and other oncologists, four pathologists, two pulmonologists, three dermatologists and 4 primary care physicians whose practices complement our business in eight markets

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in Florida as well as our Arizona, California, Michigan, New Jersey, New York, North Carolina, Rhode Island, and South Carolina local markets.


Seasonality

        Our results of operations historically have fluctuated on a quarterly basis and can be expected to continue to fluctuate. Many of the patients of our Florida treatment centers are part-time residents in Florida during the winter months. Hence, these treatment centers have historically experienced higher utilization rates during the winter months than during the remainder of the year. In addition, volume is typically lower in the summer months due to traditional vacation periods. As of December 31, 2013, 45 of our 130 U.S. radiation treatment centers are located in Florida.


Insurance

        We are subject to claims and legal actions in the ordinary course of business. To cover these claims, we maintain professional malpractice liability insurance and general liability insurance in amounts we believe are sufficient for our operations. We maintain professional malpractice liability insurance that provides primary coverage on a claims-made basis per incident and in annual aggregate amounts. Our professional malpractice liability insurance coverage is provided by an insurance company owned by certain of our directors, executive officers and equityholders. The malpractice insurance provided by this insurance company varies in coverage limits for individual physicians. The insurance company also carries excess claims-made coverage through Lloyd's of London. In addition, we currently maintain multiple layers of umbrella coverage through our general liability insurance policies. We maintain Directors and Officers liability insurance.


Competition

        The cancer care market is highly fragmented and our business is highly competitive. Competition may result from other radiation oncology practices, solo practitioners, companies in other healthcare industry segments, large physician group practices or radiation oncology physician practice management companies, hospitals and other operators of other radiation treatment centers, some of which may have greater financial and other resources than us. We believe our radiation treatment centers are distinguishable from those of many of our competitors because we offer patients a full spectrum of advanced radiation therapy options that are not otherwise available in certain geographies or offered by other providers, and which are administered by highly trained personnel and leading radiation oncologists.


Intellectual Property

        We have not registered our service marks or any of our logos with the U.S. Patent and Trademark Office. However, some of our service marks and logos may be subject to other common law intellectual property rights. We do not hold any patents. We own the rights to a copyright that protects the content of our Gamma Function software code.

        To date, we have not relied heavily on patents or other intellectual property in operating our business. Nevertheless, some of the information technology purchased or used by us may be patented or subject to other intellectual property rights. As a result, we may be found to be, or actions may be brought against us alleging that we are, infringing on the trademark, patent or other intellectual property rights of others, which could give rise to substantial claims against us. In the future, we may wish to obtain or develop trademarks, patents or other intellectual property. However, other practices and public entities, including universities, may have filed applications for (or have been issued) trademarks, patents or other intellectual property rights that may be the same as or similar to those developed or otherwise obtained by us or that we may need in the development of our own intellectual

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property. The scope and validity of such trademark, patent and other intellectual property rights, the extent to which we may wish or need to acquire such rights and the cost or availability of such rights are presently unknown. In addition, we cannot provide assurance that others will not obtain access to our intellectual property or independently develop the same or similar intellectual property to that developed or otherwise obtained by us.


Government Regulations

        The healthcare industry is highly regulated and the federal and state laws that affect our business are extensive and subject to frequent changes. Federal law and regulations are based primarily upon the Medicare and Medicaid programs, each of which is financed, at least in part, with federal money. State jurisdiction is based upon the state's authority to license certain categories of healthcare professionals and providers, the state's interest in regulating the quality of healthcare in the state, regardless of the source of payment, and state healthcare programs. The significant federal and state regulatory laws that could affect our ability to conduct our business include without limitation those regarding:

    false and other improper claims;

    HIPAA;

    civil monetary penalties law;

    privacy, security and code set regulations;

    anti-kickback laws;

    the Stark Law and other self-referral and financial inducement laws;

    fee-splitting;

    corporate practice of medicine;

    antitrust;

    licensing; and

    certificates of need.

        A violation of these laws could result in significant civil and criminal penalties, the refund of monies paid by government and/or private payers, exclusion of the physician, the practice or us from participation in Medicare and Medicaid programs and/or the loss of a physician's license to practice medicine. We exercise care in our efforts to structure our arrangements and our practices to comply with applicable federal and state laws. We have a Compliance Committee and a Corporate Compliance Program in place to review our practices and procedures. Although we believe we are in material compliance with all applicable laws, these laws are complex and a review of our practices by a court, or law enforcement or regulatory authority could result in an adverse determination that could harm our business. Furthermore, the laws applicable to us are subject to change, interpretation and amendment, which could adversely affect our ability to conduct our business. No assurance can be given that we will be able to comply with any future laws or regulations.

        We estimate that approximately 48%, 45% and 45% of our net patient service revenue for 2011, 2012 and 2013, respectively, consisted of reimbursements from Medicaid and Medicare government programs. In order to be certified to participate in the Medicare and Medicaid programs, each provider must meet applicable conditions of participation and regulations relating to, among other things, operating policies and procedures, maintenance of equipment, personnel, standards of medical care and compliance with applicable federal, state and local laws. Our treatment centers are certified to participate in the Medicare and Medicaid programs.

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Federal Law

        Unless otherwise specified, the federal healthcare laws described in this section apply in any case in which we are providing an item or service that is reimbursable under government healthcare programs, including Medicare or Medicaid. The principal federal laws that affect our business include those that prohibit the filing of false or improper claims with government healthcare programs, those that prohibit unlawful inducements for the referral or generation of business reimbursable under Medicare or Medicaid and those that prohibit the provision of certain services by an entity that has a financial relationship with the referring physician.

False and Other Improper Claims

        Under the federal False Claims Act, the government may fine us if we knowingly submit, or participate in submitting, any claims for payment that are false or fraudulent, or that contain false or misleading information, or if we knowingly conceal or knowingly and improperly avoid or decrease an obligation to pay or transmit money or property to the government. An "obligation" includes an established duty arising from an express or implied contractual arrangement, from statute or regulation, or from the retention of an overpayment. Knowingly making or using a false record or statement to receive payment from the federal government or to improperly retain payment is also a violation. The False Claims Act does not require proof of specific intent to defraud: a provider can be found liable for submitting false claims with actual knowledge or with reckless disregard or deliberate ignorance of such falseness.

        A False Claims lawsuit may be brought by the government or by a private individual by means of a "qui tam" action. A whistleblower shares in the proceeds of the case, typically being awarded between 15 and 25 percent of the proceeds. Such lawsuits have increased significantly in recent years. In addition, the federal government has engaged a number of nongovernmental-audit organizations to assist it in tracking and recovering false claims for healthcare services.

        If we were ever found to have violated the False Claims Act, we would likely be required to make significant payments to the government (including treble damages and per claim penalties in addition to the reimbursements previously collected) and could be excluded from participating in Medicare, Medicaid and other government healthcare programs. Many states have similar false claims statutes. Healthcare fraud is a priority of the U.S. Department of Justice, the OIG and the Federal Bureau of Investigation which continue to devote a significant amount of resources to investigating healthcare fraud. State Medicaid agencies also have similar fraud and abuse authority, and many states have enacted laws similar to the federal False Claims Act.

        While the criminal statutes generally are reserved for instances evidencing fraudulent intent, the civil and administrative penalty statutes are applied to an increasingly broad range of circumstances. Examples of activities giving rise to false claims liability include, without limitation, billing for services not rendered, billing for services not rendered in compliance with complex Medicare and Medicaid regulations and guidance, misrepresenting services rendered (i.e., miscoding) 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. An entity may also be subjected to False Claims Act liability for violations of the federal anti-kickback statute or the Stark Law.

        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. A civil action may also be pursued under state insurance fraud statutes, in the case of claims filed with private insurers.

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        We believe our billing and documentation practices comply with applicable laws and regulations in all material respects. We submit thousands of reimbursement claims to Medicare and Medicaid each year, however, and therefore can provide no assurance that our submissions are free from errors. Although we monitor our billing practices for compliance with applicable laws, such laws are very complex and the regulations and guidance interpreting such laws are subject to frequent changes and differing interpretations.

HIPAA Criminal Penalties

        HIPAA imposes criminal penalties for fraud against any healthcare benefit program and for obtaining money or property from a healthcare benefit program through false pretenses. HIPAA also provides for broad prosecutorial subpoena authority and authorizes certain property forfeiture upon conviction of a federal healthcare offense. Significantly, the HIPAA provisions apply not only to federal programs, but also to private health benefit programs. HIPAA also broadened the authority of the OIG to exclude participants from federal healthcare programs. If the government were to seek any substantial penalties against us pursuant to these provisions, such an action could have a material adverse effect on us.

HIPAA Civil Penalties

        HIPAA broadened the scope of certain fraud and abuse laws by adding several civil statutes that apply to all healthcare services, whether or not they are reimbursed under a federal healthcare program. HIPAA established civil monetary penalties for certain conduct, including upcoding and billing for medically unnecessary goods or services.

HIPAA Administrative Simplifications

        The federal regulations issued under HIPAA contain provisions that:

    protect individual privacy by limiting the uses and disclosures of individually identifiable health information;

    require notifications to individuals, and in certain cases to government agencies and the media, in the event of a breach of unsecured protected health information;

    require the implementation of administrative, physical and technological safeguards to ensure the confidentiality, integrity and availability of individually identifiable health information in electronic form; and

    prescribe specific transaction formats and data code sets for certain electronic healthcare transactions.

        If we fail to comply with HIPAA, we may be subject to civil monetary penalties up to $50,000 per violation, not to exceed $1.5 million per calendar year for non-compliance of an identical provision, and, in certain circumstances, criminal penalties with fines up to $250,000 per violation and/or imprisonment. State attorneys general can bring a civil action to enjoin a HIPAA violation or to obtain statutory damages up to $25,000 per violation on behalf of residents of his or her state.

        The DHHS has discretion in setting the amount of a civil monetary penalty ("CMP"), and may waive it entirely for violations due to reasonable cause and not willful neglect if the payment would be excessive relative to the violation. A CMP is waived entirely for failures due to reasonable cause that are corrected during a 30-day grace period. The regulations also provide for an affirmative defense if a covered entity can show that the violation was not due to willful neglect and was corrected within the 30-day grace period or an additional period deemed appropriate by the DHHS. Reasonable cause means an act or omission in which a covered entity or business associate knew, or by reasonable

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diligence would have known, that the act or omission was a HIPAA violation, but one in which the covered entity or business associate did not act with willful neglect. Willful neglect is defined as conscious, intentional failure or reckless indifference to the obligation to comply. The factors to be considered in determining the amount of the penalty include the nature and circumstances of the violation, the degree of culpability, the history of other violations, and the extent of the resulting harm.

        The HIPAA regulations related to privacy establish comprehensive federal standards relating to the use and disclosure of protected health information. The privacy regulations establish limits on the use and disclosure of protected health information, provide for patients' rights, including rights to access, request amendment of, and receive an accounting of certain disclosures of protected health information, and require certain safeguards for protected health information. In general, the privacy regulations do not supersede state laws that are more stringent or grant greater privacy rights to individuals. We believe our operations are in material compliance with the privacy regulations, but there can be no assurance that the federal government would agree.

        Effective September 23, 2009, HIPAA requires that individuals be notified without unreasonable delay and within 60 days of their protected health information having been inappropriately accessed, acquired or disclosed. Depending on the number of individuals affected by such a breach, notification may be required to the media and federal government as well. The regulations prescribe the method and form of the required notices. Civil penalties up to $50,000 per violation with a maximum of $1.5 million per year may attach to failures to notify.

        The Omnibus HIPAA Rule, published on January 25, 2013 and now effective, imposed significant additional obligations and liability on business associates. Business associates are now directly obligated to adhere to the HIPAA Security Rule and certain provisions of the HIPAA Privacy and Breach Notification Rules, such that violations of these rules can be enforced by the government directly against the business associate.

        The HIPAA security regulations establish detailed requirements for safeguarding protected health information that is electronically transmitted or electronically stored. Some of the security regulations are technical in nature, while others may be addressed through policies and procedures. We believe our operations are in material compliance with the security regulations, but there can be no assurance that the federal government would agree.

        The HIPAA transaction standards regulations are intended to simplify the electronic claims process and other healthcare transactions by encouraging electronic transmission rather than paper submission. These regulations provide for uniform standards for data reporting, formatting and coding that we must use in certain transactions with health plans. We believe our operations comply with these standards, but there can be no assurance that the federal government would agree.

        Although we believe that we are in material compliance with these HIPAA regulations with which compliance is currently required, we cannot guarantee that the federal government would agree. Furthermore, additional changes to the HIPAA regulations are expected to be forthcoming in the next few years, which will require additional efforts to ensure compliance.

Anti-Kickback Law

        Federal law commonly known as the "Anti-kickback Statute" prohibits the knowing and willful offer, solicitation, payment or receipt of anything of value (direct or indirect, overt or covert, in cash or in kind) which is intended to induce:

    the referral of an individual for a service for which payment may be made by Medicare and Medicaid or certain other federal healthcare programs; or

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    the ordering, purchasing, leasing, or arranging for, or recommending the purchase, lease or order of, any service or item for which payment may be made by Medicare, Medicaid or certain other federal healthcare programs.

        The Anti-kickback Statute has been broadly interpreted by a number of courts to prohibit remuneration which is offered or paid for otherwise legitimate purposes if the circumstances show that one purpose of the arrangement is to induce referrals. Even bona fide investment interests in a healthcare provider may be questioned under the Anti-kickback Statute if the government concludes that the opportunity to invest was offered as an inducement for referrals. The penalties for violations of this law include civil and criminal sanctions including fines and/or imprisonment and exclusion from federal healthcare programs.

        Our compensation and other financial arrangements, including leases, with physicians implicate the Anti-kickback Statute. The federal government has published regulations that provide "safe-harbors" that protect certain arrangements under the Anti-kickback Statute so long as certain requirements are met. We believe that our employment and leasing arrangements comply with applicable safe harbors. Failure to meet the requirements of a safe harbor, however, does not necessarily mean a transaction violates the Anti-kickback Statute. There are several aspects of our relationships with physicians to which the Anti-kickback Statute may be relevant. We claim reimbursement from Medicare or Medicaid for services that are ordered, in some cases, by our radiation oncologists who have ownership interests in the Company. Although neither the existing nor potential investments in us by physicians qualify for protection under the safe harbor regulations, we do not believe that these activities fall within the type of activities the Anti-kickback Statute was intended to prohibit. We also claim reimbursement from Medicare and Medicaid for services referred from other healthcare providers with whom we have financial arrangements, including compensation for employment and professional services. While we believe that these arrangements generally fall within applicable safe harbors or otherwise do not violate the law, there can be no assurance that the government will agree, in which event we could be harmed.

        We believe our operations are in material compliance with applicable Medicare and Medicaid and fraud and abuse laws and seek to structure arrangements to comply with applicable safe harbors where reasonably possible. There is a risk however, that the federal government might investigate such arrangements and conclude they violate the Anti-kickback Statute. Violations of the Anti- kickback Statute also subjects an entity to liability under the False Claims Act, including via "qui tam" action. If our arrangements were found to be illegal, we, the physician groups and/or the individual physicians would be subject to civil and criminal penalties, including exclusion from the participation in government reimbursement programs, and our arrangements would not be legally enforceable, which could materially adversely affect us.

        Additionally, the OIG issues advisory opinions that provide advice on whether proposed business arrangements violate the anti-kickback law. In Advisory Opinion 98-4, the OIG addressed physician practice management arrangements. In Advisory Opinion 98-4, the OIG found that administrative services fees based on a percentage of practice revenue may violate the Anti-kickback Statute under certain circumstances, and the OIG reiterated in Advisory Opinion 11-17 a concern with percentage fees based on gross collections. While we believe that the fees we charge for our services under the administrative services agreements are commensurate with the fair market value of the services and our arrangements are in material compliance with applicable law and regulations, we cannot guarantee that the OIG would agree. Any such adverse finding could have a material adverse impact on us.

Federal Self-Referral Law (The Stark Law)

        We are also subject to federal and state statutes banning payments and assigning penalties for referrals by physicians to healthcare providers with whom the physicians (or close family members) have a financial relationship. The Stark Law prohibits a physician from referring a patient to a

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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 radiology services, infusion therapy, radiation therapy and supplies, clinical laboratory, diagnostic imaging, outpatient prescription drugs and hospital services, among others. In addition to the conduct directly prohibited by the law, the statute also prohibits "circumvention schemes," that are designed to obtain referrals indirectly that cannot be made directly. The regulatory framework of the Stark Law is to first prohibit all referrals from physicians to entities for Medicare DHS and then to except certain types of arrangements from that broad general prohibition.

        Violation of these laws and regulations 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, $100,000 for a circumvention scheme, criminal penalties, exclusion from Medicare and Medicaid programs, and potential false claims liability, including via "qui tam" action, of not less than $5,500 and not more than $11,000, plus three times the amount of damages that the government sustains because of an improperly submitted claim. The repayment provisions in Stark are not dependent on the parties having an improper intent; rather, Stark is a strict liability statute and any violation is subject to repayment of all "tainted" referrals.

        Our compensation and other financial arrangements with physicians implicate the Stark Law. The Stark Law, however, contains exceptions applicable to our operations. We rely on exceptions covering employees, leases, and in-office ancillary services, as well as the "group practice" definition that allows for certain compensation and profit sharing methodologies. Additionally, the definition of "referral" under the Stark Law excludes referrals of radiation oncologists for radiation therapy if (1) the request is part of a consultation initiated by another physician; and (2) the tests or services are furnished by or under the supervision of the radiation oncologist. We believe the services rendered by our radiation oncologists will comply with this exception to the definition of referral.

        Some physicians who are not radiation oncologists are employed by or affiliated with us, companies owned by us or professional corporations owned by certain of our directors, executive officers and equityholders with which we have administrative services agreements. To the extent these professional corporations employ such physicians, and they are deemed to have made referrals for radiation therapy, their referrals will be permissible under the Stark Law if they meet the employment exception, which requires, among other things, that the compensation be consistent with the fair market value of the services provided and that it not take into account (directly or indirectly) the volume or value of any referrals by the referring physician. Another Stark exception applicable to our financial relationships with physicians who are not radiation oncologists is the in-office ancillary services exception and accompanying group practice definition which permits profit distributions to physicians within a qualifying group practice structure. The Stark Law imposes detailed requirements in order to qualify for the in-office ancillary services exception, all of which are highly technical and many of which have to date not been subject to extensive judicial review. In the event that the Stark Law were to be amended to modify or otherwise limit the in-office ancillary services exception, this could have a material adverse impact on our business.

        In addition, the Health Care Reform Act requires referring physicians under Stark to inform patients that they may obtain certain imaging services (e.g., MRI, CT and PET) or other designated health services as specified by the Secretary of the DHHS from a provider other than that physician, his or her group practice, or another physician in his or her group practice. To date, DHHS has not included radiation oncology as a service subject to this requirement.

        Lastly, recent federal legislation introduced in August 2013, entitled the Promoting Integrity in Medicare Act of 2013 ("PIMA"), proposes to significantly narrow the in-office ancillary services exception to the Stark Law. PIMA proposes to eliminate from the in-office ancillary services exception

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radiation therapy services and advanced diagnostic imaging studies, among others, and increase enforcement and penalties for improper referrals. Furthermore, ASTRO supports these recommended changes to the Stark Law and the enactment of PIMA could have a material adverse impact on our ICC model and our business.

        We believe that our current operations comply in all material respects with the Stark Law, due to, among other things, various exceptions therein and implementing regulations that exempt either the referral or the financial relationship involved. Nevertheless, to the extent physicians affiliated with us make referrals to us and a financial relationship exists between the referring physicians and us, the government might take the position that the arrangement does not comply with the Stark Law. Any such finding could have a material adverse impact on us.

State Law

State Anti-Kickback Laws

        Many states in which we operate have laws that prohibit the payment of kickbacks in return for the referral of patients. Some of these laws apply only to services reimbursable under the state Medicaid program. However, a number of these laws apply to all healthcare services in the state, regardless of the source of payment for the service. Although we believe that these laws prohibit payments to referral sources only where a principal purpose for the payment is for the referral, the laws in most states regarding kickbacks have been subjected to limited judicial and regulatory interpretation and, therefore, no assurances can be given that our activities will be found to be in compliance. Noncompliance with such laws could have a material adverse effect upon us and subject us and the physicians involved to penalties and sanctions.

State Self-Referral Laws

        A number of states in which we operate, such as Florida, have enacted self- referral laws that are similar in purpose to the Stark Law. However, each state law is unique. The state laws and regulations vary significantly from state to state and, in many cases, have not been widely interpreted by courts or regulatory agencies. State statutes and regulations affecting the referral of patients to healthcare providers range from statutes and regulations that are substantially the same as the federal laws and safe harbor regulations to a simple requirement that physicians or other healthcare professionals disclose to patients any financial relationship the physicians or healthcare professionals have with a healthcare provider that is being recommended to the patients. Some states only prohibit referrals where the physician's financial relationship with a healthcare provider is based upon an investment interest. Other state laws apply only to a limited number of designated health services. For example, in Maryland (where we operate 6 facilities), state law prohibits physicians other than radiologists or radiation oncologists from being part of a group practice or otherwise benefitting from MRI, CT or radiation oncology services.

        These statutes and regulations generally apply to services reimbursed by both governmental and private payers. Violations of these laws may result in prohibition of payment for services rendered, refund of any monies received pursuant to a prohibited referral, loss of licenses as well as fines and criminal penalties.

        We believe that we are in compliance with the self-referral law of each state in which we have a financial relationship with a physician. However, we cannot guarantee that the government would agree, and adverse judicial or administrative interpretations of any of these laws could have a material adverse effect on our operating results and financial condition. In addition, expansion of our operations into new jurisdictions, or new interpretations of laws in existing jurisdictions, could require structural and organizational modifications of our relationships with physicians to comply with that jurisdiction's

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laws. Such structural and organizational modifications could have a material adverse effect on our operating results and financial condition.

Fee-Splitting Laws

        Many states in which we operate prohibit the splitting or sharing of fees between physicians and referral sources and/or between physicians and non-physicians. These laws vary from state to state and are enforced by courts and regulatory agencies, each with broad discretion. Some states have interpreted management agreements between entities and physicians as unlawful fee-splitting. In most cases, it is not considered to be fee-splitting when the payment made by the physician is reasonable, fair market value reimbursement for services rendered on the physician's behalf.

        In certain states, we receive fees from professional corporations owned by certain of our directors, executive officers and equityholders under administrative services agreements. We believe we structure these fee provisions to comply with applicable state laws relating to fee-splitting. However, there can be no certainty that, if challenged, either we or the professional corporations will be found to be in compliance with each state's fee- splitting laws, and, a successful challenge could have a material adverse effect upon us.

        In certain states we operate integrated cancer care practices and share ancillary profits within the practice. We believe we have structured these financial arrangements to comply with state fee-splitting laws. However, there can be no certainty that, if challenged, we will be found to be in compliance with each state's fee-splitting provisions and a successful challenge could have a material adverse effect on us.

        We believe our arrangements with physicians comply in all material respects with the fee-splitting laws of the states in which we operate. Nevertheless, it is possible regulatory authorities or other parties could claim we are engaged in fee-splitting. If such a claim were successfully asserted in any jurisdiction, our radiation oncologists and other physicians could be subject to civil and criminal penalties, professional discipline and we could be required to restructure or terminate our contractual and other arrangements. Any restructuring of our contractual and other arrangements with physician practices could result in lower revenue from such practices, increased expenses in the operation of such practices and reduced input into the business decisions of such practices. Termination of such contracts would result in loss of revenue. In addition, expansion of our operations to other states with fee-splitting prohibitions may require structural and organizational modification to the form of relationships that we currently have with physicians, affiliated practices and hospitals. Any modifications could result in less profitable relationships with physicians, affiliated practices and hospitals, less influence over the business decisions of physicians and affiliated practices and failure to achieve our growth objectives.

Corporate Practice of Medicine

        We are not licensed to practice medicine. The practice of medicine is conducted solely by our licensed radiation oncologists and other licensed physicians. The manner in which licensed physicians can be organized to perform and bill for medical services is governed by the laws of the state in which medical services are provided and by the medical boards or other entities authorized by such states to oversee the practice of medicine. Most states prohibit any person or entity other than a licensed professional from holding him, her or itself out as a provider of diagnoses, treatment or care of patients. Many states extend this prohibition to bar companies not wholly owned by licensed physicians from employing physicians, a practice commonly referred to as the "Corporate Practice of Medicine," in order to maintain physician independence and clinical judgment.

        Business corporations are generally not permitted under certain state laws to exercise control over the medical judgments or decisions of physicians, or engage in certain practices such as fee-splitting

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with physicians. Particularly in states where we are not permitted to own a medical practice, we perform only non-medical and administrative and support services, do not represent to the public or clients that we offer professional medical services and do not exercise influence or control over the practice of medicine.

        Corporate Practice of Medicine laws vary widely by state regarding the extent to which a licensed physician can affiliate with corporate entities for the delivery of medical services. In Florida, it is not uncommon for business corporations to own medical practices. New York, by contrast, prohibits physicians from sharing revenue received in connection with the furnishing of medical care, other than with a partner, employee or associate in a professional corporation, subcontractor or physician consultant relationship. We have developed arrangements which we believe are in compliance with the Corporate Practice of Medicine laws in the states in which we operate.

        We believe our operations and contractual arrangements as currently conducted are in material compliance with existing applicable laws. However, we cannot assure you that we will be successful if our existing organization and our contractual arrangements with the professional corporations are challenged as constituting the unlicensed practice of medicine. In addition, we might not be able to enforce certain of our arrangements, including non-competition agreements and transition and stock pledge agreements. While the precise penalties for violation of state laws relating to the corporate practice of medicine vary from state to state, violations could lead to fines, injunctive relief dissolving a corporate offender or criminal felony charges. There can be no assurance that review of our business and the professional corporations by courts or regulatory authorities will not result in a determination that could adversely affect their operations or that the healthcare regulatory environment will not change so as to restrict existing operations or their expansion. In the event of action by any regulatory authority limiting or prohibiting us or any affiliate from carrying on our business or from expanding our operations and our affiliates to certain jurisdictions, we may be required to implement structural and organizational modifications, which could adversely affect our ability to conduct our business.

Antitrust Laws

        In connection with the Corporate Practice of Medicine laws referred to above, certain of the physician practices with which we are affiliated are necessarily organized as separate legal entities. As such, the physician practice entities may be deemed to be persons separate both from us and from each other under the antitrust laws and, accordingly, subject to a wide range of laws that prohibit anticompetitive conduct among separate legal entities. These laws may limit our ability to enter into agreements with separate practices that compete with one another. In addition, where we also are seeking to acquire or affiliate with established and reputable practices in our target geographic markets, any market concentration could lead to antitrust claims.

        We believe we are in material compliance with federal and state antitrust laws and intend to comply with any state and federal laws that may affect the development of our business. There can be no assurance, however, that a review of our business by courts or regulatory authorities would not adversely affect our operations and the operations of our affiliated physician practice entities.

State Licensing

        As a provider of radiation therapy services in the states in which we operate, we must maintain current occupational and use licenses for our treatment centers as healthcare facilities and machine registrations for our linear accelerators and simulators. Additionally, we must maintain radioactive material licenses for each of our treatment centers which utilize radioactive sources. We believe that we possess or have applied for all requisite state and local licenses and are in material compliance with all state and local licensing requirements.

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Certificate of Need

        Many states have enacted certificate of need laws, including, but not limited to, Kentucky, Massachusetts, Michigan, North Carolina, Rhode Island, South Carolina and West Virginia, which require prior approval for a number of actions, including for the purchase, construction, acquisition, renovation or expansion of healthcare facilities and treatment centers, to make certain capital expenditures or to make changes in services or bed capacity. In deciding whether to approve certain requests, these states consider the need for additional or expanded healthcare facilities or services. The certificate of need program is intended to prevent unnecessary duplication of services and can be a competitive process whereby only one proposal among competing applicants who wish to provide a particular health service is chosen or a proposal by one applicant is challenged by another provider who may prevail in getting the state to deny the addition of the service.

        Certain states are reconsidering their participation in certificate of need programs, and these decisions could significantly impact the approval process for future projects. For example, on June 25, 2013, the governor of South Carolina vetoed the appropriation of funds for the state's certificate of need program. This veto was upheld by the South Carolina House of Representatives the next day. As a result of the veto, the South Carolina Department of Health and Environmental Control ("SCDEHC") suspended the operation of the certificate of need program for the fiscal year beginning July 1, 2013. The SCDEHC is not reviewing any new or existing applications while the certificate of need program is suspended. A petition is currently pending in front of the South Carolina Supreme Court seeking a declaratory ruling on the ability of providers to engage in activities covered by the state's certificate of need law without approval by the SCDEHC. The outcome of this ruling and other potential future efforts in other states could materially affect our ability to develop new projects in various states and/or alter the competitive landscape.

        In certain states these certificate of need statutes and regulations apply to our related physician corporations and in others it applies to hospitals where we have management agreements or joint venture relationships.

        We believe that we have applied for all requisite state certificate of need approvals or notified state authorities as required by statute and are in material compliance with state requirements. There can be no assurance, however, that a review of our business or proposed new practices by regulatory authorities would not limit our growth or otherwise adversely affect the operations of us and our affiliated physician practice entities.

Other Laws and Regulations

Hazardous Materials

        We are subject to various federal, state and local laws and regulations governing the use, discharge and disposal of hazardous materials, including medical waste products. We believe that all of our treatment centers comply with these laws and regulations in all material respects and we do not anticipate that any of these laws will have a material adverse effect on our operations.

        Although our linear accelerators and certain other equipment do not use radioactive or other hazardous materials, our treatment centers do provide specialized treatment involving the implantation of radioactive material in the prostate and other organs. The radioactive sources generally are obtained from, and returned to, the suppliers, which have the ultimate responsibility for their proper disposal. We, however, remain subject to state and federal laws regulating the protection of employees who may be exposed to hazardous material and the proper handling, storage and disposal of that material.

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Reimbursement and Cost Containment

Reimbursement

        We provide a full range of both professional and technical services. Those services include the initial consultation, clinical treatment planning, simulation, medical radiation physics, dosimetry, treatment devices, special services and clinical treatment management procedures.

        The initial consultation is charged as a professional fee for evaluation of the patient prior to the decision to treat the patient with radiation therapy. The clinical treatment planning also is reimbursed as a technical and professional component. Simulation of the patient prior to treatment involves both a technical and a professional component, as the treatment plan is verified with the use of a simulator accompanied by the physician's approval of the plan. The medical radiation physics, dosimetry, treatment devices and special services also include both professional and technical components. The basic dosimetry calculation is accomplished, treatment devices are specified and approved, and the physicist consults with the radiation oncologist, all as professional and technical components of the charge. Special blocks, wedges, shields, or casts are fabricated, all as a technical and professional component.

        The delivery of the radiation treatment from the linear accelerator is a technical charge. The clinical treatment administrative services fee is the professional fee charged weekly for the physician's management of the patient's treatment. Global fees containing both professional and technical components also are charged for specialized treatment such as hyperthermia, clinical intracavitary hyperthermia, clinical brachytherapy, interstitial radioelement applications, and remote after-loading of radioactive sources.

        Coding and billing for radiation therapy is complex. We maintain a staff of certified coding professionals responsible for interpreting the services documented on the patients' charts to determine the appropriate coding of services for billing of third-party payers. This staff provides coding and billing services for all of our treatment centers except for four treatment centers in New York. In addition, we do not provide coding and billing services to hospitals where we are providing only the professional component of radiation treatment services. We provide training for our coding staff and believe that our coding and billing expertise result in appropriate and timely reimbursement. Given the complexity of the regulations and guidance governing coding and billing, we cannot guarantee that the government will not challenge any of our practices. Any such challenge could have a material adverse effect on us.

Cost Containment

        We derived approximately 48%, 45% and 45% of our net patient service revenue for the years ended December 31, 2011, 2012 and 2013, respectively, from payments made by government sponsored healthcare programs, principally Medicare. These programs are subject to substantial regulation by the federal and state governments. Any change in payment regulations, policies, practices, interpretations or statutes that place limitations on reimbursement amounts, or changes in reimbursement coding, or practices could materially and adversely affect our financial condition and results of operations.

        In recent years, the federal government has sought to constrain the growth of spending in the Medicare and Medicaid programs. Through the Medicare program, the federal government has implemented a resource-based relative value scale ("RBRVS") payment methodology for physician services. RBRVS is a fee schedule that, except for certain geographical and other adjustments, pays similarly situated physicians the same amount for the same services. The RBRVS is adjusted each year and is subject to increases or decreases at the discretion of Congress. Changes in the RBRVS may result in reductions in payment rates for procedures provided by the Company. RBRVS-type payment systems also have been adopted by certain private third-party payers and may become a predominant payment methodology. Broader implementation of such programs could reduce payments by private

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third-party payers and could indirectly reduce our operating margins to the extent that the cost of providing management services related to such procedures could not be proportionately reduced. To the extent our costs increase, we may not be able to recover such cost increases from government reimbursement programs. In addition, because of cost containment measures and market changes in non-governmental insurance plans, we may not be able to shift cost increases to non-governmental payers. Changes in the RBRVS could result in a reduction from historical levels in per patient Medicare revenue received by us; however, we do not believe such reductions would, if implemented, result in a material adverse effect on us.

        In addition to current governmental regulation, both federal and state governments periodically propose legislation for comprehensive reforms affecting the payment for and availability of healthcare services. Aspects of certain of such healthcare proposals, such as reductions in Medicare and Medicaid payments, if adopted, could adversely affect us. Other aspects of such proposals, such as universal health insurance coverage and coverage of certain previously uncovered services, could have a positive impact on our business, depending on accompanying reimbursement rates. On March 21, 2010, the House of Representatives passed the Patient Protection and Affordable Care Act, and the corresponding reconciliation bill. President Obama signed the larger comprehensive bill into law on March 23, 2010 and the reconciliation bill on March 30, 2010. We anticipate that the Health Care Reform Act will continue to significantly affect how the healthcare industry operates in relation to Medicare, Medicaid and the insurance industry. The Health Care Reform Act contains a number of provisions, including those governing fraud and abuse, enrollment in federal healthcare programs, and reimbursement changes, which will impact existing government healthcare programs and will continue to result in the development of new programs, including Medicare payment for performance initiatives and improvements to the physician quality reporting system and feedback program. It is not possible at this time to predict what, if any, additional reforms will be adopted by Congress or state legislatures, or when such reforms would be adopted and implemented. As healthcare reform progresses and the regulatory environment accommodates reform, it is likely that changes in state and federal regulations will necessitate modifications to our agreements and operations. While we believe we will be able to restructure in accordance with applicable laws and regulations, we cannot assure that such restructuring in all cases will be possible or profitable.

        Although governmental payment reductions have not materially affected us in the past, it is possible that such changes implemented in connection with the Health Care Reform Act and any future changes could have a material adverse effect on our financial condition and results of operations. In addition, Medicare, Medicaid and other government sponsored healthcare programs are increasingly shifting to some form of managed care. Additionally, funds received under all healthcare reimbursement programs are subject to audit with respect to the proper billing for physician services. Retroactive adjustments of revenue from these programs could occur. We expect that there will continue to be proposals to reduce or limit Medicare and Medicaid payment for services.

        Rates paid by private third-party payers, including those that provide Medicare supplemental insurance, are based on established physician, clinic and hospital charges and are generally higher than Medicare payment rates. Changes in the mix of our patients between non-governmental payers and government sponsored healthcare programs, and among different types of non-government payer sources, could have a material adverse effect on us.

Reevaluations and Examination of Billing

        Payers periodically reevaluate the services they cover. In some cases, government payers such as Medicare and Medicaid also may seek to recoup payments previously made for services determined not to be covered. Any such action by payers would have an adverse effect on our revenue and earnings.

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        Due to the uncertain nature of coding for radiation therapy services, we could be required to change coding practices or repay amounts paid for incorrect practices either of which could have a materially adverse effect on our operating results and financial condition.

Other Regulations

        In addition, we are subject to licensing and regulation under federal, state and local laws relating to the collecting, storing, handling and disposal of infectious and other regulated waste and radioactive materials as well as the safety and health of laboratory employees. We believe our operations are in material compliance with applicable federal and state laws and regulations relating to the collection, storage, handling, treatment and disposal of all infectious and other regulated waste and radioactive materials. We utilize licensed vendors for the disposal of such specimen and waste. Nevertheless, there can be no assurance that our current or past operations would be deemed to be in compliance with applicable laws and regulations, and any noncompliance could result in a material adverse effect on us including fines or penalties or liability for clean-up of contaminated third-party disposal sites.

        In addition to our comprehensive regulation of safety in the workplace, the federal Occupational Safety and Health Administration has established extensive requirements relating to workplace safety for healthcare employees, whose workers may be exposed to blood-borne pathogens, such as HIV and the hepatitis B virus. These regulations require work practice controls, protective clothing and equipment, training, medical follow-up, vaccinations and other measures designed to minimize exposure to, and transmission of, blood-borne pathogens.

Healthcare Reform

        National healthcare reform remains a focus at the federal level. On March 21, 2010, the House of Representatives passed the Patient Protection and Affordable Care Act, and the corresponding reconciliation bill. President Obama signed the larger comprehensive bill into law on March 23, 2010 and the reconciliation bill on March 30, 2010. The comprehensive $940 billion overhaul is expected to extend coverage to approximately 32 million previously uninsured Americans.

        A significant portion of our patient volume is derived from government healthcare programs, principally Medicare, which are highly regulated and subject to frequent and substantial changes. We anticipate the Health Care Reform Act will significantly affect how the healthcare industry operates in relation to Medicare, Medicaid and the insurance industry. The Health Care Reform Act contains a number of provisions, including those governing fraud and abuse, enrollment in federal healthcare programs, and reimbursement changes, which will impact existing government healthcare programs and will result in the development of new programs, including Medicare payment for performance initiatives and improvements to the physician quality reporting system and feedback program.

        On June 28, 2012, the United States Supreme Court upheld the constitutionality of the Health Care Reform Act's "individual mandate" that will require individuals as of 2014 to either purchase health insurance or pay a penalty. The Supreme Court also held, however, that the federal government cannot force states to expand their Medicaid programs by threatening to cut their existing Medicaid funds. As a result of this decision, states are left with a choice about whether to expand their Medicaid programs to cover low-income, non-disabled adults without children. Numerous states opted not to expand their Medicaid program in 2014, which may materially impact our Medicaid revenue in these states.

        The Health Care Reform Act provides for the creation of health insurance Marketplaces in each state where individuals can compare and enroll in QHPs. State were given the option to operate an insurance Marketplace themselves, to partner with the federal government in operating a Marketplace, or to opt for the federal government to operate their Marketplace. Individuals with an income less than 400% of the federal poverty level that purchase insurance on a Marketplace may be eligible for federal

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subsidies to cover a portion of their health insurance premium costs. In addition, they may be eligible for government cost sharing of co-insurance or co-pay obligations. An open question remains whether the availability of these federal subsidies classifies a QHP as a federal healthcare program. On October 30, 2013, Kathleen Sebelius, the Secretary of DHHS, indicated by letter that DHHS does not consider QHPs to be federal healthcare programs. However, this statement by Secretary Sebelius has not been tested in court, and a judge may not agree. If QHPs are classified as federal healthcare programs it could significantly increase the cost of compliance and could materially impact our operations.

        The Health Care Reform Act has experienced several setbacks that heighten the uncertainty about its implementation. On October 1, 2013, the DHHS launched the federally-run insurance Marketplaces through its Healthcare.gov website. The website has experienced multiple problems throughout its launch, which has limited the ability of individuals to sign up for healthcare coverage and has exposed security concerns. In addition, during the Fall of 2013, millions of people with individual health insurance plans received cancelation letters from their insurance providers. These letters frequently expressed that plans were being canceled because they failed to meet the new requirements of the Health Care Reform Act. In response, the White House announced that it would grant state insurance commissioners federal permission to allow consumers to keep existing health insurance policies through 2014. Several state insurance commissions have nonetheless continued to maintain that insurers cannot offer plans in 2014 unless they meet the requirements of the Health Care Reform Act. These implementation setbacks have called into question early predictions about the number of previously un-insured individuals who will obtain coverage through a Marketplace plan. In addition, certain members of Congress continue to introduce legislation that would repeal or significantly amend the Health Care Reform Act. Because of the continued uncertainty about the implementation of the Health Care Reform Act, we cannot predict the impact of the law or any future reforms on our business.

        We can give no assurance that the Health Care Reform Act will not adversely affect our business and financial results, and we cannot predict how future federal or state legislative or administrative changes relating to healthcare reform would affect our business.

        In addition, the Joint Select Committee on Deficit Reduction ("JSC") was created under the Budget Control Act of 2011 and signed into law on August 2, 2011. Under the law, unless the JSC could achieve $1.2 trillion in savings, an across-the-board sequestration would occur on January 2, 2013, and each subsequent year through 2021, to achieve $1.2 trillion in savings. On November 21, 2011, the JSC released a statement indicating the committee would be unable to reach agreement, thereby clearing the way for the sequestration process. Unless Congress acts to reverse the cuts, Medicare providers will be cut under the sequestration process by two percent each year relative to baseline spending through 2021. On January 2, 2013, the President signed the American Taxpayer Relief Act, which extended the sequestration order required under the Budget Control Act until March 1, 2013. On March 1, 2013, President Obama issued the required sequestration order and, pursuant to 2 U.S.C. § 906, the two percent Medicare sequester began to take effect for services provided on or after April 1, 2013.

Legal Proceedings

        We are involved in certain legal actions and claims that arise in the ordinary course of our business and are generally covered by insurance. It is the opinion of management, based on advice of legal counsel, that such litigation and claims will be resolved without material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

        On February 18, 2014, we were served with subpoenas from the Office of Inspector General of the Department of Health & Human Services acting with the assistance of the U.S. Attorney's Office for

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the Middle District of Florida who together have requested the production of medical records of patients treated by certain of our physicians for the period from January 2007 to present regarding the ordering, billing and medical necessity of certain laboratory services as part of a civil False Claims Act investigation, as well as our agreements with such physicians. The laboratory services under review relate to the utilization of fluorescence in situ hybridization ("FISH") laboratory tests ordered by certain of our employed physicians and performed by us. We have recorded a liability of approximately $4.7 million that is included in accrued expenses and general and administrative expense in our consolidated balance sheet and statement of operations and comprehensive loss, respectively, as of December 31, 2013. The recorded estimate is based on a probability weighted analysis of the low-end of the range of the liability that considers the facts currently known by us, our review of qualitative and quantitative factors, and our assessment of potential outcomes under different scenarios used to assess our exposure which may be used to determine a potential settlement should we decide not to litigate. Our recording of a liability related to this matter is not an admission of guilt. Depending on how this matter progresses, our exposure may be less than or more than the liability recorded and we will continue to reassess and adjust the liability until this matter is settled. Our estimate of the high-end of the range of exposure is $9.4 million.

        Based on reviews performed to date, we do not believe that we or our physicians knowingly submitted false claims in violation of applicable Medicare statutory or regulatory requirements. We are cooperating fully with the subpoena requests. We believe we have a meritorious position and will vigorously defend any claim that may be asserted against us.


Recent Developments

SFRO Joint Venture

        On February 10, 2014, we completed our investment in SFRO increasing the number of our radiation therapy centers by 21 and adding 88 additional radiation oncology and ICC physicians. In connection with our purchase of a 65% interest in SFRO, we entered into a new credit agreement providing for a $60 million term loan facility and $7.9 million of term loans to refinance existing SFRO debt (the "SFRO Credit Agreement"). In addition, subject to certain terms and conditions, the owners of the remaining 35% of SFRO will have the right to exchange their ownership interest in SFRO for common stock of 21CH.

        The SFRO Joint Venture increases the number of our treatment centers by approximately 10% and is expected to add approximately 591 average treatments per day.

        We believe that both the OnCure Acquisition and SFRO Joint Venture provide us an opportunity to further leverage our infrastructure, contracting, technology and footprint to achieve significant operating synergies, broaden and deepen our ability to offer advanced cancer care to patients throughout the United States and offer expansion opportunities for our ICC model across the Company.

        As a result of our recently completed transactions, we now operate 179 treatment centers, including 145 centers located in 16 U.S. states.

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Available Information

        We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") and, in accordance therewith, file reports and other information with the Securities and Exchange Commission (the "SEC"). Such reports and other information can be inspected and copied at the Public Reference Room of the SEC located at Room 1580, 100 F Street, N.E., Washington D.C. 20549. Copies of such materials can be obtained from the Public Reference Room of the SEC at prescribed rates. You can call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room. Such materials may also be accessed electronically by means of the SEC's home page on the Internet (http://www.sec.gov).

        Our corporate website is www.21co.com and we make available copies of our filings under the Exchange Act, including Annual Reports on Form 10-K,, Quarterly Reports on Form 10-Q , Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act on our website, free of charge, under the heading "SEC Filings", as soon as reasonably practicable after such material is filed or furnished to the SEC. The information contained on the website is not part of this Annual Report on Form 10-K and is not incorporated into this Annual Report on Form 10-K by reference.

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Item 1A.    Risk Factors

        You should carefully consider the risk factors set forth below as well as the other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes, in evaluating our company and our business. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition or results of operations. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. In such a case, you may lose all or part of your original investment.


Risks Related to Our Business

We depend on payments from government Medicare and, to a lesser extent, Medicaid programs for a significant amount of our revenue. Our business could be materially harmed by any changes that result in reimbursement reductions.

        Our payer mix is concentrated with Medicare patients due to the high proportion of cancer patients over the age of 65. We estimate that approximately 48%, 45%, and 45% of our U.S. net patient service revenue for the years ended December 31, 2011, 2012 and 2013, respectively, consisted of payments from Medicare and Medicaid. Only a small percentage of that revenue resulted from Medicaid patients, equaling approximately 2.8%, 2.7%, and 2.7% for the years ended December 31, 2011, 2012 and 2013, respectively. In addition, Medicare Advantage represents approximately 13% of our 2013 U.S. net patient service revenue. These government programs generally reimburse us on a fee-for-service basis based on predetermined government reimbursement rate schedules. As a result of these reimbursement schedules, we are limited in the amount we can record as revenue for our services from these government programs. Following a public comment period, the Centers for Medicare & Medicaid Services ("CMS") can change these schedules annually and therefore the prices that the agency pays for these services. In addition, if our operating costs increase, we will not be able to recover these costs from government payers. As a result, our financial condition and results of operations may be adversely affected by changes in reimbursement for Medicare reimbursement. Various state Medicaid programs also have recently reduced Medicaid payments to providers based on state budget reductions. Although Medicaid reimbursement encompasses only a small portion of our business, there can be no certainty as to whether Medicaid reimbursement will increase or decrease in the future and what affect, if any, this will have on our business.

        In the final Medicare 2013 Physician Fee Schedule, CMS reduced payments for radiation oncology by 7%. This reduction related to (1) the fourth year of the four-year transition to the utilization of new Physician Practice Information Survey ("PPIS") data, (2) a change in equipment interest rate assumptions, (3) budget neutrality effects of a proposal to create a new discharge care management code, (4) input changes for certain radiation therapy procedures, and (5) certain other revised radiation oncology codes. The largest of these changes (accounting for 4% of the gross reduction) reflected the transition of the final 25% of PPIS data used in the Practice Expense Relative Value Unit ("PERVU") methodology. The change in the CMS interest rate policy (accounting for 3% of the gross reduction) reduced interest rate assumptions in the CMS database from 11% to a sliding scale of 5.5% to 8%. CMS also finalized its proposal to create a HCPCS G-code to describe transition care management from a hospital or other institutional stay to a primary physician in the community (accounting for 1% of the gross reduction). While this policy benefited primary care, non-primary care physicians are negatively impacted due to the budget-neutrality of the Medicare 2013 Physician Fee Schedule. The rule also made adjustments (accounting for 1% of the gross reduction) due to the use of new time of care assumptions for IMRT and stereotactic body radiation therapy ("SBRT"). Although the proposed reductions in time of care assumptions alone would have resulted in a gross 7% reduction to radiation oncology, CMS in its final rule included updated cost data submitted by the radiation oncology community for code inputs which reversed the vast majority of the reduction resulting from the new time of care assumptions. Total gross reductions in the final rule were offset by a 2% increase due to

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certain other revised radiation oncology codes, which resulted in a total net reduction to radiation oncology of 7%.

        In the proposed Medicare 2014 Physician Fee Schedule, CMS proposed to reduce payments for radiation oncology by 5% overall. This reduction related to a cap on certain radiation oncology services at the hospital outpatient department and ambulatory surgical center's ("OPD/ASC") rate [-4%]; reductions to certain radiation oncology codes due to Medicare Economic Index ("MEI") revisions [-2%]; and offsetting minor increases due to other aspects of the fee schedule [+1%]. Because the cap and MEI policies only applied to freestanding settings, the cut to freestanding centers would likely have been closer to 8%, while hospital-based radiation oncologists would have received an increase in payment under the proposal. In the final Medicare 2014 Physician Fee Schedule, CMS did not finalize its proposal to cap certain radiation oncology services at the OPD/ASC rate. Although CMS did finalize its proposal to revise the MEI [-2% impact], CMS also incorporated updated relative value units ("RVUs") for new and existing codes [+3% impact] resulting in a net impact of +1% for radiation oncology overall. Because the MEI policy only applies to freestanding settings, the impact to freestanding centers is approximately flat, while hospital-based radiation oncologists would receive an increase in payment under the final rule. CMS noted in the final rule, due to budget neutrality requirements relating to the MEI policy, the 2014 conversion factor was estimated to be $35.6446 (assuming no sustainable growth rate ("SGR") cuts), rather than the 2013 conversion factor of $34.023.

        Medicare reimbursement rates for all procedures under Medicare ultimately are determined by a formula which takes into account a conversion factor ("CF") which is updated on an annual basis based on the SGR. For the last several years, the SGR policy has threatened significant cuts to the CF, although Congress has consistently delayed those cuts. On December 26, 2013 the President signed into law the Pathway for SGR Reform Act of 2013, which prevented the scheduled SGR payment reduction for physicians from taking effect on January 1, 2014. Instead, the Pathway for SGR Reform Act provided for a 0.5 percent update (to $35.8228) for such services through March 31, 2014. On April 1, 2014, the President signed H.R. 4302, the Protecting Access to Medicare Act of 2014 which extended the $35.8228 conversion factor through 2014 and also provided for a zero percent update through March 31, 2015. If future SGR reductions are not suspended, and if a permanent "doc fix" is not signed into law, the currently scheduled SGR reimbursement decrease (estimated at more than 20%) will take effect on April 1, 2015.

        In addition, under the Budget Control Act of 2011, Medicare providers are cut under a sequestration process by 2% each year relative to baseline spending through 2021. This policy subsequently was extended through 2024. In the Protecting Access to Medicare Act, the sequestration policy was frontloaded for the year 2024 such that Medicare providers would be cut 4% in the first half of 2024 and 0% in the second half of 2024.

Reforms to the U.S. healthcare system may adversely affect our business.

        On March 21, 2010, the House of Representatives passed the Patient Protection and Affordable Care Act, and the corresponding reconciliation bill. President Obama signed the larger comprehensive bill into law on March 23, 2010 and the reconciliation bill on March 30, 2010 (collectively, the "Health Care Reform Act"). The comprehensive $940 billion dollar overhaul could extend coverage to approximately 32 million previously uninsured Americans.

        A significant portion of our U.S. patient volume is derived from government programs, principally Medicare, which are highly regulated and subject to frequent and substantial changes. We anticipate the Health Care Reform Act will continue to significantly affect how the healthcare industry operates in relation to Medicare, Medicaid and the insurance industry. The Health Care Reform Act contains a number of provisions, including those governing fraud and abuse, enrollment in federal healthcare programs, and reimbursement changes, which impact existing government healthcare programs and will

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continue to result in the development of new programs, including Medicare payment for performance initiatives and improvements to the physician quality reporting system and feedback program.

        On June 28, 2012, the U.S. Supreme Court upheld the constitutionality of the Health Care Reform Act's "individual mandate" that will require individuals as of 2014 to either purchase health insurance or pay a penalty. The Supreme Court also held, however, that the federal government cannot force states to expand their Medicaid programs by threatening to cut their existing Medicaid funds. As a result of this decision, states are left with a choice about whether to expand their Medicaid programs to cover low-income, non-disabled adults without children. Numerous states opted not to expand their Medicaid program in 2014, which may materially impact our Medicaid revenue in these states.

        The Health Care Reform Act provides for the creation of health insurance "Marketplaces" in each state where individuals can compare and enroll in Qualified Health Plans ("QHPs"). Some QHPs will be partially subsidized by Federal funds. Individuals with an income less than 400% of the federal poverty level that purchase insurance on a Marketplace may be eligible for federal subsidies to cover a portion of their health insurance premium costs. In addition, they may be eligible for government cost sharing of co-insurance or co-pay obligations. The presence of Federal funds in QHPs in the form of subsidies and cost sharing may subject providers to heightened government attention and enforcement, which could significantly increase the cost of compliance and could materially impact our operations.

        Furthermore, an open question remains whether the availability of these federal subsidies classifies a QHP as a federal healthcare program. In an October 30, 2013 letter, Kathleen Sebelius, the Secretary of the U.S. Department of Health and Human Services ("DHHS"), indicated that DHHS does not consider QHPs to be federal healthcare programs. However, this statement by Secretary Sebelius has not been tested in court, and a judge may not agree. Additionally, a subsequent Centers for Medicare and Medicaid Services ("CMS") FAQ on November 4, 2013, as well as a November 7, 2013 letter from U.S. Senator Charles Grassley to Secretary Sebelius and Attorney General Eric Holder, indicates that this issue is not settled. If QHPs are classified as federal healthcare programs it could further increase the cost of compliance significantly for providers. The Health Care Reform Act has experienced several setbacks that heighten the uncertainty about its implementation. On October 1, 2013, the DHHS launched the federally-run insurance Marketplaces through its www.healthcare.gov website. The website has experienced multiple problems throughout its launch, which has limited the ability of individuals to sign up for healthcare coverage and has exposed security concerns. In addition, during the fall of 2013, millions of people with individual health insurance plans received cancellation letters from their insurance providers. These letters frequently expressed that plans were being cancelled because they failed to meet the new requirements of the Health Care Reform Act. In response, the White House announced that it would grant state insurance commissioners federal permission to allow consumers to keep existing health insurance policies through 2014. Several state insurance commissions have nonetheless continued to maintain that insurers cannot offer plans in 2014 unless they meet the requirements of the Health Care Reform Act. These implementation setbacks have called into question early predictions about the number of previously un-insured individuals who will obtain coverage through a Marketplace plan. In addition, certain members of Congress continue to introduce legislation that would repeal or significantly amend the Health Care Reform Act. Because of the continued uncertainty about the implementation of the Health Care Reform Act, we cannot predict the impact of the law or any future reforms on our business.

        We can give no assurance that the Health Care Reform Act will not adversely affect our business and financial results, and we cannot predict how future federal or state legislative or administrative changes relating to healthcare reform would affect our business.

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If payments by managed care organizations and other commercial payers decrease, our revenue and profitability could be adversely affected.

        We estimate that approximately 51%, 54% and 54% of our net patient service revenue for the years ended December 31, 2011, 2012 and 2013, respectively, was derived from commercial payers such as managed care organizations and private health insurance programs as well as individuals. As of December 31, 2013, we have over 900 contracts with commercial payers. These commercial payers generally reimburse us for services rendered to insured patients based upon predetermined rates. Rates for health maintenance organization ("HMO") benefit plans are typically lower than those for preferred provider organization ("PPO") or other benefit plans that offer broader provider access. While commercial payer rates are generally higher than government program reimbursement rates, approximately 7% of our non-Medicare Advantage commercial payer revenue is directly linked to Medicare reimbursement rates. When Medicare rates change, these commercial rates automatically change as well. Additionally, most commercial payers tend to negotiate their rates as a percentage of Medicare reimbursement. Even when our commercial rates are fixed and not tied directly to changes in Medicare, there is often pressure to renegotiate our reimbursement to align with these modified levels. If managed care organizations and other private insurers reduce their rates or we experience a significant shift in our revenue mix toward certain additional managed care payers or Medicare or Medicaid reimbursements, then our revenue and profitability may decline and our operating margins will be reduced. Non-government payers, including managed care payers, continue to demand discounted fee structures, and the trend toward consolidation among non-government payers tends to increase their bargaining power over fee structures. Our future success will depend, in part, on our ability to retain and renew our managed care contracts as well as enter into new managed care contracts on terms favorable to us. Any inability to maintain suitable financial arrangements with commercial payers could have a material adverse impact on our business.

        Increasingly, commercial payers are turning to third-party benefits managers to pre-certify radiation oncology services or develop payment-based treatment protocols. The failure to obtain such pre-certifications and adhere to such protocols can result in the payers' denial of payment in whole or in part. While we are working with such benefits managers to assure compliance with their policies or to obtain modification of what we believe to be inappropriate policies, there can be an assurance that they will not have a material adverse effect on our business.

Our overall business results may suffer from an economic downturn.

        The U.S. economy has weakened significantly following the 2008 financial crisis. Depressed consumer spending and higher unemployment rates continue to pressure many industries and geographic locations. During economic downturns, governmental entities often experience budget deficits as a result of increased costs and lower than expected tax collections. These budget deficits may force federal, state and local government entities to decrease spending for health and human service programs, including Medicare, Medicaid and similar programs, which represent significant payer sources for our treatment centers. Other risks we face from general economic weakness include potential declines in the population covered under managed care agreements, patient decisions to postpone or cancel elective procedures as well as routine diagnostic examinations, potential increases in the uninsured and underinsured populations and further difficulties in our collecting patient co-payment and deductible receivables.

Due to the rising costs of managed care premiums and co-pay amounts, coupled with the current economic environment, we may realize an increased exposure to bad debt due to patients' inability to pay for certain forms of cancer treatment.

        As more patients become uninsured as a result of job losses or receive reduced coverage as a result of cost-control measures by employers to offset the increased costs of managed care premiums, patients are becoming increasingly responsible for the rising costs of treatment, which is increasing our

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exposure to bad debt. This also relates to patient accounts for which the primary insurance carrier has paid the amounts covered by the applicable agreement, but patient responsibility amounts (deductibles and co-payments) remain outstanding. The shifting responsibility to pay for care has, in some instances, resulted in patients electing not to receive certain forms of cancer treatment.

        In response to this environment, we have improved our processes associated with verification of insurance eligibility and patient responsibility payment programs. In addition, we have improved our patient financial counseling efforts and developed tools to monitor our progress in this area. However, a continuation of the trends that have resulted in an increasing proportion of accounts receivable being comprised of uninsured accounts and a deterioration in the collectability of these accounts will adversely affect our cash flows and results of operations.

We depend on recruiting and retaining qualified healthcare professionals for our success.

        Our success is dependent upon our continuing ability to recruit, train and retain or affiliate with radiation oncologists, ICC physicians, physicists, dosimetrists and radiation therapists. While there is currently a national shortage of certain of these healthcare professionals, we have not experienced significant problems attracting and retaining key personnel and professionals in the recent past. We face competition for such personnel from other healthcare providers, research and academic institutions, government entities and other organizations. 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. Additionally, many of our senior radiation oncologists, due to their reputations and experience, are very important in the recruitment and education of radiation oncologists. The loss of any such senior radiation oncologists could negatively impact us.

        Most of our radiation oncologists and other ICC physicians in the United States are employed under employment agreements which, among other things, provide that they will not compete with us (or the professional corporations contracting with us) for a period of time after their employment terminates. Such covenants not to compete are enforced to varying degrees from state to state. In most states, a covenant not to compete will be enforced only to the extent that it is necessary to protect the legitimate business interest of the party seeking enforcement, that it does not unreasonably restrain the party against whom enforcement is sought and that it is not contrary to the public interest. This determination is made based upon all the facts and circumstances of the specific case at the time enforcement is sought. It is unclear whether our interests under our administrative services agreements will be viewed by courts as the type of protected business interest that would permit us or the professional corporations to enforce a non-competition covenant against the radiation oncologists. Since our success depends in substantial part on our ability to preserve the business of our radiation oncologists and other ICC physicians, a determination that these provisions are unenforceable could have a material adverse effect on us.

        As a result of the OnCure Acquisition, in several markets we rely on physician practices to provide our services. Following our acquisition of OnCure, we assumed the Management Services Agreements ("MSAs") previously in place between OnCure and most of its managed practices, which excluded certain of the MSAs that were rejected in the OnCure bankruptcy proceeding, with all but five of the affected centers becoming either a direct Company provider or placed under a new MSA with a practice that was previously affiliated with us. Under the MSAs, OnCure provides the necessary medical and office equipment, clinical and operating staff (other than physicians) and office space and leasehold improvements, as well as general management and billing/collection services, in exchange for a management fee based on a percentage of the practice's revenues or EBITDA. The MSAs generally run for a term of ten years or longer with either party having the right to renew. Upon the termination or expiration of an MSA, OnCure retains the ownership of the office space and medical and office equipment, as well as the right to operate the center with a different medical provider. While there are certain reciprocal non-compete obligations, such obligations are generally relinquished upon the termination of the MSA.

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We depend on our senior management and we may be materially harmed if we lose any member of our senior management.

        We are dependent upon the services of our senior management, especially Daniel E. Dosoretz, M.D., our Chief Executive Officer, and a director on the Company's Board of Directors and Alejandro Dosoretz, President and Chief Executive Officer of Medical Developers Cooperatief U.A. B.V. and Vidt Centro Medico. We have entered into executive employment and non-competition agreements with certain members of our senior management. Because many members of our senior management team have been with us for over 10 years and have contributed greatly to our growth, their services would be very difficult, time consuming and costly to replace. We carry key-man life insurance on Dr. Daniel Dosoretz. The loss of key management personnel or our inability to attract and retain qualified management personnel could have a material adverse effect on us. A decision by any of these individuals to leave our employ, to compete with us or to reduce their involvement in our business, could have a material adverse effect on our business.

The oncology treatment market is highly competitive.

        The cancer treatment market is highly competitive in each market in which we operate. Our treatment centers face competition from hospitals, other medical practitioners and other operators of radiation treatment centers. There is a growing trend by hospitals to employ medical oncologists and other ICC physicians. We compete against hospitals and other providers to employee these individuals, which generally results in such physicians referring their patients to the hospitals' radiation facilities, rather than other free-standing facilities. There is also a growing trend of physicians in specialties other than radiation oncology, such as urology, entering the radiation treatment business. If these trends continue it could harm our referrals and our business. Certain of our competitors have longer operating histories and greater financial and other resources than us. In addition, in states that do not require a certificate of need for the purchase, construction or expansion of healthcare facilities or services, competition in the form of new services, facilities and capital spending is more prevalent. If our competitors are better able to attract patients, recruit physicians, expand services or obtain favorable managed care contracts at their facilities than our centers, we may experience an overall decline in patient volume. In the event that we are not able to compete successfully, our business may be adversely affected and competition may make it more difficult for us to affiliate with or employ additional radiation oncologists on terms that are favorable to us.

We could be the subject of governmental investigations, claims and litigation.

        Healthcare companies are subject to numerous types of investigations by various governmental agencies. Further, under the False Claims Act, private parties have the right to bring "qui tam," or "whistleblower," suits against companies that knowingly submit false claims for payments to, or improperly retain overpayments from, the government. The False Claims Act imposes penalties of not less than $5,500 and not more than $11,000, plus three times the amount of damages which the government sustains because of the submission of a false claim. In addition, if we are found to have violated the False Claims Act, we could be excluded from participation in Medicare, Medicaid and other federal healthcare programs. Some states have adopted similar state whistleblower and false claims provisions. Certain of our individual facilities have received, and other facilities may receive, inquiries from federal and state agencies related to potential False Claims Act liability. Depending on whether the underlying conduct in these or future inquiries or investigations could be considered systemic, their resolution could have a material adverse effect on our financial position, results of operations and liquidity.

        Governmental agencies and their agents, such as the Medicare Administrative Contractors, as well as the Office of Inspector General of the U.S. Department of Health and Human Services ("OIG"), CMS and state Medicaid programs, conduct audits of our healthcare operations. Private payers may conduct similar post-payment audits, and we also perform internal audits and monitoring. Depending

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on the nature of the conduct found in such audits and whether the underlying conduct could be considered systemic, the resolution of these audits could have a material adverse effect on our financial position, results of operations and liquidity.

        The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 established the Recovery Audit Contractor ("RAC") three-year demonstration program to conduct post-payment reviews to detect and correct improper payments in the fee-for-service Medicare program. The Tax Relief and Health Care Act of 2006 made the RAC program permanent and expanded the program nationwide as of 2010. Since the nationwide expansion of the RAC program, CMS has recouped more than $5 billion in overpayments from fee-for-service Medicare providers. In addition, the Health Care Reform Act mandated the expansion of the RAC program to Medicaid. In 2011 CMS issued a Final Rule on Medicaid RAC program, requiring every state Medicaid agency to implement its Medicaid RAC program by 2012. State Medicaid agencies have also increased their review activities. Should we be found out of compliance with any of these laws, regulations or programs, depending on the nature of the findings, our business, our financial position and our results of operations could be materially adversely affected.

        Consistent with its ongoing oversight obligations, the DHHS, acting through local Medicare carriers, the OIG and other enforcement agencies has requested information from us, through subpoenas and other civil information requests, seeking to confirm that the validity of claims that we submit for payment from the Medicare program. Upon receipt of such requests, we are fully cooperative with the government representatives/agents in supplying the requested information. Through our rigorous corporate compliance program that was established in accordance with OIG guidelines and includes periodic internal claims audits, we believe that we are in material compliance with all pertinent Medicare regulations, policies and procedures. The resolution of these requests could have a material adverse effect on our financial position, results of operations and liquidity.

We may be subject to actions for false claims, which could harm our business, if we do not comply with government coding and billing rules.

        If we fail to comply with federal and state documentation, coding and billing rules, we could be subject to criminal and/or civil penalties, loss of licenses and exclusion from the Medicare and Medicaid programs, which could harm us. We estimate that approximately 48%, 45%, and 45% of our U.S. net patient service revenue for the years ended December 31 2011, 2012 and 2013, respectively, consisted of payments from Medicare and Medicaid programs. In addition, Medicare Advantage represents approximately 13% of our 2013 U.S. net patient service revenue. In billing for our services to third-party payers, we must follow complex documentation, coding and billing rules. These rules are based on federal and state laws, rules and regulations, various government pronouncements, and on industry practice. Failure to follow these rules could result in potential civil liability under the False Claims Act, under which extensive financial penalties can be imposed. It could further result in criminal liability under various federal and state criminal statutes. We submit thousands of claims for Medicare and other payments and there can be no assurance that there have not been errors. While we carefully and regularly review our documentation, coding and billing practices as part of our compliance program, the rules are frequently vague and confusing and we cannot assure that governmental investigators, private insurers or private whistleblowers will not challenge our practices. Such a challenge could result in a material adverse effect on our business.

If we fail to comply with the federal anti-kickback statute, we could be subject to criminal and civil penalties, loss of licenses and exclusion from the Medicare and Medicaid programs, which could materially harm us.

        A provision of the Social Security Act, commonly referred to as the federal anti-kickback statute, prohibits the offer, payment, solicitation or receipt of any form of remuneration in return for referring, ordering, leasing, purchasing or arranging for or recommending the ordering, purchasing or leasing of items or services payable by Medicare, Medicaid or any other federally funded healthcare program. The

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federal anti-kickback statute is very broad in scope, as remuneration includes the transfer of anything of value, in cash or in kind. Financial relationships covered by this statute can include any relationship where remuneration is provided for referrals including payments not commensurate with fair market value, whether in the form of space, equipment leases, professional or technical services or anything else of value. As it is an "intent-based" statute, as detailed in federal court precedent, one or both parties must intend the remuneration to be in exchange for or to induce referrals. Violations of the federal anti-kickback statute may result in substantial civil or criminal penalties, including criminal fines of up to $25,000, imprisonment of up to five years, civil penalties under the Civil Monetary Penalties Law of up to $50,000 for each violation, plus three times the remuneration involved, civil penalties under the federal False Claims Act of up to $11,000 for each claim submitted, plus three times the amounts paid for such claims and exclusion from participation in the Medicare and Medicaid programs. These penalties and the participation exclusion, if applied to us or one or more of our subsidiaries or affiliates, could result in significant reductions in our revenues and could have a material adverse effect on our business.

        In addition, most of the states in which we operate, including Florida, have also adopted laws, similar to the federal anti-kickback statute, that prohibit payments to physicians in exchange for referrals, some of which apply regardless of whether the source of payment is a government payer or a private payer. These statutes typically impose criminal and civil penalties as well as loss of licenses.

        Under a provision of the federal Civil Monetary Penalties Law, civil monetary penalties (and exclusion) may be imposed on any person who offers or transfers remuneration to any patient who is a Medicare or Medicaid beneficiary, when the person knows or should know that the remuneration is likely to induce the patient to receive medical services from a particular provider. This broad provision applies to many kinds of inducements or benefits provided to patients, including complimentary items, services or transportation that are of more than a nominal value. We have reviewed our practices of providing services to our patients, and have structured those services in a manner that we believe complies with the law and its interpretation by government authorities. We cannot provide assurances, however, that government authorities will not take a contrary view and impose civil monetary penalties and exclude us for past or present practices.

If we fail to comply with physician self-referral laws as they are currently interpreted or may be interpreted in the future, or if other legislative restrictions are issued, we could incur a significant loss of reimbursement revenue.

        We are subject to the federal Stark Law, as well as similar state statutes and regulations, which bans payments for designated health services ("DHS") rendered as a result of referrals by physicians to DHS entities with which the physicians (or immediate family members) have a financial relationship. DHS includes, but is not limited to, radiation therapy, radiology and laboratory services. A "financial relationship" includes investment and compensation arrangements, both direct and indirect. The regulatory framework of the Stark Law is to first prohibit all referrals from physicians to entities for Medicare DHS and then to except certain types of arrangements from that broad general prohibition.

        State self-referral laws and regulations vary significantly based on the state and, in many cases, have not been interpreted by courts or regulatory agencies. These state laws and regulations can encompass not only services reimbursed by Medicaid or government payers but also private payers. Violation of these federal and state laws and regulations may result in prohibition of payment for services rendered, loss of licenses, $15,000 civil monetary penalties for specified infractions, $100,000 for a circumvention scheme, criminal penalties, exclusion from Medicare and Medicaid programs, and potential false claims liability, including via "qui tam" action, of not less than $5,500 and not more than $11,000 per claim, plus three times the amount of damages that the government sustains because of an improperly submitted claim. 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.

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        Our compensation and other financial arrangements with physicians are governed by the federal Stark Law. We rely on certain exceptions to the Stark Law, including those covering employees and in-office ancillary services, and the exclusion of certain requests by radiation oncologists for radiation therapy services from the definition of "referral." Under our ICC model, we have relationships with non-radiation oncology physicians such as medical oncologists, surgeons and urologists that are members of a group practice with our radiation oncologists and we rely on the Stark group practice definition and rules with respect to such relationships.

        The Health Care Reform Act also imposes new disclosure requirements, including one such requirement on referring physicians under the federal Stark Law to inform patients that they may obtain certain imaging services (e.g., magnetic resonance imaging ("MRI"), computed tomography ("CT") and positron emission tomography ("PET")) or other designated health services as specified by the Secretary of Health and Human Services in the future from a provider other than that physician, his or her group practice, or another physician in his or her group practice. To date, CMS has not applied these disclosure requirements to radiation therapy referrals but could do so in the future.

        While we believe that our financial relationships with physicians and referral practices are in compliance with applicable laws and regulations, we cannot guarantee that government authorities might take a different position. If we were found to be in violation of the Stark Law, we could be subject to significant civil and criminal penalties, including fines as specified above, exclusion from participation in government and private payer programs and requirements to refund amounts previously received from government and private payers.

        In addition, expansion of our operations to new jurisdictions, or new interpretations of laws in our existing jurisdictions, could require structural and organizational modifications of our relationships with physicians to comply with that jurisdiction's laws. Such structural and organizational modifications could result in lower profitability and failure to achieve our growth objectives.

        Certain states have proposed statutory or regulatory enactments that would prohibit the use of the Stark Law "in-office ancillary services" ("IOAS") exception for ICC physicians to obtain any financial benefit from radiation oncology and other DHS services even if they are part of a group practice. To date, only the state of Maryland has enacted such prohibition. Similarly, the American Society for Radiation Oncology ("ASTRO") supports recent proposed federal legislation, the Promoting Integrity in Medicare Act of 2013 ("PIMA"), which, if passed, would eliminate certain specified ancillary services from the IOAS exception to the Stark Law, including radiation therapy services and advanced diagnostic imaging studies, and increase enforcement and penalties for improper referrals. If any of these state or federal proposed enactments are promulgated, this could have a material adverse impact on our ICC model and our business.

If a federal or state agency asserts a different position or enacts new laws or regulations regarding illegal payments under the Medicare, Medicaid or other governmental programs, we may be subject to civil and criminal penalties, experience a significant reduction in our revenue or be excluded from participation in the Medicare, Medicaid or other governmental programs.

        Any change in interpretations or enforcement of existing or new laws and regulations could subject our current business practices to allegations of impropriety or illegality, or could require us to make changes in our treatment centers, equipment, personnel, services, pricing or capital expenditure programs, which could increase our operating expenses and have a material adverse effect on our operations or reduce the demand for or profitability of our services.

        Additionally, new federal or state laws may be enacted that would cause our relationships with our radiation oncologists or other physicians to become illegal or result in the imposition of penalties against us or our treatment centers. If any of our business arrangements with our radiation oncologists or other physicians in a position to make referrals of radiation therapy services were deemed to violate the federal anti-kickback statute or similar laws, or if new federal or state laws were enacted rendering these arrangements illegal, our business would be adversely affected.

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We may encounter numerous business risks in identifying, acquiring and developing additional treatment centers, and may have difficulty operating and integrating those treatment centers.

        Over the past three years ended December 31, 2013, we have acquired 69 treatment centers, acquired 3 professional/other centers, developed 5 treatment centers, developed 1 professional/other center and transitioned 2 professional/other centers to freestanding treatment centers, all of which includes our acquisition of OnCure which we completed on October 25, 2013. As part of our growth strategy, we expect to continue to add additional treatment centers in our existing and new local and international markets. When we acquire or develop additional treatment centers, we may:

    be unable to make acquisitions on terms favorable to us or at all;

    have difficulty identifying desirable targets or locations for treatment centers in suitable markets;

    be unable to obtain adequate financing to fund our growth strategy;

    be unable to successfully operate the treatment centers;

    have difficulty integrating their operations and personnel;

    be unable to retain physicians or key management personnel;

    acquire treatment centers with unknown or contingent liabilities, including liabilities for failure to comply with healthcare laws and regulations;

    experience difficulties with transitioning or integrating the information systems of acquired treatment centers;

    be unable to contract with third-party payers or attract patients to our treatment centers; and/or

    experience losses and lower gross revenues and operating margins during the initial periods of operating our newly-developed treatment centers.

        Larger acquisitions could increase our potential exposure to business risks. Furthermore, integrating a new treatment center could be expensive and time consuming, and could disrupt our ongoing business and distract our management and other key personnel. In addition, we may incur significant transaction fees and expenses, including for potential transactions that are not consummated.

        We may continue to explore acquisition opportunities outside of the United States when favorable opportunities are available to us. In addition to the risks set forth herein, foreign acquisitions involve unique risks including the particular economic, political and regulatory risks associated with the specific country, currency risks, the relative uncertainty regarding laws and regulations and the potential difficulty of integrating operations across different cultures and languages.

        We currently plan to continue to develop new treatment centers in existing and new local markets, including international markets. We may not be able to structure economically beneficial arrangements in new markets as a result of healthcare laws applicable to such market or otherwise. If these plans change for any reason or the anticipated schedules for opening and costs of development are revised by us, we may be negatively impacted. There can be no assurance that these planned treatment centers will be completed or that, if developed, will achieve sufficient patient volume to generate positive operating margins. If we are unable to timely and efficiently integrate a newly-developed treatment center, our business could suffer.

        In the case of OnCure, the business operates through a structure dependent on management services agreements. If we are unable to manage these management services agreements and the associated relationships, the business may suffer and the expected results of the acquisition may not be realized.

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        We cannot assure you that we will achieve the revenue and benefits identified in this Annual Report from completed acquisitions, including with respect to OnCure, or that we will achieve synergies and cost savings or benefits in connection with future acquisitions. In addition, many of the businesses that we have acquired and will acquire have unaudited financial statements that have been prepared by the management of such companies and have not been independently reviewed and audited. We cannot assure you that the financial statements of companies we have acquired or will acquire would not be materially different if such statements were audited. Finally, we cannot assure you that we will continue to acquire businesses at valuations consistent with our prior acquisitions or that we will complete acquisitions at all.

Any failure to comply with regulations relating to privacy and security of patient information could subject us to significant penalties.

        There are numerous federal and state laws and regulations addressing patient information privacy and security concerns, including state laws related to identity theft. In particular, the federal regulations issued under the Health Insurance Portability and Accountability Act of 1996, as modified by Title XIII, subtitle D of the Health Information Technology for Economic and Clinical Health Act (collectively, "HIPAA") contain provisions that:

    protect individual privacy by limiting the uses and disclosures of patient information;

    require notifications to individuals, and in certain cases to government agencies and the media, in the event of a breach of unsecured protected health information;

    require the implementation of security safeguards to ensure the confidentiality, integrity and availability of individually identifiable health information in electronic form; and

    prescribe specific transaction formats and data code sets for certain electronic healthcare transactions.

        Furthermore, the Omnibus HIPAA Rule, published on January 25, 2013 and now effective, makes business associates directly obligated to adhere to the HIPAA Security Rule and certain provisions of the HIPAA Privacy and Breach Notification Rules, such that violations of these rules can be enforced by the government directly against the business associate.

        Compliance with these regulations requires us to spend money and substantial time and resources. We believe that we are in material compliance with the HIPAA regulations with which we are currently required to comply. If we fail to comply with the HIPAA regulations, we could suffer civil penalties up to $50,000 per violation, not to exceed $1.5 million per calendar year for non-compliance of identical provisions, and criminal penalties with fines up to $250,000 per violation and possible imprisonment. Our facilities could be subject to a periodic audit by the federal government, and enforcement of HIPAA violations may occur by either federal agencies or state attorneys general. In 2011, the government launched a HIPAA audit initiative to assess covered entities' controls and processes implemented to comply with the HIPAA Privacy, Security, and Breach notification Rules, and the Office of Civil Rights is expected to implement a permanent HIPAA audit program beginning in 2014, which will expand compliance audits to business associates.

State law limitations and prohibitions on the corporate practice of medicine may materially harm our business and limit how we can operate.

        State governmental authorities regulate the medical industry and medical practices extensively. Many states have corporate practice of medicine laws which prohibit us from:

    employing physicians;

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    practicing medicine, which, in some states, includes managing or operating a radiation treatment center;

    certain types of fee arrangements with physicians;

    owning or controlling equipment used in a medical practice;

    setting fees charged for physician services;

    controlling the content of physician advertisements and marketing;

    billing and coding for services;

    pursuing relationships with physicians and other referral sources; or

    adding facilities and services.

        In addition, many states impose limits on the tasks a physician may delegate to other staff members. We have administrative services agreements in states that prohibit the corporate practice of medicine such as California, Massachusetts, Michigan, Nevada, New York and North Carolina. Corporate practice of medicine laws and their interpretation vary from state to state, and regulatory authorities enforce them with broad discretion. We have structured our agreements and services in those states in a manner that we believe complied with the law and its interpretation by government authorities. If, however, we are deemed to be in violation of these laws, we could be required to restructure or terminate our agreements which could materially harm our business and limit how we operate. In the event the corporate practice of medicine laws of other states would adversely limit our ability to operate, it could prevent us from expanding into the particular state and impact our growth strategy.

In certain states we depend on administrative services agreements with professional corporations, including related party professional corporations, and if we are unable to continue to enter into them or they are terminated, we could be materially harmed.

        Certain states, including California, Massachusetts, Michigan, Nevada, New York and North Carolina, have laws prohibiting business corporations from employing physicians. Our treatment centers in California, Massachusetts, Michigan, Nevada, New York and North Carolina operate through administrative services agreements with professional corporations that employ the radiation oncologists who provide professional services at the treatment centers in those states. In 2011, 2012 and 2013, $114.7 million, $132.8 million and $131.9 million, respectively, of our net patient service revenue was derived from administrative services agreements, as opposed to $524.0 million, $553.4 million and $584.1 million, respectively, from all of our other centers. The professional corporations in these states are currently owned by certain of our directors, executive officers and equityholders, who are licensed to practice medicine in those states. As we enter into new states that will require an administrative services agreement, there can be no assurance that a related party professional corporation, or any professional corporation, will be willing or able to enter into an administrative services agreement. Furthermore, if we enter into an administrative services agreement with an unrelated party there could be an increased risk of differences arising or future termination. We cannot assure you that a professional corporation will not seek to terminate an agreement with us on any basis, including on the basis of state laws prohibiting the corporate practice of medicine, nor can we assure you that governmental authorities in those states will not seek termination of these arrangements on the same basis. While we have not been subject to such proceedings in the past, we could be materially harmed if any state governmental authorities or the professional corporations with which we have an administrative services agreement were to succeed in such a termination.

        As compared to our approach, the OnCure model involves MSA arrangements (as more fully described elsewhere in this Annual Report) with medical practices whose shareholders and partners are

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not otherwise affiliated with OnCure. Such medical practices serve as the provider of clinical services with all revenues being billed to patients and/or third party payers in the name or tax identification number or provider number of the practice. As compared to our general model, OnCure has less involvement in the clinical aspects of the center, focusing instead on the provision of space and equipment, as well as day-to-day management. While in connection with the integration of OnCure, it is our plan to introduce our proprietary technology and systems, as well as our ICC model, to these managed practices, there is no assurance that the shareholders and partners in the practices will adopt these systems and model. Moreover, while the terms of the MSAs generally run for ten years or longer, the non-compete obligations of the managed practices and their shareholders and partners generally cease upon the expiration or termination of the MSAs. Finally, whereas our financial arrangements with our affiliated physicians and practices generally involve an employment or compensation arrangement, the financial model under the OnCure MSAs involves a sharing of revenues or EBITDA. In short, the practices that are affiliated with OnCure under the MSA model generally have greater autonomy in their operations than the model we generally deploy.

Our business could be materially harmed by future interpretation or implementation of state laws regarding prohibitions on fee-splitting.

        Many states prohibit the splitting or sharing of fees between physicians and non-physicians, as well as between treating physicians and referral sources. These laws vary from state to state and are enforced by courts and regulatory agencies, each with broad discretion. Some states have interpreted certain types of fee arrangements in practice management agreements between entities and physicians as unlawful fee-splitting. We believe our arrangements with physicians comply in all material respects with the fee-splitting laws of the states in which we operate. Nevertheless, if government regulatory authorities were to disagree, we and our radiation oncologists could be subject to civil and criminal penalties, and we could be required to restructure or terminate our contractual and other arrangements, which would result in a loss of revenue and could result in less input by us into the business decisions of such practices. In addition, expansion of our operations to other states with certain types of fee-splitting prohibitions may require structural and organizational modification to the form of relationships that we currently have with physicians, professional corporations and hospitals, which could have a material adverse effect on our business, financial condition and results of operation.

If we fail to comply with the laws and regulations applicable to our treatment center operations, we could suffer penalties or be required to make significant changes to our operations.

        Our treatment center operations are subject to many laws and regulations at the federal, state and local government levels. These laws and regulations require that our treatment centers meet various licensing, certification and other requirements, including those relating to:

    qualification of medical and support persons;

    pricing of services by healthcare providers;

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

    clinic licensure and certificates of need;

    maintenance and protection of records; and

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

        While we have structured our operations in a manner that we believe complies in all material respects with all applicable laws and regulations, we cannot assure you that government regulators will agree, given the breadth and complexity of such laws. If a government agency were to find that we are

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not in compliance with these laws, we could suffer civil or criminal penalties, including becoming the subject of cease and desist orders, rejection of the payment of our claims, the loss of our licenses to operate and our ability to participate in government or private healthcare programs, any of which could have a material adverse effect on our business, financial condition and results of operation.

Our failure to comply with laws related to hazardous materials could materially harm us.

        Our treatment centers provide specialized treatment involving the use of radioactive material in the treatment of the lungs, prostate, breasts, cervix and other organs. The materials are obtained from, and, if not permanently placed in a patient or consumed, returned to, a third-party provider of supplies to hospitals and other radiation therapy practices, which has the ultimate responsibility for its proper disposal. We, however, remain subject to state and federal laws regulating the protection of employees who may be exposed to hazardous material and regulating the proper handling, storage and disposal of that material. Although we believe we are in compliance in all material respects with all applicable laws, a violation of such laws, or the future enactment of more stringent laws or regulations, could subject us to liability, or require us to incur costs that could have a material adverse effect on us.

Our business may be harmed by technological and therapeutic changes.

        The treatment of cancer patients is subject to potential significant technological and therapeutic changes. Future technological developments could render our equipment obsolete. We may incur significant costs in replacing or modifying equipment in which we have already made a substantial investment prior to the end of its anticipated useful life. In addition, there may be significant advances in other cancer treatment methods, such as chemotherapy, surgery, biological therapy or in cancer prevention techniques, which could reduce demand or even eliminate the need for the radiation therapy services we provide.

Changes in medical treatment guidelines or recommendations may adversely affect our business.

        There are numerous options that a cancer patient can undergo for treatment. There are also a number of regulatory bodies, research panels and formal guidelines that can influence or even dictate patients, payers and physicians in the course of action that a patient determines to take for his or her particular form of cancer. For instance, in May 2012, the U.S. Preventative Task Force finalized its recommendation against prostate-specific antigen ("PSA") screening and the National Cancer Institute suggested changes in treatment patterns for prostate cancer away from definitive treatment and towards "watchful waiting" or "active surveillance." Both of these bodies' proclamations negatively impacted the volume of prostate cancer treatments nationally. On a same practice basis, in 2012, our prostate cancer treatment volumes declined by over 9.6% over 2011. Although our prostate volumes have stabilized, there can be no assurance that further recommendations or changes in treatment guidelines for prostate cancer or other cancer types will not result in a decrease in diagnosis and treatment of cancer which could have a materially adverse effect on our business.

Efforts to regulate the construction, acquisition or expansion of healthcare treatment centers could prevent us from developing or acquiring additional treatment centers or other facilities or renovating our existing treatment centers.

        Many states have enacted certificate of need laws which require prior approval for the construction, acquisition or expansion of healthcare treatment centers. In giving approval, these states consider the need for additional or expanded healthcare treatment centers or services. In the states of Kentucky, Massachusetts, Michigan, North Carolina, Rhode Island, South Carolina and West Virginia in which we currently operate, certificates of need must be obtained for capital expenditures exceeding a prescribed amount, changes in capacity or services offered and various other matters. Other states in which we now or may in the future operate may also require certificates of need under certain

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circumstances not currently applicable to us. We may not be able to obtain the certificates of need or other required approvals for ongoing, additional or expanded treatment centers or services in the future. In addition, at the time we acquire a treatment center, we may agree to replace equipment or expand the acquired treatment center. If we are unable to obtain required approvals, we may not be able to acquire additional treatment centers or other facilities or expand acquired treatment centers, expand the healthcare services we provide at these treatment centers or replace equipment.

        Certain states are reconsidering their participation in certificate of need programs, and these decisions could significantly impact the approval process for future projects. For example, on June 25, 2013, the governor of South Carolina vetoed the appropriation of funds for the state's certificate of need program. This veto was upheld by the South Carolina House of Representatives the next day. As a result of the veto, the South Carolina Department of Health and Environmental Control ("SCDEHC") suspended the operation of the certificate of need program for the fiscal year beginning July 1, 2013. The SCDEHC is not reviewing any new or existing applications while the certificate of need program is suspended. A petition is currently pending in front of the South Carolina Supreme Court seeking a declaratory ruling on the ability of providers to engage in activities covered by the state's certificate of need law without approval by the SCDEHC. The outcome of this ruling and other potential future efforts in other states could materially affect our ability to develop new projects in various states.

We are exposed to local business risks in different countries, which could have a material adverse effect on our financial condition or results of operations.

        We have significant operations in foreign countries. Currently, we operate through 25 legal entities in Argentina, Costa Rica, The Dominican Republic, El Salvador, Guatemala and Mexico, in addition to our operations in the United States. Our offshore operations are subject to risks inherent in doing business in foreign countries, including, but not necessarily limited to:

    new and different legal and regulatory requirements in local jurisdictions, which may conflict with U.S. laws;

    local economic conditions;

    potential staffing difficulties and labor disputes;

    increased costs of transportation or shipping;

    credit risk and financial conditions of government, commercial and patient payers;

    risk of nationalization of private enterprises by foreign governments;

    potential imposition of restrictions on investments;

    potential restrictions on repatriation of funds, payments of dividends and other financial options integral to our investments and operations;

    potential declines in government and/or private payer reimbursement amounts for our services;

    potentially adverse tax consequences, including imposition or increase of withholding and other taxes on remittances and other payments by subsidiaries;

    foreign currency exchange restrictions and fluctuations; and

    local political and social conditions, including the possibility of hyperinflationary conditions and political or social instability in certain countries.

        We may not be successful in developing and implementing policies and strategies to address the foregoing factors in a timely and effective manner at each location where we do business. Consequently, the occurrence of one or more of the foregoing factors could have a material adverse effect on our international operations or upon our financial condition and results of operations.

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        Further, our international operations require us to comply with a number of U.S. and international regulations. For example, we must comply with U.S. economic sanctions and export control laws in connection with exports of products and services, and we must comply with the Foreign Corrupt Practices Act ("FCPA"), which prohibits U.S. companies or their agents and employees from providing anything of value to a foreign official or agent thereof for the purposes of influencing any act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person or corporate entity or obtain any unfair advantage. Any failure by us to ensure that our employees and agents comply with the FCPA, economic sanctions and export controls, and applicable laws and regulations in foreign jurisdictions could result in substantial penalties or restrictions on our ability to conduct business in certain foreign jurisdictions, and our results of operations and financial condition could be materially and adversely affected.

        In addition, local governments may take actions that are adverse to our interests and our business. For example, in 2012 Argentina's government nationalized the country's largest oil and gas company via taking a 51% stake. While no such proposal has been made or threatened with respect to any businesses in the Argentine healthcare sector, we have significant operations in Argentina and any such development could have a material adverse effect on our international operations or upon our financial condition and results of operations.

        Our international subsidiaries accounted for $60.5 million, $81.2 million and $90.9 million or 9.4%, 11.7% and 12.3%, of our revenues for the years ended December 31, 2011, 2012 and 2013, respectively.

Fluctuations in currency exchange rates may significantly impact our results of operations and may significantly affect the comparability of our results between financial periods.

        Some of our operations are conducted by subsidiaries in foreign countries. The results of the operations and the financial position of these subsidiaries are reported in the relevant foreign currencies and then translated into U.S. dollars at the applicable exchange rates for inclusion in our consolidated financial statements. The main currency to which we are exposed, besides the U.S. dollar, is the Argentine peso. The exchange rate between the Argentine peso and the U.S. dollar in recent years has fluctuated significantly and may continue to do so in the future. A depreciation of this currency against the U.S. dollar will decrease the U.S. dollar equivalent of the amounts derived from these operations reported in our consolidated financial statements and an appreciation of this currency will result in a corresponding increase in such amounts. In addition, currency fluctuations may affect the comparability of our results of operations between financial periods.

        We incur currency exchange risk whenever we enter into a transaction using a currency other than the local currency of the transacting entity. Given the volatility of exchange rates, there can be no assurance that we will be able to effectively manage our currency exchange risks or that any volatility in currency exchange rates will not have a material adverse effect on our financial condition or results of operations.

Exchange controls implemented by the Argentine Government on the acquisition of U.S. dollars and other foreign currencies could have a material impact in our operations, business, financial condition and results of operations.

        The Argentine government has implemented certain measures that control and restrict the ability of companies and individuals to exchange Argentine Pesos for foreign currencies. Those measures include, among other things, the requirement to obtain the prior approval from the Argentine Tax Authority and Central Bank of the foreign currency transaction (for example and without limitation, for the payment of non-Argentine goods and services, payment of principal and interest on non-Argentine debt and also payment of dividends to parties outside of the country), which approval process could delay, and eventually restrict, the ability to exchange Argentine pesos for other currencies, such as U.S.

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dollars. Those approvals are administered by the Argentine Central Bank through the Mercado Unico y Libre de Cambio, which is the only market where exchange transactions may be lawfully made. Further, restrictions also currently apply to the acquisition of any foreign currency for holding as cash within Argentina. There can be no assurance that the Central Bank of Argentina or other government agencies will not increase such controls or restrictions or make modifications to these regulations or establish more severe restrictions on currency exchange, making payments to foreign creditors or providers, dividend payments to foreign shareholders or require its prior authorization for such purposes. As a result, these exchange controls and restrictions could materially affect the business, financial condition and results of operations of our Argentine subsidiaries and could significantly impact our ability to comply with our foreign currency obligations, each of which could have a material adverse effect on our financial condition and results of operation.

Our information systems are critical to our business and a failure of those systems could materially harm us.

        We depend on our ability to store, retrieve, process and manage a significant amount of information, and to provide our treatment centers with efficient and effective accounting and scheduling systems. Our information systems require maintenance and upgrading to meet our needs, which could significantly increase our administrative expenses. We are currently upgrading multiple systems and migrating to other systems within our organization.

        Furthermore, any system failure that causes an interruption in service or availability of our systems could adversely affect operations or delay the collection of revenues. Even though we have implemented network security measures, our servers are vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering. The occurrence of any of these events could result in interruptions, delays, the loss or corruption of data, or cessations in the availability of systems, all of which could have a material adverse effect on our financial position and results of operations and harm our business reputation.

        The performance of our information technology and systems is critical to our business operations. Our information systems are essential to a number of critical areas of our operations, including:

    accounting and financial reporting;

    billing and collecting accounts;

    coding and compliance;

    clinical systems;

    medical records and document storage;

    inventory management;

    negotiating, pricing and administering managed care contracts and supply contracts; and

    monitoring quality of care and collecting data on quality measures necessary for full Medicare payment updates.

        Any failure of our information technology and systems could disrupt these operations, which could lead to a material adverse effect on our financial position and results of operations.

If we fail to effectively and timely implement electronic health record systems, our operations could be adversely affected.

        As required by the American Recovery and Reinvestment Act of 2009, the DHHS has developed and is implementing an incentive payment program for eligible healthcare professionals that adopt and meaningfully use certified electronic health record ("EHR") technology. If our future treatment centers

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are unable to meet the requirements for participation in the incentive payment program, we will not be eligible to receive incentive payments that could offset some of the costs of implementing EHR systems. Further, beginning in 2015, eligible healthcare professionals that fail to demonstrate meaningful use of certified EHR technology will be subject to reduced payments from Medicare. While we have qualified at our existing facilities, failure to implement EHR systems effectively and in a timely manner at our recently acquired facilities or any future facilities would impact our eligibility to participate in these incentive programs and could have a material adverse effect on our financial position and results of operations.

Our financial results may suffer if we have to write-off goodwill or other intangible assets.

        A significant portion of our total assets consist of goodwill and other intangible assets. Goodwill and other intangible assets, net of accumulated amortization, accounted for approximately 58.8% and 56.4% of the total assets on our balance sheet as of December 31, 2013 and 2012, respectively. We may not realize the value of our goodwill or other intangible assets. We expect to engage in additional transactions that will result in our recognition of additional goodwill or other intangible assets. We evaluate on a regular basis whether events and circumstances have occurred that indicate that all or a portion of the carrying amount of goodwill or other intangible assets may no longer be recoverable, and is therefore impaired. Under current accounting rules, any determination that impairment has occurred would require us to write-off the impaired portion of our goodwill or the unamortized portion of our intangible assets, resulting in a charge to our earnings. We have written off significant amounts of goodwill and intangible assets in the past, and any future write-off could have a material adverse effect on our financial condition and results of operations. For the year ended December 31, 2011, we wrote-off approximately $360.6 million in goodwill, trade name, leasehold improvements and other investments as a result of our annual impairment testing of our goodwill and indefinite-lived intangible assets and branding initiatives relating to our trade name. For the year ended December 31, 2012, we wrote-off approximately $81.0 million in goodwill and leasehold improvements as a result of our interim impairment testing of our goodwill and indefinite-lived intangible assets. For the year ended December 31, 2013, there was no impairment of goodwill or intangible.

We are addressing a previous material weakness with respect to our internal controls and have identified two separate material weaknesses in our internal controls, which could, if not sufficiently remediated, result in material misstatements in our financial statements.

        In connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2012, we identified a material weakness in internal controls relating to the valuation of goodwill. We have taken steps since then to remediate the internal control weakness, such that at December 31, 2013, our controls over the valuation of goodwill operated effectively. During 2013, we continued to review the underlying assumptions and inputs to the valuation specialists, as well as reviewed the underlying schedules related to the output of the calculation of the impairment values. As we further optimize and refine our goodwill valuation processes, we will review the related controls and may take additional steps to ensure that they remain effective and are integrated appropriately. While we have implemented the procedures described above and will continue to take further steps in the near future to strengthen further our internal controls, there can be no assurance that we will not identify control deficiencies in the future or that such deficiencies will not have a material impact on our operating results or financial statements.

        In addition, in March 2014, we identified a material weakness in our internal communications regarding the identification of and accounting for the loss contingency, along with the related disclosure regarding certain subpoenas we received in February, 2014, from the Office of Inspector General of the Department of Health & Human Services. We determined that the error was caused by (i) the design of certain controls relating to the identification and communication of potential losses relating to

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certain patient billings and (ii) deficiencies in the determination of and accounting for the probable loss as well as the related disclosures regarding the subpoenas. Management determined that these control deficiencies constituted material weaknesses in our internal control over financial reporting as of December 31, 2013. See Item 9A for further information.

        We are in the process of developing and implementing new processes and procedures to remediate the material weaknesses that existed in our internal control over financial reporting with respect to the identification of and accounting for a loss contingency and related disclosure as of December 31, 2013, as well as the continued improvement of our overall system of internal controls over financial reporting with respect to the accounting for loss contingencies, including the establishment of a disclosure committee and the assessment of future probable loss contingency accounting and methods.

        If our remedial measures are insufficient to address the material weakness or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, we may be unable to accurately report our financial results, or report them within the required timeframes, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results in the future, which could cause investors and others to lose confidence in our financial statements, limit our ability to raise capital and could adversely affect our reputation, results of operations and financial condition.

A significant number of our treatment centers are concentrated in certain states, particularly Florida, which makes us sensitive to regulatory, economic and other conditions in those states.

        Our Florida treatment centers accounted for approximately 40%, 39% and 39% of our freestanding radiation revenues during the years ended December 31 2011, 2012 and 2013, respectively. Our treatment centers are also concentrated in the states of California and North Carolina, which accounted for approximately 7.0% and 7.2%, respectively, of our freestanding radiation revenues for the year ended December 31, 2012. This concentration makes us particularly sensitive to regulatory requirements in those locations, including those related to false and improper claims, anti-kickback laws, self-referral laws, fee-splitting, corporate practice of medicine, antitrust, licensing and certificates of need, as well as economic and other conditions which could impact us. If our treatment centers in these states are adversely affected by changes in regulatory, economic or other conditions, our revenue and profitability may decline.

Our operations in Florida and other areas could be disrupted or damaged by hurricanes and other natural disasters.

        Florida is susceptible to hurricanes, and as of December 31, 2013, we have 45 radiation treatment centers located in Florida. Our Florida centers accounted for approximately 40%, 39% and 39% of our freestanding radiation revenues during the years ended December 31 2011, 2012 and 2013, respectively. Our California centers are located in areas that are known to experience earthquakes from time to time, some of which have been severe. In 2005, 21 of our treatment centers in South Florida were disrupted by Hurricane Wilma which required us to close all of these centers for one business day. Although none of these treatment centers suffered structural damage as a result of the hurricane, their utility services were disrupted. While Hurricane Wilma did not have any long-term impact on our business, our Florida treatment centers, our California treatment centers and any of our other treatment centers located in other areas that may be affected by a hurricane, earthquake or other natural disaster could be subject to significant disruptions and/or damage in the future and could have an adverse effect on our business and financial results. We carry property damage and business interruption insurance on our facilities, but there can be no assurance that it would be adequate to cover all such losses.

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We have potential conflicts of interest relating to our related party transactions which could harm our business.

        We have potential conflicts of interest relating to existing agreements we have with certain of our directors, executive officers and equityholders. In 2011, 2012 and 2013, we paid an aggregate of $21.5 million, $21.6 million and $22.9 million, respectively, under certain of our related party agreements, including leases, and malpractice insurance premiums and we received $82.7 million, $62.5 million and $72.1 million, respectively, pursuant to our other services agreements with related parties. Potential conflicts of interest can exist if a related party has to make a decision that has different implications for us and the related party. If a dispute arises in connection with any of these agreements, if not resolved satisfactorily to us, our business could be harmed. These agreements include:

    administrative services agreements with professional corporations that are owned by certain of our directors, executive officers and equityholders;

    leases we have entered into with entities owned by certain of our directors, executive officers and equityholders; and

    medical malpractice insurance which we acquire from an entity owned by certain of our directors, executive officers and equityholders.

        In California, Maryland, Massachusetts, Michigan, Nevada, New York and North Carolina, we have administrative services agreements with professional corporations that are owned by certain of our directors, executive officers and equityholders who own interests in these professional corporations. While we have stock transfer agreements corresponding to our administrative services agreements in place in all states except New York that provide us with the ability to designate qualified successor physician owners of the shares held by the physician owners of these professional corporations upon the occurrence of certain events, there can be no assurance that we will be able to enforce them under the laws of the respective states or that they will not be challenged by regulatory agencies. Such stock transfer agreements do not exist with the practices located in California, Florida and Indiana that are affiliated with OnCure. Potential conflicts of interest may arise in connection with the administrative services agreements that may have materially different implications for us and the professional corporations and there can be no assurance that it will not harm us. For example, we bill for such services either on a fixed basis, percentage of net collections basis, or on a per treatment basis, depending on the particular state requirements and certain of these arrangements are subject to renegotiation on an annual basis. We may be unable to renegotiate acceptable fees, in which event many of the administrative services agreements provide for binding arbitration. If we are unsuccessful in renegotiations or arbitration this could negatively impact our operating margins or result in the termination of our administrative services agreements.

        Additionally, we lease 37 of our treatment centers from ownership groups that consist of certain of our directors, executive officers and equityholders. Before we enter into these leases, we compare rates and terms with our standard documentation as well as rely on third-party fair market value reports for relevant markets. We may be unable to renegotiate these leases when they come up for renewal on terms acceptable to us, if at all.

        In October 2003, we replaced our existing third-party medical malpractice insurance coverage with coverage we obtained from an insurance entity which is owned by certain of our directors, executive officers and equityholders. After soliciting various third-party proposals for malpractice insurance coverage on an annual basis, we renewed this coverage in 2011, 2012 and 2013, with the approval of the Audit and Compliance Committee of the Company's Board of Directors. We may be unable to renegotiate this coverage at acceptable rates and comparable coverage may not be available from third-party insurance companies. If we are unsuccessful in renewing our malpractice insurance coverage, we

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may not be able to continue to operate without being exposed to substantial risks of claims being made against us for damage awards we are unable to pay.

        Related party transactions between us and any related party are subject to approval by the Audit and Compliance Committee on behalf of the Company's Board of Directors or by the Company's Board of Directors, and disputes are handled by the Company's Board of Directors. There can be no assurance that the above or any future conflicts of interest will be resolved in our favor. If not resolved in our favor, such conflicts could harm our business. For a further description of our related party transactions, see "Certain Relationships and Related Party Transactions."

In recent years, accreditation of facilities and the establishment of a national error reporting database have been under consideration.

        The Chairman of the American College of Radiology ("ACR") called for the required accreditation of all facilities which bill Medicare for advanced medical imaging and radiation oncology services, including those in hospitals at a congressional hearing on medical radiation. In addition, ASTRO called for the establishment of the nation's first central database for the reporting of errors involving linear accelerators and CT scanners. Federal legislation was also introduced in March 2013, which requires certain personnel furnishing medical imaging examinations or radiation therapy to obtain state licensure and certification from certain approved certification organizations, and directs HHS to establish a program for designating and publishing a list of such certification organizations.

        Of our 130 U.S. treatment centers, 96 have received or are in process of receiving ACR accreditation. In addition to a deep physics infrastructure and internal maintenance department, we have recently begun to utilize Gamma Function as a broad application radiation safety monitoring tool to minimize potential errors in our radiation therapy treatments. While we continue to improve upon safety measures aimed at minimizing errors in radiation therapy treatment in accordance with our internal protocols as well as the mandates of organizations like ACR, we cannot assure you that any further critical press and government scrutiny will not adversely affect our business and results of operations.

Our financial results could be adversely affected by claims brought against our facilities, the increasing costs of professional liability insurance and by successful malpractice claims.

        We could be subject to litigation relating to our business practices, including claims and legal actions by patients and others in the ordinary course of business alleging malpractice, product liability or other legal theories. We are also exposed to the risk of professional liability and other claims against us and our radiation oncologists and other physicians and professionals arising out of patient medical treatment at our treatment centers. Our risk exposure as it relates to our non-radiation oncology physicians could be greater than with our radiation oncologists to the extent such non-radiation oncology physicians are engaged in diagnostic activities. For a discussion of current pending material litigation against us, see "Business—Legal Proceedings." Malpractice claims, if successful, could result in substantial damage awards which might exceed the limits of any applicable insurance coverage. Insurance against losses of this type can be expensive and insurance premiums may increase in the near future. Insurance rates vary from state to state, by physician specialty and other factors. The rising costs of insurance premiums, as well as successful malpractice claims against us or one of our physicians, could have a material adverse effect on our financial position and results of operations.

        It is also possible that our excess liability and other insurance coverage will not continue to be available at acceptable costs or on favorable terms. In addition, our insurance does not cover all potential liabilities arising from governmental fines and penalties, indemnification agreements and certain other uninsurable losses. For example, from time to time we agree to indemnify third parties,

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such as hospitals and clinical laboratories, for various claims that may not be covered by insurance. As a result, we may become responsible for substantial damage awards that are uninsured.

        If payment for claims exceed actuarially determined estimates or are not covered by insurance, or if reinsurers, if any, fail to meet their obligations, our results of operations and financial position could be adversely affected.

Our substantial debt could adversely affect our financial condition.

        We have $991.7 million of total debt outstanding as of December 31, 2013. Our high level of debt could have adverse effects on our business and financial condition. Specifically, our high level of debt could have important consequences, including the following:

    making it more difficult for us to satisfy our obligations with respect to our debt;

    limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

    requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes;

    increasing our vulnerability to general adverse economic and industry conditions;

    limiting our flexibility in planning for and reacting to changes in the industry in which we compete;

    placing us at a disadvantage compared to other, less leveraged competitors; and

    increasing our cost of borrowing.

        Our ability to make scheduled payments on and to refinance our indebtedness depends on and is subject to our financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and other factors beyond our control, including the availability of financing in the international banking and capital markets. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to service our debt, to refinance our debt or to fund our other liquidity needs. If we are unable to meet our debt obligations or to fund our other liquidity needs, we will need to restructure or refinance all or a portion of our debt, which could cause us to default on our debt obligations and impair our liquidity. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants which could further restrict our business operations.

Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage.

        We will have the right to incur substantial additional indebtedness in the future. The terms of our Term Facility and our $100 million revolving credit facility (the "Revolving Credit Facility" and together with the Term Facility, the "Credit Facilities") and the indentures governing our notes restrict, but do not in all circumstances, prohibit us from doing so. Under the instruments governing our debt, we are permitted to incur substantial additional debt. Any additional debt may be governed by indentures or other instruments containing covenants that could place restrictions on the operation of our business and the execution of our business strategy in addition to the restrictions on our business already contained in the agreements governing our existing debt. Because any decision to issue debt securities or enter into new debt facilities will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any future debt financings and whether we may be required to accept unfavorable terms for any such financings.

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The indentures governing our notes and our Credit Facilities impose significant operating and financial restrictions on our Company and our subsidiaries, which may prevent us from capitalizing on business opportunities.

        The indentures governing our notes and our Credit Facilities impose significant operating and financial restrictions on us. These restrictions limit our ability, among other things, to:

    incur additional indebtedness or enter into sale and leaseback obligations;

    pay certain dividends or make certain distributions on our capital stock or repurchase our capital stock;

    make certain investments or other restricted payments;

    place restrictions on the ability of subsidiaries to pay dividends or make other payments to us;

    engage in transactions with equityholders or affiliates;

    sell certain assets or merge with or into other companies; and

    create liens.

        As a result of these covenants and restrictions, we will be limited in how we conduct our business and we may be unable to raise additional debt or other financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.

We are indirectly owned and controlled by Vestar and its interests may conflict with yours as a noteholder.

        Vestar indirectly controls approximately 81% of the Class A voting equity units of 21st Century Oncology Investments, LLC "21CI"), which controls us, and which in turn controls our subsidiaries. As a result, they have the power to elect a majority of our board of directors and effectively have control over major decisions regardless of whether noteholders believe that any such decisions are in their own best interests. The interests of Vestar as an equity holder may conflict with the interests of a noteholder. Vestar may have an incentive to increase the value of their investment or cause us to distribute funds at the expense of our financial condition and affect our ability to make payments on the notes. In addition, Vestar may have an interest in pursuing acquisitions, divestitures, financings or other transactions that it believes could enhance its equity investments even though such transactions might involve risks to you as a noteholder.

Item 1B.    Unresolved Staff Comments

        None

Item 2.    Properties

        Our executive and administrative offices are located in Fort Myers, Florida. These offices contain approximately 79,000 square feet of space. These offices will be adequate for our current primary needs, but we also believe that we will require significant additional space to meet our future needs and such future expansion is in the preliminary stages.

        Our radiation treatment centers typically range in size from 5,000 to 12,000 square feet. As of December 31, 2013 we provided radiation therapy services in 163 treatment centers in 16 states and in Latin America, Central America, Mexico, and the Caribbean. We own the real estate on which three of our treatment centers are located. We lease land and space at 152 treatment center locations, of which in 37 of these locations, certain of our directors, executive officers and equityholders have an ownership interest. These leases expire at various dates between 2014 and 2044 and 98 of these leases have one or

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more renewal options of five or 10 years. Also, eight of our treatment center locations are operated pursuant to professional and other service arrangements. We consider all of our offices and treatment centers to be well-suited to our present requirements. However, as we expand to additional treatment centers, or where additional capacity is necessary in a treatment center, additional space will be obtained where feasible. The following list summarizes the number of radiation treatment centers operated in each state, country, or region:

State/County/Region
  Treatment
Centers
 
State/County/Region
  Treatment
Centers
 

Alabama

    2   North Carolina     13  

Arizona

    5   Rhode Island     3  

California

    24   South Carolina     1  

Florida

    45   West Virginia     3  

Indiana

    4   Argentina     25  

Kentucky

    4   Costa Rica     2  

Maryland

    5   Dominican Republic     2  

Massachusetts

    2   El Salvador     1  

Michigan

    6   Guatemala     1  

Nevada

    4   Mexico     2  

New Jersey

    4            

New York

    5   Total     163  

Item 3.    Legal Proceedings

        We are involved in certain legal actions and claims that arise in the ordinary course of our business. We do not believe that an adverse decision in any of these matters would have a material adverse effect on our consolidated financial position, results of operations or cash flows.

        On February 18, 2014, we were served with subpoenas from the Office of Inspector General of the Department of Health & Human Services acting with the assistance of the U.S. Attorney's Office for the Middle District of Florida who together have requested the production of medical records of patients treated by certain of our physicians for the period from January 2007 to present regarding the ordering, billing and medical necessity of certain laboratory services as part of a civil False Claims Act investigation, as well as our agreements with such physicians. The laboratory services under review relate to the utilization of fluorescence in situ hybridization ("FISH") laboratory tests ordered by certain of our employed physicians and performed by us. We have recorded a liability of approximately $4.7 million that is included in accrued expenses and general and administrative expense in our consolidated balance sheet and statement of operations and comprehensive loss, respectively, as of December 31, 2013. The recorded estimate is based on a probability weighted analysis of the low-end of the range of the liability that considers the facts currently known by us, our review of qualitative and quantitative factors, and our assessment of potential outcomes under different scenarios used to assess our exposure which may be used to determine a potential settlement should we decide not to litigate. Our recording of a liability related to this matter is not an admission of guilt. Depending on how this matter progresses, our exposure may be less than or more than the liability recorded and we will continue to reassess and adjust the liability until this matter is settled. Our estimate of the high-end of the range of exposure is $9.4 million.

        Based on reviews performed to date, we do not believe that we or our physicians knowingly submitted false claims in violation of applicable Medicare statutory or regulatory requirements. We are cooperating fully with the subpoena requests. We believe we have a meritorious position and will vigorously defend any claim that may be asserted against us.

Item 4.    Mine Safety Disclosures

        Not applicable to 21st Century Oncology Holdings, Inc.

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

        We are a direct wholly owned subsidiary of 21CI. Accordingly, there is no public trading market for our common stock.

Stockholders

        As of March 1, 2014, there was one owner of record of our common stock, 21CI.

Dividends

        We have not paid cash dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future.

        Our senior secured credit facilities and the indentures governing our notes generally prohibit the payment of dividends by us on shares of our common stock, with certain limited exceptions.

Equity Compensation Plan Information

        The following table lists the number of securities of 21CI available for issuance as of December 31, 2013 under the 21CI equity-based incentive plan, as amended. For a description of the plan, please see

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note 18 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Plan Category
  Number of Securities to be
Issued Upon Exercise of
Outstanding Options
(a)
  Weighted-Average
Exercise Price of
Outstanding Options
(b)
  Number of Securities
Remaining
Available for Future Issuance
under Equity Compensation
Plans (excluding
Securities Reflected in
Column(a))

Equity compensation plans approved by security holders

    N/A     N/A   Non-voting preferred equity units: 2,825

              Voting Class A equity units: 51,854

              Non-voting MEP equity units: 89,179

              Non-voting Class G equity units: 10

Equity compensation plans not approved by security holders

   
N/A
   
N/A
 

N/A

TOTAL

   
   
 

Non-voting preferred equity units: 2,825

              Voting Class A equity units: 51,854

              Non-voting MEP equity units: 89,179

              Non-voting Class G equity units: 10

Unregistered Sales of Equity Securities

        On March 1, 2011, 25 shares of common stock of the Company were issued in connection with our acquisition of MDLLC, which we refer to herein as the "MDLLC Acquisition". In addition, the Company's direct parent, 21CI issued 13,660 Preferred Units and 258,955 Class A Units of 21CI as a component of the consideration in the MDLLC Acquisition.

        On August 22, 2013, 3 shares of common stock of the Company were issued in connection with the final payment of the earn-out liability. The earn out payment is contingent upon certain acquired centers attaining earnings before interest, taxes, depreciation and amortization targets, is due 18 months subsequent to the transaction closing, and is payable through Company financing and issuance of equity units. In addition, 21CI issued 1,513 Preferred Units and 28,684 Class A Units of 21CI as a component of the consideration of the earn out payment.

        21CI sold equity securities during this period. The number of units of common equity of 21CI issued during 2013 pursuant to the 21CI equity-based incentive plan, as amended were granted under Rule 701 promulgated under the Securities Act.

        On December 9, 2013, 21CI entered into a Fourth Amended and Restated Limited Liability Company Agreement (the "Fourth Amended LLC Agreement") which replaced the Third Amended LLC Agreement in its entirety. The Fourth Amended LLC Agreement established new classes of incentive equity units (such new units, together with Class MEP Units, as modified under the

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Fourth Amended LLC Agreement, the "2013 Plan") in 21CI in the form of Class M Units, Class N Units and Class O Units for issuance to employees, officers, directors and other service providers, eliminated 21CI's Class L Units and Class EMEP Units, and modified the distribution entitlements for holders of each existing class of equity units of 21CI.

Repurchases of Equity Securities

        Neither the Company's nor 21CI repurchased any equity securities during 2013:

Item 6.    Selected Financial Data

        The following selected historical consolidated financial data as of December 31, 2013 and 2012 and for the years ended December 31, 2011 to 2013 were derived from our audited consolidated financial statements, included elsewhere in this Annual Report on Form 10-K. The selected historical consolidated financial data as of and for the years ended December 31, 2009 to December 31, 2010 were derived from our audited consolidated financial statements, which are not included in this Annual Report on Form 10-K. Our historical results included below and elsewhere in this Annual Report on Form 10-K are not necessarily indicative of our future performance. You should read the following data in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," our audited consolidated financial statements and the accompanying notes included

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elsewhere in this Annual Report on Form 10-K, and other financial information included in this Annual Report on Form 10-K.

 
  Year Ended
December 31,
2009
  Year Ended
December 31,
2010
  Year Ended
December 31,
2011
  Year Ended
December 31,
2012
  Year Ended
December 31,
2013
 

(in thousands):

                               

Consolidated Statements of Operations and Comprehensive Loss Data:

                               

Net patient service revenue

  $ 517,646   $ 535,913   $ 638,690   $ 686,216   $ 715,999  

Management fees

                    11,139  

Other revenue

    6,838     8,050     6,027     7,735     9,378  
                       

Total revenues

    524,484     543,963     644,717     693,951     736,516  

Salaries and benefits

    259,532     282,302     326,782     372,656     409,352  

Medical supplies

    45,361     43,027     51,838     61,589     64,640  

Facility rent expense

    22,106     27,885     33,375     39,802     45,565  

Other operating expenses

    24,398     27,103     33,992     38,988     45,629  

General and administrative expenses

    54,537     65,798     81,688     82,236     106,887  

Depreciation and amortization

    46,416     46,346     54,084     64,893     65,195  

Provision for doubtful accounts

    12,871     8,831     16,117     16,916     12,146  

Interest expense, net

    62,502     58,505     60,656     77,494     86,747  

Electronic health records incentive income

                (2,256 )   (1,698 )

Fair value adjustment of earn-out liability and noncontrolling interests-redeemable

                1,219     130  

Loss on sale of assets of a radiation treatment center

        1,903              

Gain on the sale of an interest in a joint venture

                    (1,460 )

Loss on sale leaseback transaction

                    313  

Loss on investments

            250          

Gain on fair value adjustment of previously held equity investment

            (234 )        

Loss on foreign currency transactions

            106     339     1,283  

Loss on forward currency derivative contracts

            672     1,165     467  

Early extinguishment of debt

        10,947         4,473      

Impairment loss

    3,474     97,916     360,639     81,021      
                       

Total expenses

    531,197     670,563     1,019,965     840,535     835,196  

Loss before income taxes

    (6,713 )   (126,600 )   (375,248 )   (146,584 )   (98,680 )

Income tax (benefit) expense

    1,002     (12,810 )   (25,365 )   4,545     (20,432 )
                       

Net loss

    (7,715 )   (113,790 )   (349,883 )   (151,129 )   (78,248 )

Net income attributable to non-controlling interests

    (1,835 )   (1,698 )   (3,558 )   (3,079 )   (1,966 )
                       

Net loss attributable to 21st Century Oncology Holdings, Inc. shareholder

  $ (9,550 ) $ (115,488 ) $ (353,441 ) $ (154,208 ) $ (80,214 )
                       
                       

Net loss per common share:

                               

Net loss attributable to 21st Century Oncology Holdings, Inc. shareholder—basic

    (9,550.00 )   (115,488.00 )   (346,171.40 )   (150,446.83 )   (78,181.29 )

Net loss attributable to 21st Century Oncology Holdings, Inc. shareholder—diluted

    (9,550.00 )   (115,488.00 )   (346,171.40 )   (150,446.83 )   (78,181.29 )

Weighted average shares outstanding:

                               

Basic

    1,000     1,000     1,021     1,025     1,026  
                       
                       

Diluted

    1,000     1,000     1,021     1,025     1,026  
                       
                       

Balance Sheet Data (at end of period):

                               

Cash and cash equivalents

  $ 32,958   $ 13,977   $ 10,177   $ 15,410   $ 17,462  

Working capital(1)

    49,970     19,076     19,929     24,262     9,057  

Total assets

    1,379,225     1,236,330     998,592     922,301     1,128,191  

Finance obligations

    77,230     8,568     14,266     17,192     20,650  

Total debt

    549,059     598,831     679,033     762,368     991,666  

Total equity

    622,007     508,208     177,294     18,467     (79,218 )

Other Financial Data:

   
 
   
 
   
 
   
 
   
 
 

Ratio of earnings to fixed charges(2)

                     

Deficiency to cover fixed charges(3)

    9,127     128,292     377,137     148,837     100,171  

(1)
Working capital is calculated as current assets minus current liabilities.

(2)
For purposes of calculating the ratio of earnings to fixed charges, (i) earnings is defined as pretax income (loss) from continuing operations before adjustment for noncontrolling interests in consolidated subsidiaries plus/minus income or loss from equity investees plus fixed charges and (ii) fixed charges is defined as interest expense (including capitalized interest, of which we have

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    none, and any amortization of debt issuance costs) and the estimated portion of operating lease expense deemed by management to represent the interest component of rent expense.

(3)
Coverage deficiency represents the amount by which earnings were insufficient to cover fixed charges.

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

        The following discussion and analysis should be read in conjunction with the "Selected Financial Data "and the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This section of this Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties, such as statements about our plans, objectives, expectations and intentions. We use words such as "expect", "anticipate", "plan", "believe", "seek", "estimate", "intend", "future" and similar expressions to identify forward-looking statements. In particular, statements that we make in this section relating to the sufficiency of anticipated sources of capital to meet our cash requirements are forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including as a result of some of the factors described below and in the section titled "Risk Factors". You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K.

Overview

        We are the leading global, physician-led provider of integrated cancer care ("ICC") services. Our physicians provide comprehensive, academic quality, cost-effective coordinated care for cancer patients in personal and convenient community settings (our "ICC model"). We believe we offer a powerful value proposition to patients, hospital systems, payers and risk-taking physician groups by delivering high quality care and good clinical outcomes at lower overall costs through outpatient settings, clinical excellence, physician coordination and scaled efficiency.

        We operate the largest integrated network of cancer treatment centers and affiliated physicians in the world which, as of December 31, 2013, was comprised of approximately 671 community-based physicians in the fields of radiation oncology, medical oncology, breast, gynecological and general surgery, urology and primary care. Our physicians provide medical services at approximately 304 locations, including our 163 radiation therapy centers. Of the 163 treatment centers, 38 treatment centers were internally developed and 117 were acquired (including two which were transitioned from professional and other arrangements to freestanding). 41 radiation therapy centers operate in partnership with health systems and other clinics and community-based sites. Our 130 cancer treatment centers in the United States are operated predominantly under the 21st Century Oncology brand and are strategically clustered in 31 local markets in 16 states, including Alabama, Arizona, California, Florida, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, South Carolina, Rhode Island, and West Virginia. Our 33 international treatment centers in Latin America are operated under the 21st Century Oncology brand or a local brand and, in many cases, are operated with local minority partners, including hospitals. We hold market leading positions in the majority of our local markets and continue to expand our affiliation with physician specialties in closely related areas including gynecological, breast and surgical oncology, medical oncology and urology in a number of our local markets to strengthen our clinical working relationships and to evolve from a freestanding radiation oncology centric model to an ICC model.

        We use a number of metrics to assist management in evaluating financial condition and operating performance, and the most important follow:

    the number of Relative Value Units ("RVUs") (a standard measure of value used in the U.S. Medicare reimbursement formula for physician services) delivered per day in our freestanding centers;

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    the percentage change in RVUs per day in our freestanding centers;

    the number of treatments delivered per day in our freestanding centers;

    the average revenue per treatment in our freestanding centers;

    the number and type of radiation oncology cases completed;

    the number of treatments per radiation oncology case completed;

    the revenue per radiation oncology case;

    the ratio of funded debt to pro-forma adjusted earnings before interest, taxes, depreciation and amortization (leverage ratio); and

    facility gross profit.

Revenue Drivers

        Our revenue growth is primarily driven by expanding the number of our centers, optimizing the utilization of advanced technologies at our existing centers and benefiting from demographic and population trends in most of our local markets and by providing value added services to other healthcare and provider organizations. New centers are added or acquired based on capacity, demographics and competitive considerations.

        The average revenue per treatment is sensitive to the mix of services used in treating a patient's tumor. The reimbursement rates set by Medicare and commercial payers tend to be higher for more advanced treatment technologies, reflecting their higher complexity. A key part of our business strategy is to make advanced technologies available once supporting economics exist. For example, we have been utilizing IGRT and Gamma Function, a proprietary capability to enable measurement of the actual amount of radiation delivered during a treatment and to provide immediate feedback for adaption of future treatments as well as for quality assurance, where appropriate, now that reimbursement codes are in place for these services.

Operating Costs

        The principal costs of operating a treatment center are (1) the salary and benefits of the physician and technical staff, and (2) equipment and facility costs. The capacity of each physician and technical position is limited to a number of delivered treatments, while equipment and facility costs for a treatment center are generally fixed. These capacity factors cause profitability to be very sensitive to treatment volume. Profitability will tend to increase as resources from fixed costs including equipment and facility costs are utilized.

Sources of Revenue By Payer

        We receive payments for our services rendered to patients from the government Medicare and Medicaid programs, commercial insurers, managed care organizations and our patients directly. Generally, our revenue is determined by a number of factors, including the payer mix, the number and nature of procedures performed and the rate of payment for the procedures. The following table sets forth the percentage of our net patient service revenue we earned based upon the patients' primary insurance by category of payer in our last three fiscal years.

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    U.S. Domestic

 
  Year Ended December 31,  
 
  2011   2012   2013  

Payer

                   

Medicare

    44.9 %   42.6 %   41.9 %

Commercial

    50.9     53.6     54.3  

Medicaid

    2.8     2.7     2.7  

Self pay

    1.4     1.1     1.1  
               

Total U.S. domestic net patient service revenue

    100.0 %   100.0 %   100.0 %
               
               

Medicare and Medicaid

        Medicare is a major funding source for the services we provide and government reimbursement developments can have a material effect on operating performance. These developments include the reimbursement amount for each Current Procedural Terminology ("CPT") service that we provide and the specific CPT services covered by Medicare. CMS, the government agency responsible for administering the Medicare program, administers an annual process for considering changes in reimbursement rates and covered services. We have played, and will continue to play, a role in that process both directly and through the radiation oncology professional societies.

        Since cancer disproportionately affects elderly people, a significant portion of our U.S. net patient service revenue is derived from the Medicare program, as well as related co-payments. Medicare reimbursement rates are determined by CMS and are lower than our normal charges. Medicaid reimbursement rates are typically lower than Medicare rates; Medicaid payments represent approximately 2.7% of our U.S. net patient service revenue for the year ended December 31, 2013.

        In the final Medicare 2013 Physician Fee Schedule, CMS reduced payments for radiation oncology by 7%. This reduction related to (1) the fourth year of the four-year transition to the utilization of new PPIS data, (2) a change in equipment interest rate assumptions, (3) budget neutrality effects of a proposal to create a new discharge care management code, (4) input changes for certain radiation therapy procedures, and (5) certain other revised radiation oncology codes. The largest of these changes (accounting for 4% of the gross reduction) reflected the transition of the final 25% of PPIS data used in the PERVU methodology. The change in the CMS interest rate policy (accounting for 3% of the gross reduction) reduced interest rate assumptions in the CMS database from 11% to a sliding scale of 5.5% to 8%. CMS also finalized its proposal to create a HCPCS G-code to describe transition care management from a hospital or other institutional stay to a primary physician in the community (accounting for 1% of the gross reduction). While this policy benefited primary care, non-primary care physicians are negatively impacted due to the budget-neutrality of the Medicare 2013 Physician Fee Schedule. The rule also made adjustments (accounting for 1% of the gross reduction) due to the use of new time of care assumptions for IMRT and SBRT. Although the proposed reductions in time of care assumptions alone would have resulted in a gross 7% reduction to radiation oncology, CMS in its final rule included updated cost data submitted by the radiation oncology community for code inputs which reversed the vast majority of the reduction resulting from the new time of care assumptions. Total gross reductions in the final rule were offset by a 2% increase due to certain other revised radiation oncology codes, which resulted in a total net reduction to radiation oncology of 7%.

        In the proposed Medicare 2014 Physician Fee Schedule, CMS proposed to reduce payments for radiation oncology by 5% overall. This reduction related to a cap on certain radiation oncology services at the hospital outpatient department and ambulatory surgical center's ("OPD/ASC") rate [-4%]; reductions to certain radiation oncology codes due to Medicare Economic Index ("MEI") revisions [-2%]; and offsetting minor increases due to other aspects of the fee schedule [+1%]. Because the cap and MEI policies only applied to freestanding settings, the cut to freestanding centers

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would likely have been closer to 8%, while hospital-based radiation oncologists would have received an increase in payment under the proposal. In the final Medicare 2014 Physician Fee Schedule, CMS did not finalize its proposal to cap certain radiation oncology services at the OPD/ASC rate. Although CMS did finalize its proposal to revise the MEI [-2% impact], CMS also incorporated updated relative value units ("RVUs") for new and existing codes [+3% impact] resulting in a net impact of +1% for radiation oncology overall. Because the MEI policy only applies to freestanding settings, the impact to freestanding centers is approximately flat, while hospital-based radiation oncologists would receive an increase in payment under the final rule. CMS noted in the final rule, due to budget neutrality requirements relating to the MEI policy, the 2014 conversion factor was estimated to be $35.6446 (assuming no sustainable growth rate ("SGR") cuts), rather than the 2013 conversion factor of $34.023.

        Medicare reimbursement rates for all procedures under Medicare ultimately are determined by a formula which takes into account a conversion factor ("CF") which is updated on an annual basis based on the SGR. For the last several years, the SGR policy has threatened significant cuts to the CF, although Congress has consistently delayed those cuts. On December 26, 2013 the President signed into law the Pathway for SGR Reform Act of 2013, which prevented the scheduled SGR payment reduction for physicians from taking effect on January 1, 2014. Instead, the Pathway for SGR Reform Act provided for a 0.5 percent update (to $35.8228) for such services through March 31, 2014. On April 1, 2014, the President signed H.R. 4302, the Protecting Access to Medicare Act of 2014 which extended the $35.8228 conversion factor through 2014 and also provided for a zero percent update through March 31, 2015. If future SGR reductions are not suspended, and if a permanent "doc fix" is not signed into law, the currently scheduled SGR reimbursement decrease (estimated at more than 20%) will take effect on April 1, 2015.

        In addition, under the Budget Control Act of 2011, Medicare providers are cut under a sequestration process by 2% each year relative to baseline spending through 2021. This policy subsequently was extended through 2024. In the Protecting Access to Medicare Act, the sequestration policy was frontloaded for the year 2024 such that Medicare providers would be cut 4% in the first half of 2024 and 0% in the second half of 2024.

Commercial

        Commercial sources include private health insurance as well as related payments for co-insurance and co-payments. We enter into contracts with private health insurance and other health benefit groups by granting discounts to such organizations in return for the patient volume they provide.

        Most of our commercial revenue is from managed care business and is attributable to contracts where a set fee is negotiated relative to services provided by our treatment centers. We do not have any contracts that individually represent over 10% of our total U.S. net patient service revenue. We receive our managed care contracted revenue under two primary arrangements. Approximately 97% of our managed care business is attributable to contracts where a fee schedule is negotiated for services provided at our treatment centers. For the year ended December 31, 2013 approximately 3% of our U.S. net patient service revenue is attributable to contracts where we bear utilization risk. Although the terms and conditions of our managed care contracts vary considerably, they are typically for a one-year term and provide for automatic renewals. If payments by managed care organizations and other private third-party payers decrease, then our total revenues and net income would decrease.

Self-Pay

        Self-pay consists of payments for treatments by patients not otherwise covered by third-party payers, such as government or commercial sources. Because the incidence of cancer is much higher in those over the age of 65, most of our patients have access to Medicare or other insurance and therefore the self-pay portion of our business is less than it would be in other circumstances. However, we are seeing a general increase in the patient responsibility portion of our claims and revenue.

        We grant a discount on gross charges to self-pay patients not covered under other third party payer arrangements. The discount amounts are excluded from patient service revenue. To the extent that we realize additional losses resulting from nonpayment of the discounted charges, such additional losses are included in the provision for doubtful accounts.

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Other Material Factors

        Other material factors that we believe will also impact our future financial performance include:

    patient volume and census;

    continued advances in technology and the related capital requirements;

    continued affiliation with physician specialties other than radiation oncology;

    our ability to develop and conduct business with hospitals and other large healthcare organizations in a manner that adequately and attractively compensates us for our services;

    accounting for business combinations requiring that all acquisition-related costs be expensed as incurred;

    our ability to achieve identified cost savings and operational efficiencies;

    increased costs associated with development and optimization of our internal infrastructure; and

    healthcare reform.

Results of Operations

        The following summary results of operations data are qualified in their entirety by reference to, and should be read in conjunction with, our audited consolidated financial statements and the accompanying notes, included in this Annual Report on Form 10-K, and other financial information included in this Annual Report on Form 10-K.

Years Ended December 31, 2011, 2012 and 2013

        For the year ended December 31, 2013, our total revenues grew by approximately 6.1%, over the prior year, while our total revenues for the year ended December 31, 2012 grew by approximately 7.6% over the prior year. For the years ended December 31, 2013, 2012 and 2011, we had total revenues of $736.5 million, $694.0 million and $644.7 million, respectively.

        For the years ended December 31, 2013, 2012 and 2011, net patient service revenue comprised 97.2%, 98.9% and 99.1%, respectively, of our total revenues. In states where we employ radiation oncologists, we derive our net patient service revenue through fees earned from the provision of the professional and technical component fees of radiation therapy services. In states where we do not employ radiation oncologists, we derive our administrative services fees principally from administrative services agreements with professional corporations. In accordance with ASC 810, we consolidate the operating results of certain of the professional corporations for which we provide administrative services into our own operating results. In 2013, 2012 and 2011, 18.4%, 19.4% and 18.0%, respectively, of our net patient service revenue was generated by professional corporations with which we have administrative services agreements.

        In our net patient service revenue for the years ended December 31, 2013, 2012, and 2011, revenue from the professional-only component of radiation therapy and revenue from our ICC physician practices, comprised approximately 29.8%, 28.7%, and 25.8%, respectively, of our total revenues.

        Management fees are recorded at the amount earned by us under the management services agreements. Services rendered by the respective physician groups are billed by us, as the exclusive billing agent of the physician groups, to patients, third-party payors, and others. For the year ended December 31, 2013, management fees comprised 1.5% of our total revenues.

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        For the years ended December 31, 2013, 2012 and 2011, other revenue comprised approximately 1.3%, 1.1% and 0.9%, respectively, of our total revenues. Other revenue is primarily derived from management services provided to hospital radiation therapy departments, technical services provided to hospital radiation therapy departments, billing services provided to non-affiliated physicians, gain and losses from sale/disposal of medical equipment, equity interest in net earnings/losses of unconsolidated joint ventures and income for equipment leased by joint venture entities.

        The following table summarizes key operating statistics of our results of operations for the periods presented:

 
  Year Ended
December 31,
   
  Year Ended
December 31,
   
 
 
  %
Change
  %
Change
 
Domestic U.S.
  2011*   2012   2012   2013  

Number of treatment days

    255     255     0.0 %   255     255     0.0 %

Total RVU's—freestanding centers

    11,986,768     11,483,600     (4.2 )%   11,483,600     11,615,189     1.1 %

RVU's per day—freestanding centers

    47,007     45,034     (4.2 )%   45,034     45,550     1.1 %

Percentage change in RVU's per day—freestanding centers—same market basis

    10.5 %   (6.3 )%         (6.3 )%   (3.5 )%      

Total treatments—freestanding centers

    473,400     493,330     4.2 %   493,330     546,951     10.9 %

Treatments per day—freestanding centers

    1,856     1,935     4.2 %   1,935     2,145     10.9 %

Percentage change in revenue per treatment freestanding centers—same market basis

    2.8 %   (3.9 )%         (3.9 )%   (6.2 )%      

Percentage change in treatments per day freestanding centers—same market basis

    1.0 %   2.0 %         2.0 %   4.3 %      

Percentage change in freestanding revenues same market basis

    4.2 %   (2.1 )%         (2.1 )%   (2.2 )%      

Radiation oncology cases completed:

   
 
   
 
   
 
   
 
   
 
   
 
 

3-D cases

          6,174           6,174     7,442        

IMRT cases

          10,862           10,862     11,955        

Other cases

          2,072           2,072     2,223        
                                 

Total radiation oncology cases completed

          19,108           19,108     21,620     13.1 %
                                 
                                 

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  Year Ended
December 31,
   
  Year Ended
December 31,
   
 
 
  %
Change
  %
Change
 
Domestic U.S.
  2011*   2012   2012   2013  

Treatments per radiation oncology case completed

          24.2           24.2     23.6        

Revenue per radiation oncology case

        $ 19,206         $ 19,206   $ 18,703        

Number of employed, contracted and affiliated physicians:

   
 
   
 
   
 
   
 
   
 
   
 
 

Radiation oncologists

    116     111           111     156        

Urologists

    83     106           106     124        

Surgeons

    31     34           34     35        

Medical oncologists

    17     24           24     25        

Gynecologic oncologists

    4     5           5     7        

Other physicians

    8     10           10     13        

Affiliated physicians

        281           281     311        
                               

Total physicians

    259     571     120.5 %   571     671     17.5 %
                               
                               

Treatment centers—freestanding (global)

    118     121     2.5 %   121     155     28.1 %

Treatment centers—hospital / other groups (global)

    9     5     (44.4 )%   5     8     60.0 %
                               

Total treatment centers

    127     126     (0.8 )%   126     163     29.4 %
                               
                               

Days sales outstanding at quarter end

    39     34           34     31        

Net patient service revenue—professional services only (in thousands)

  $ 166,090   $ 199,097         $ 199,097   $ 219,721        

Net patient service revenue—excluding physician practice expense (in thousands)

  $ 638,690   $ 686,216         $ 686,216   $ 731,171        

*
Excludes the impact of the termination of a capitated contract in Las Vegas, Nevada. Case data not available for 2011.

        The following table summarizes key operating statistics of our results of operations for our international operations for the periods presented:

 
  Years ended
December 31,
   
  Years ended
December 31,
   
 
International
  2011**   2012   % Change   2012   2013   % Change  

Number of new cases

                                     

2-D cases

    5,411     4,857           4,857     3,716        

3-D cases

    6,888     8,901           8,901     10,418        

IMRT / IGRT cases

    1,478     1,471           1,471     1,956        
                               

Total

    13,777     15,229     10.5 %   15,229     16,090     5.7 %
                               
                               

Revenue per radiation oncology case

  $ 5,080   $ 5,382         $ 5,382   $ 5,659        

**
includes full period operating statistics, including period prior to our acquisition on March 1, 2011

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International

        Comparison of the Years Ended December 31, 2012 and 2013.    MDLLC's total revenues increased $9.7 million, or 11.9%, from $81.2 million to $90.9 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. Total revenue was positively impacted by $0.6 million of revenue from the start-up of a new Center in Argentina in August 2012, growth in treatments and an improvement in treatment mix from our November, 2011 acquisition in Argentina, growth in treatments and overall service mix improvements at our Argentina, El Salvador, and our centers in the Dominican Republic, and improved capitated pricing in Argentina, offset by the impact of a greater depreciation in the Argentine Peso versus the same period in 2012. Case growth increased by 861 or 5.7% during the period. The trend toward more clinically-advanced treatments which require more time to complete continued during the period with an increase in the number of higher-revenue IMRT/IGRT treatments and 3D treatments vs. 2D treatments as compared to the same period in 2012.

        Facility gross profit increased $6.0 million, or 13.8% from $43.5 million to $49.5 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012. Facility-level gross profit as a percentage of total revenues increased to 54.4% from 53.5%. Margin growth resulted from growth in IMRT and 3-D cases, and improved pricing for capitated cases in Argentina, offset by higher depreciation and amortization relating to our continued growth and investment in Latin America, local inflation in Argentina, and higher facility rent expense.

        Medical Developers' total service revenues was $20.8 million for the three months ended December 31, 2012 which represents a $0.5 million or 2.5% increase from the $20.3 million for the same period in 2011. Total revenue was positively impacted by $1.0 million of revenue from the acquisition of four radiation treatment facilities in November 2011 the start-up of a new Center in Argentina during the third quarter, growth in treatments and an improvement in treatment mix in Costa Rica, Mexico and Guatemala, mitigated by a reduction in IMRT treatments in Argentina compared to the same period in 2011 and decreased activity in December due to timing of holidays in many countries where we operate. In addition, we experienced growth in the number of new cases initiated during the quarter by 180, 54% of which pertained to the acquired operations in November 2011. The trend toward more clinically-advanced cases continued during the quarter with an increase in the number of higher-revenue 3D treatments vs. 2D treatments as compared to the same period in 2011.

        Facility gross profit decreased $0.7 million, or 6.2% from $10.9 million to $10.2 million for the three months ended December 31, 2012 as compared to the same period in 2011. Facility-level gross profit as a percentage of total revenues decreased from 53.7% to 49.2%. Lower IMRT cases in Argentina, increases in compensation, facility rent, and incremental depreciation expense relating to our continued growth and investment in Latin America, as well as local inflation was offset by decreases in medical supplies and other operating costs, including lower outsourcing of scans as a result of recent equipment purchases.

        MDLLC's net patient service revenue increased $2.6 million, or 14.7%, from $17.7 million to $20.3 million for the three months ended December 31, 2011 as compared to the three months ended September 30, 2011. Total revenue was positively impacted by $1.0 million of revenue from the acquisition of four radiation treatment facilities in November 2011, and the opening of new treatment centers in San Juan, Argentina and San Salvador, El Salvador in February and March 2011, respectively. The continued ramp-up in operations at our Centro de Radiaciones de La Costa and Centro de Radioterapia Siglo XXI subsidiaries in Argentina which opened in May and July 2010, respectively also favorably impacted revenue growth. In addition, we experienced growth in the number of new cases initiated during the quarter by 233 versus the September quarter and 448 versus the prior year's quarter, of which 250 pertained to the acquired operations in November 2011. The trend toward

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more clinically-advanced treatments continued during the quarter with an increase in the number of higher-revenue 3D and IMRT treatments.

        Facility gross profit increased $0.9 million, or 9.0% from $10.0 million to $10.9 million for the three months ended December 31, 2011 as compared to the three months ended September 30, 2011. Facility-level gross profit as a percentage of net patient service revenue decreased to 53.7% from 56.5%, primarily due to an increase in physician compensation, incremental depreciation expense relating to our continued growth and investment in Latin America, facility rent expense and expenses from the outsourcing of scans.

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        The following table presents summaries of results of operations for the years ended December 31, 2011, 2012 and 2013 (dollars in thousands). This information has been derived from the consolidated statements of operations and comprehensive loss included elsewhere in this Annual Report on Form 10-K.

 
  Years ended December 31,  
(in thousands)
  2011   2012   2013  

Revenues:

                                     

Net patient service revenue

  $ 638,690     99.1 % $ 686,216     98.9 % $ 715,999     97.2 %

Management fees

                    11,139     1.5  

Other revenue

    6,027     0.9     7,735     1.1     9,378     1.3  
                           

Total revenues

    644,717     100.0     693,951     100.0     736,516     100.0  

Expenses:

                                     

Salaries and benefits

    326,782     50.7     372,656     53.7     409,352     55.6  

Medical supplies

    51,838     8.0     61,589     8.9     64,640     8.8  

Facility rent expenses

    33,375     5.2     39,802     5.7     45,565     6.2  

Other operating expenses

    33,992     5.3     38,988     5.6     45,629     6.2  

General and administrative expenses

    81,688     12.7     82,236     11.9     106,887     14.5  

Depreciation and amortization

    54,084     8.4     64,893     9.4     65,195     8.9  

Provision for doubtful accounts

    16,117     2.5     16,916     2.4     12,146     1.6  

Interest expense, net

    60,656     9.4     77,494     11.2     86,747     11.8  

Electronic health records incentive income

            (2,256 )   (0.3 )   (1,698 )   (0.2 )

Gain on the sale of an interest in a joint venture

                    (1,460 )   (0.2 )

Loss on sale leaseback transaction

                    313      

Early extinguishment of debt

            4,473     0.6          

Fair value adjustment of earn-out liability and noncontrolling interests-redeemable

            1,219     0.2     130      

Impairment loss

    360,639     55.9     81,021     11.7          

Loss on investments

    250                      

Gain on fair value adjustment of previously held equity investment

    (234 )                    

Loss on foreign currency transactions

    106         339         1,283     0.2  

Loss on foreign currency derivative contracts

    672     0.1     1,165     0.2     467     0.1  
                           

Total expenses

    1,019,965     158.2     840,535     121.2     835,196     113.5  
                           

Loss before income taxes

    (375,248 )   (58.2 )   (146,584 )   (21.2 )   (98,680 )   (13.5 )

Income tax (benefit) expense

    (25,365 )   (3.9 )   4,545     0.7     (20,432 )   (2.8 )
                           

Net loss

    (349,883 )   (54.3 )   (151,129 )   (21.9 )   (78,248 )   (10.7 )

Net income attributable to noncontrolling interests—redeemable and non-redeemable

    (3,558 )   (0.6 )   (3,079 )   (0.4 )   (1,966 )   (0.3 )
                           

Net loss attributable to 21st Century Oncology Holdings, Inc. shareholder

  $ (353,441 )   (54.8 )% $ (154,208 )   (22.3 )% $ (80,214 )   (11.0 )%
                           
                           

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Comparison of the Years Ended December 31, 2012 and 2013

Revenues

        Total revenues.    Total revenues increased by $42.5 million, or 6.1%, from $694.0 million in 2012 to $736.5 million in 2013. Total revenue was positively impacted by $59.4 million due to our expansion into new practices and treatments centers in existing local markets and new local markets during 2012 and 2013 through the acquisition of several urology, medical oncology and surgery practices in Arizona, California, Florida, Nevada, New Jersey, New York, North Carolina, Rhode Island and the acquisition of physician radiation practices in Arizona, California, Florida, Indiana, North Carolina, Mexico and the opening of two de novo centers and two hospital professional services arrangements transitioned to freestanding as follows:

Date
  Sites   Location   Market   Type

February 2012

   
1
 

Asheville, North Carolina

 

Western North Carolina

 

Acquisition

March 2012

   
2
 

Broward County—Florida

 

Broward County—Florida

 

Transition from professional / other to freestanding

March 2012

   
1
 

Lakewood Ranch—Florida

 

Sarasota/Manatee Counties—Florida

 

Acquisition

August 2012

   
1
 

Latin America

 

International (Argentina)

 

De Novo

May 2013

   
3
 

Cape Coral / Ft. Myers / Bonita Springs—Florida

 

Lee County—Florida

 

Acquisition

May 2013

   
2
 

Naples—Florida

 

Collier County—Florida

 

Acquisition

June 2013

   
1
 

Casa Grande—Arizona

 

Central Arizona

 

Joint Venture Acquisition

July 2013

   
1
 

Latin America

 

International (Mexico)

 

Acquisition

September 2013

   
1
 

Latin America

 

International (Argentina)

 

De Novo (Hospital Campus)

October 2013

   
30
 

California / Indiana / Florida

 

California / Indiana / Florida

 

Acquisition—OnCure Freestanding

October 2013

   
3
 

Indiana

 

Indiana

 

Acquisition—OnCure professional / other

October 2013

   
1
 

Roanoke Rapids, North Carolina

 

Eastern North Carolina

 

Acquisition

        Revenue from CMS for the 2013 PQRI program decreased approximately $0.6 million and revenues in our existing local markets and practices decreased by approximately $16.3 million. The decrease in revenue in our existing local markets is predominately due to the reductions in RVUs for many of our treatment codes effective with the 2013 Physician Fee Schedule, one less treatment day and treatment declines for prostate cancer as a result of the slowing rate of men diagnosed and referred to treatment regimens, as a result of the Preventative Services Task Force report issued in May 2012 recommending against routine PSA screenings for healthy men, as well as suggested changes in treatment pattern for low risk prostate cancer away from definitive treatment. The decrease was partially offset by increased managed care pricing and organic growth.

Expenses

        Salaries and benefits.    Salaries and benefits increased by $36.7 million, or 9.8%, from $372.7 million in 2012 to $409.4 million in 2013. Salaries and benefits as a percentage of total revenues

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increased from 53.7% in 2012 to 55.6% in 2013. Additional staffing of personnel and physicians due to our development and expansion of several urology, medical oncology and surgery practices in Arizona, California, Florida, Nevada, New Jersey, New York, North Carolina, and Rhode Island as well as the acquisitions of treatment centers in existing and new local markets during the latter part of 2012 and 2013 contributed $30.8 million to our salaries and benefits. In June 2012, we implemented a new equity-incentive plan, which provided stock compensation of $3.3 million in 2012 as compared to $0.6 million in 2013. For existing practices and centers within our local markets, salaries and benefits increased $8.6 million due increased salaries related to our physician liaison program and the expansion of our senior management team offset by decreases in our compensation arrangements with certain radiation oncologists.

        Medical supplies.    Medical supplies increased by $3.0 million, or 5.0%, from $61.6 million in 2012 to $64.6 million in 2013. Medical supplies as a percentage of total revenues decreased from 8.9% in 2012 to 8.8% in 2013. Medical supplies consist of patient positioning devices, radioactive seed supplies, supplies used for other brachytherapy services, pharmaceuticals used in the delivery of radiation therapy treatments and chemotherapy-related drugs and other medical supplies. Approximately $4.5 million of the increase was related to our development and expansion of several urology, medical oncology and surgery practices in Arizona, California, Florida, Nevada, New Jersey, New York, North Carolina, and Rhode Island as well as the acquisitions of treatment centers in existing and new local markets during the latter part of 2012 and 2013. In our remaining practices and centers in existing local markets, medical supplies decreased by approximately $1.5 million as certain chemotherapy drugs are administered through hospital settings under physician practice arrangements. These pharmaceuticals and chemotherapy medical supplies are principally reimbursable by third-party payers.

        Facility rent expenses.    Facility rent expenses increased by $5.8 million, or 14.5%, from $39.8 million in 2012 to $45.6 million in 2013. Facility rent expenses as a percentage of total revenues increased from 5.7% in 2012 to 6.2% in 2013. Facility rent expenses consist of rent expense associated with our treatment center locations. Approximately $6.0 million of the increase was related to our development and expansion of several urology, medical oncology and surgery practices in Arizona, California, Florida, Nevada, New Jersey, New York, North Carolina, and Rhode Island as well as the acquisitions of treatment centers in existing and new local markets during the latter part of 2012 and 2013. In March 2012 we paid approximately $0.4 million to terminate a lease for our Beverly Hills, California office we closed in March 2011. Facility rent expense in our remaining practices and centers in existing local markets increased by approximately $0.1 million.

        Other operating expenses.    Other operating expenses increased by $6.6 million or 17.0%, from $39.0 million in 2012 to $45.6 million in 2013. Other operating expense as a percentage of total revenues increased from 5.6% in 2012 to 6.2% in 2013. Other operating expenses consist of repairs and maintenance of equipment, equipment rental and contract labor. Approximately $4.7 million of the increase was related to our development and expansion of several urology, medical oncology and surgery practices in Arizona, California, Florida, Nevada, New Jersey, New York, North Carolina, and Rhode Island as well as the acquisitions of treatment centers in existing and new local markets during the latter part of 2012 and 2013. Approximately $1.8 million relates to equipment rental expense relating to the equipment refinancing closed in September 2012. In our remaining practices and centers in existing local markets other operating expenses increased approximately $0.1 million.

        General and administrative expenses.    General and administrative expenses increased by $24.7 million or 30.0%, from $82.2 million in 2012 to $106.9 million in 2013. General and administrative expenses principally consist of professional service fees, consulting, office supplies and expenses, insurance, marketing and travel costs. General and administrative expenses as a percentage of total revenues increased from 11.9% in 2012 to 14.5% in 2013. The net increase of $24.7 million in general and administrative expenses was due in part to an increase of approximately $7.9 million

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relating to our development and expansion of several urology, medical oncology and surgery practices in Arizona, California, Florida, Nevada, New Jersey, New York, North Carolina, and Rhode Island as well as the acquisitions of treatment centers in existing and new local markets during the latter part of 2012 and 2013. In addition there was an increase of approximately $2.0 million related to expenses for consulting services for the CMS 2013/2014 fee schedule, $11.5 million in diligence costs relating to acquisitions and potential acquisitions of physician practices, $4.7 million relating to an estimated loss contingency reserve, $0.3 million in our rebranding initiatives to 21st Century Oncology trade name, offset by a decrease of approximately $1.0 million in litigation settlements with certain physicians and a decrease of approximately $0.7 million in our remaining practices and treatments centers in our existing local markets.

        Depreciation and amortization.    Depreciation and amortization increased by $0.3 million or 0.5%, from $64.9 million in 2012 to $65.2 million in 2013. Depreciation and amortization expense as a percentage of total revenues decreased from 9.4% in 2012 to 8.9% in 2013. The change in depreciation and amortization was due to an increase of approximately $5.6 million relating to our development and expansion of several urology, medical oncology and surgery practices in Arizona, California, Florida, Nevada, New Jersey, New York, North Carolina, and Rhode Island as well as the acquisitions of treatment centers in existing and new local markets during the latter part of 2012 and 2013. A decrease of approximately $3.7 million in amortization of our trade name and a decrease of approximately $1.4 million predominately due to the refinancing of certain medical equipment leases with a financial institution in September 2012 classified as prepaid rent. In our remaining practices and centers in existing local markets depreciation and amortization decreased approximately $0.2 million.

        Provision for doubtful accounts.    The provision for doubtful accounts decreased by $4.8 million, or 28.2%, from $16.9 million in 2012 to $12.1 million in 2013. The provision for doubtful accounts as a percentage of total revenues decreased from 2.4% in 2012 to 1.6% in 2013. We continued to reduce our provision for doubtful accounts as we made progress in improving the overall collection process, including centralization of the prior authorization process, with a standardization process supporting peer to peer justification of medical necessity, improvements in payment posting timeliness, electronic submission of documentation to Medicare carriers, Medicaid eligibility retro scrubbing of self-pay patients, automated insurance rebilling, focused escalation processes for claims in medical review with insurers, collector productivity and quality tracking and monitoring, and improved processes at the treatment centers to collect co-pay amounts at the time of service. These actions have resulted in improved collections and lower bad debt expense as a percentage of total revenues.

        Interest expense, net.    Interest expense, increased by $9.3 million, or 11.9%, from $77.5 million in 2012 to $86.7 million in 2013. The increase is primarily attributable to an increase of approximately $11.8 million of interest as a result of the Secured Notes issued in May 2012 of approximately $350.0 million, the refinancing of our senior secured credit facility in August 2013, the issuance of $75.0 million in senior secured notes in the OnCure transaction and additional capital lease financing. An increase in the amortization of deferred financing costs and original issue discount of approximately $0.6 million as a result of our refinancing of our senior credit facility in August 2013 and an increase of approximately $0.1 million of interest expense in our international markets, offset by a decrease in our interest rate swap expense of approximately $2.8 million and the write- off of loan costs of approximately $0.5 million in May 2012.

        Electronic health records incentive income.    The American Recovery and Reinvestment Act of 2009 provides for incentive payments for Medicare eligible professionals who are meaningful users of certified EHR technology. We account for EHR incentive payments utilizing the gain contingency model. Pursuant to the gain contingency model, we recognize EHR incentive payments when the specified meaningful use criteria have been satisfied, as all contingencies in estimating the amount of the incentive payments to be received are resolved. For the year ended December 31, 2013 and 2012 we recognized approximately $1.7 million and $2.3 million, respectively of EHR revenues.

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        Gain on the sale of an interest in a joint venture.    In June 2013, we sold our 45% interest in an unconsolidated joint venture which operated a radiation treatment center in Providence, Rhode Island in partnership with a hospital to provide stereotactic radio-surgery through the use of a cyberknife for approximately $1.5 million, and recorded a respective gain on the sale.

        Loss on sale leaseback transaction.    In December 2013, the Company entered into a sale leaseback transaction with two financial institutions. The sale leaseback transaction related to medical equipment. Proceeds from the sale were approximately $18.4 million. The Company recorded a loss on the sale leaseback transaction of approximately $0.3 million.

        Early extinguishment of debt.    We incurred approximately $4.5 million from the early extinguishment of debt as a result of the prepayment of the $265.4 million senior secured credit facility—Term Loan B and prepayment of $63.0 million senior secured credit facility—revolving credit portion, which included the write-offs of $3.7 million in deferred financing costs and $0.8 million in original issue discount costs.

        Fair value adjustment of earn-out liability.    On March 1, 2011, we purchased the remaining 67% interest in MDLLC from Bernardo Dosoretz as well as interests in the subsidiaries of MDLLC from Alejandro Dosoretz and Bernardo Dosoretz, resulting in an ownership interest of approximately 91% in the underlying radiation oncology practices located in South America, Central America, Mexico and the Caribbean. We also purchased an additional 61% interest in Clinica de Radioterapia La Asuncion S.A. from Bernardo Dosoretz, resulting in an ownership interest of 80%. The Company recorded an estimated contingent earn out payment totaling $2.3 million at the time of the closing of these acquisitions. The earn out payment is contingent upon certain acquired centers attaining earnings before interest, taxes, depreciation and amortization targets, is due 18 months subsequent to the transaction closing, and is payable through Company financing and issuance of equity units. At December 31, 2012, we estimated the fair value of the contingent earn out liability and increased the liability due to the seller to approximately $3.4 million. We recorded the $1.0 million to expense in the fair value adjustment caption in the consolidated statements of operations and comprehensive loss.

        On November 4, 2011, we purchased an 80% interest in an operating entity, which operates 1 radiation treatment center in Argentina; an 80% interest in another operating entity, which operates 3 radiation treatment centers in Argentina; and a 96% interest in an operating entity, which operates 1 radiation treatment center in Argentina. In November 2012, we exercised our purchase option to purchase the remaining interest for approximately $1.4 million and recorded the adjustment of $0.2 million to the purchase option as an expense in the fair value adjustment of the noncontrolling interests-redeemable in the consolidated statements of operations and comprehensive loss.

        On October 25, 2013, we completed the acquisition of OnCure. The transaction was funded through a combination of cash on hand, borrowings from our senior secured credit facility and the issuance of $82.5 million in senior secured notes of OnCure, which accrue interest at a rate of 11.75% per annum and mature January 15, 2017, of which $7.5 million is subject to escrow arrangements and will be released to holders upon satisfaction of certain conditions. The $7.5 million subject to escrow arrangements was recorded as an earn out payment contingent upon certain acquired centers attaining earnings before interest, taxes, depreciation and amortization targets, and is due and payable on December 31, 2015. At December 31, 2013, we estimated the fair value of the contingent earn out liability and increased the liability due to the holders to approximately $7.6 million. We recorded the $0.1 million to expense in the fair value adjustment caption in the consolidated statements of operations and comprehensive loss.

        Impairment loss.    During the third quarter of 2012, we completed an interim impairment test for goodwill and indefinite-lived intangible assets as a result of our review of growth expectations and the release of the final rule issued on the physician fee schedule for 2013 by CMS on November 1, 2012, which included certain rate reductions on Medicare payments to freestanding radiation oncology

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providers as well as the changes in treatment patterns and volumes in prostate cancer as a result of the slowing rate of men diagnosed and referred to treatment regimens, as a result of the Preventative Services Task Force report issued in May 2012 recommending against routine PSA screenings for healthy men, as well as suggested changes in treatment pattern for low risk prostate cancer away from definitive treatment. In performing this test, we assessed the implied fair value of our goodwill and intangible assets. As a result, we recorded an impairment loss of approximately $69.9 million during the third quarter of 2012 primarily relating to goodwill impairment in certain of our reporting units, including Mid East United States (Northwest Florida, North Carolina, Southeast Alabama, South Carolina), Central South East United States (Delmarva Peninsula, Central Maryland, Central Kentucky, South New Jersey), California, South West United States (central Arizona and Las Vegas, Nevada), and Southwest Florida of approximately $69.8 million. In addition, during the third quarter of 2012, an impairment loss of approximately $0.1 million was recognized related to the impairment of certain leasehold improvements of a planned radiation treatment facility office relocation in Monroe, Michigan in the Northeast U.S. region.

        During the fourth quarter of 2012, we completed our annual impairment test for goodwill and indefinite-lived intangible assets. In performing this test, we assessed the implied fair value of our goodwill and intangible assets. As a result, we recorded an impairment loss of approximately $11.1 million during the fourth quarter of 2012 primarily relating to goodwill impairment in certain of our reporting units, including Central South East United States (Delmarva Peninsula, Central Maryland, Central Kentucky, South New Jersey), and Southwest Florida of approximately $10.8 million. In addition, during the fourth quarter of 2012, an impairment loss of approximately $0.1 million was recognized related to the impairment of certain leasehold improvements in the Delmarva Peninsula local market and approximately $0.2 million related to a consolidated joint venture in the Central Maryland local market.

        Loss on foreign currency derivative contracts.    We are exposed to a significant amount of foreign exchange risk, primarily between the U.S. dollar and the Argentine Peso. This exposure relates to the provision of radiation oncology services to patients at our Latin American operations and purchases of goods and services in foreign currencies. We maintain foreign currency derivative contracts which mature on a quarterly basis. In 2013 and 2012, the expiration of the December 31, 2013 foreign currency derivative contract and the mark to market valuation of the remaining contracts resulted in a loss of approximately $0.5 million and $1.2 million, respectively.

        Income taxes.    Our effective tax rate was 20.8% in fiscal 2013 and (3.1)% in fiscal 2012. The change in the effective rate in 2013 compared to the same period of the year prior is primarily due to the favorable effect of the OnCure purchase price adjustments on the valuation allowance booked against our net deferred tax assets. The fiscal year 2012 tax rate was also impacted by the income tax benefit associated with the termination of the interest rate swap in the first quarter and by the recording of a noncash impairment charge relating to goodwill in the U.S. domestic reporting segment of $80.7 million. As a result, on an absolute dollar basis, the expense for income taxes changed by $24.9 million from the income tax expense of $4.5 million in 2012 to an income tax benefit of $20.4 million in 2013.

        Our future effective tax rates could be affected by changes in the relative mix of taxable income and taxable loss jurisdictions, changes in the valuation of deferred tax assets or liabilities, or changes in tax laws or interpretations thereof. We monitor the assumptions used in estimating the annual effective tax rate and make adjustments, if required, throughout the year. If actual results differ from the assumptions used in estimating our annual effective tax rates, future income tax expense (benefit) could be materially affected.

        In addition, we are periodically under audit by federal, state, or local authorities in the areas of income taxes and other taxes. These audits include questioning the timing and amount of deductions and compliance with federal, state, and local tax laws. We regularly assess the likelihood of adverse

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outcomes from these audits to determine the adequacy of our provision for income taxes. To the extent we prevail in matters for which accruals have been established or are required to pay amounts in excess of such accruals, the effective tax rate could be materially affected.

        Net loss.    Net loss decreased by $72.9 million, from $151.1 million in net loss in 2012 to $78.2 million net loss in 2013. Net loss represents 21.9% of total revenues in 2012 and 10.7% of total revenues in 2013.

Comparison of the Years Ended December 31, 2011 and 2012

Revenues

        Total revenues.    Total revenues increased by $49.3 million, or 7.6%, from $644.7 million in 2011 to $694.0 million in 2012. Total revenue was positively impacted by $80.2 million due to our expansion into new practices and treatments centers in existing local markets and new local markets during 2011 and 2012 through the acquisition of several urology, medical oncology and surgery practices in Arizona, California, Florida, North Carolina, South Carolina, and the acquisition of physician radiation practices in California, Florida, North Carolina and the acquisition of 30 physician practices in Latin America, Central America and the Caribbean, the opening of two de novo centers and an outpatient radiation therapy management services agreement with a medical group to manage its radiation oncology treatment site and two hospital professional services arrangements transitioned to freestanding as follows:

Date
  Sites   Location   Market   Type

March 2011

    26   Latin America, Central America, Mexico and the Caribbean   International   Acquisition

June 2011

    1   London, Kentucky   Central Kentucky   Professional / other groups

August 2011

    1   Andalusia, Alabama   Southeastern Alabama   De Novo

August 2011

    1   Redding, California   Northern California   Acquisition

September 2011

    2   Broward County—Florida   Broward County—Florida   Professional / other groups

November 2011

    4   Latin America   International   Acquisition

December 2011

    2   Goldsboro and Sampson, North Carolina   Eastern North Carolina   Acquisition

February 2012

    1   Asheville, North Carolina   Western North Carolina   Acquisition

March 2012

    2   Broward County—Florida   Broward County—Florida   Transition from professional/other to freestanding

March 2012

    1   Lakewood Ranch—Florida   Sarasota/Manatee Counties—Florida   Acquisition

August 2012

    1   Latin America   International (Argentina)   De Novo

        Revenue from CMS for the 2012 PQRI program decreased approximately $1.3 million and revenues in our existing local markets and practices decreased by approximately $29.6 million, including a $5.2 million reduction relating to non-renewal of the capitated contracts in our Las Vegas, Nevada market. The decrease in revenue in our existing local markets is predominately due to the reductions in RVUs for many of our treatment codes effective with the 2012 physician fee schedule and treatment declines for prostate cancer as a result of the slowing rate of men diagnosed and referred to treatment regimens, as a result of the Preventative Services Task Force report issued in May 2012 recommending against routine PSA screenings for healthy men, as well as suggested changes in treatment pattern for low risk prostate cancer away from definitive treatment. The decrease was partially offset by increased managed care pricing and organic growth. We continue to see stable patient volumes for the period and our percentage increase in treatments per day at our freestanding centers on a same practice basis (excluding the impact of the termination of a capitated contract in Las Vegas, Nevada) was 2.0%.

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Expenses

        Salaries and benefits.    Salaries and benefits increased by $45.9 million, or 14.0%, from $326.8 million in 2011 to $372.7 million in 2012. Salaries and benefits as a percentage of total revenues increased from 50.7% in 2011 to 53.7% in 2012. Additional staffing of personnel and physicians due to our development and expansion in urology, medical oncology and surgery practices in Arizona, California, Florida, North Carolina and South Carolina, the acquisitions of treatment centers in existing local markets during the latter part of 2011 and 2012, and the expansion into a new region internationally in 2011 contributed $44.3 million to our salaries and benefits. In June 2012, we implemented a new equity-incentive plan, which increased stock compensation by approximately $1.8 million. For existing practices and centers within our local markets, salaries and benefits decreased $0.2 million due to decreases in our compensation arrangements with certain radiation oncologists offset by increased salaries related to our physician liaison program and the expansion of our senior management team.

        Medical supplies.    Medical supplies increased by $9.8 million, or 18.8%, from $51.8 million in 2011 to $61.6 million in 2012. Medical supplies as a percentage of total revenues increased from 8.0% in 2011 to 8.9% in 2012. Medical supplies consist of chemotherapy-related drugs and other medical supplies, patient positioning devices, radioactive seed supplies, supplies used for other brachytherapy services, pharmaceuticals used in the delivery of radiation therapy treatments. Approximately $8.0 million of the increase was related to our development and expansion in urology, medical oncology and surgery practices in Arizona, California, Florida, North Carolina and South Carolina, the acquisitions of treatment centers in existing local markets during the latter part of 2011 and 2012, and the expansion into a new region internationally in 2011. In our remaining practices and centers in existing local markets, medical supplies increased by approximately $1.8 million as we continue to see stable patient volumes and treatment counts in our existing local markets. These pharmaceuticals and chemotherapy medical supplies are principally reimbursable by third-party payers.

        Facility rent expenses.    Facility rent expenses increased by $6.4 million, or 19.3%, from $33.4 million in 2011 to $39.8 million in 2012. Facility rent expenses as a percentage of total revenues increased from 5.2% in 2011 to 5.7% in 2012. Facility rent expenses consist of rent expense associated with our treatment center locations. Approximately $5.7 million of the increase was related to our development and expansion in urology, medical oncology and surgery practices in Arizona, California, Florida, North Carolina and South Carolina, the acquisitions of treatment centers in existing local markets during the latter part of 2011 and 2012, and the expansion into a new region internationally in 2011. In March 2012 we paid approximately $0.4 million to terminate a lease for our Beverly Hills, California office we closed in March 2011. Facility rent expense in our remaining practices and centers in existing local markets increased by approximately $0.3 million.

        Other operating expenses.    Other operating expenses increased by $5.0 million or 14.7%, from $34.0 million in 2011 to $39.0 million in 2012. Other operating expense as a percentage of total revenues increased from 5.3% in 2011 to 5.6% in 2012. Other operating expenses consist of repairs and maintenance of equipment, equipment rental and contract labor. Approximately $4.7 million of the increase was related to our development and expansion in urology, medical oncology and surgery practices in Arizona, California, Florida, North Carolina and South Carolina, the acquisitions of treatment centers in existing local markets during the latter part of 2011 and 2012, and the expansion into a new region internationally in 2011, and an increase of approximately $0.3 million in our remaining practices and centers in existing local markets.

        General and administrative expenses.    General and administrative expenses increased by $0.5 million or 0.7%, from $81.7 million in 2011 to $82.2 million in 2012. General and administrative expenses principally consist of professional service fees, office supplies and expenses, insurance and travel costs. General and administrative expenses as a percentage of total revenues decreased from 12.7% in 2011

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to 11.9% in 2012. The increase of $0.5 million in general and administrative expenses was due to an increase of approximately $6.3 million relating to our development and expansion in urology, medical oncology and surgery practices in Arizona, California, Florida, North Carolina and South Carolina, the acquisitions of treatment centers in existing local markets during the latter part of 2011 and 2012, and the expansion into a new region internationally in 2011. In addition there was an increase of approximately $0.8 million related to expenses for consulting services for the CMS 2013 preliminary physician fee schedule, an increase of approximately $0.9 million in litigation settlements with certain physicians, offset by a decrease of approximately $2.4 million in diligence costs relating to acquisitions and potential acquisitions of physician practices, a decrease of approximately $0.3 million associated with improvements in our income tax provision process and a decrease of approximately $4.8 million in our remaining practices and treatments centers in our existing local markets.

        Depreciation and amortization.    Depreciation and amortization increased by $10.8 million, or 20.0%, from $54.1 million in 2011 to $64.9 million in 2012. Depreciation and amortization expense as a percentage of total revenues increased from 8.4% in 2011 to 9.4% in 2012. The increase of $10.8 million in depreciation and amortization was due to an increase of approximately $4.9 million relating to our development and expansion in urology, medical oncology and surgery practices in Arizona, California, Florida, North Carolina and South Carolina, the acquisitions of treatment centers in existing local markets during the latter part of 2011 and 2012, and the expansion into a new region internationally in 2011. An increase in capital expenditures related to our investment in advanced radiation treatment technologies increased our depreciation and amortization by approximately $3.3 million and $2.8 million increase due to the amortization of our trade name offset by a decrease of approximately $0.2 million predominately due to the expiration of certain non-compete agreements.

        Provision for doubtful accounts.    The provision for doubtful accounts increased by $0.8 million, or 5.0%, from $16.1 million in 2011 to $16.9 million in 2012. The provision for doubtful accounts as a percentage of total revenues decreased from 2.5% in 2011 to 2.4% in 2012. In 2012 we reduced our provision for doubtful accounts as we made progress in improving the overall collection process, including centralization of the prior authorization process, with standardization process supporting peer to peer justification of medical necessity, improvements in payment posting timeliness, electronic submission of documentation to Medicare carriers, Medicaid eligibility retro scrubbing of self pay patients, automated insurance rebilling, focused escalation process for claims in Medical Review with insurers, collector productivity and quality tracking and monitoring, and improved processes at the treatment centers to collect co-pay amounts at the time of service. These actions have resulted in improved collections and lower bad debt expense as a percentage of total revenues in 2012.

        Interest expense, net.    Interest expense, increased by $16.8 million, or 27.8%, from $60.7 million in 2011 to $77.5 million in 2012. The increase is primarily attributable to an increase of approximately $14.7 million of interest as a result the additional senior subordinated notes issued in March 2011 of approximately $50.0 million, the issuance of the senior secured second lien notes issued in May 2012 of approximately $350.0 million and additional capital lease financing and the additional amortization of deferred financing costs and original issue discount costs of approximately $0.9 million related thereto, the write-off of loan costs of approximately $0.5 million and approximately $1.1 million of interest related to international debt, offset by a decrease in our interest rate swap expense of approximately $0.4 million.

        Electronic health records incentive income.    The American Recovery and Reinvestment Act of 2009 provides for incentive payments for Medicare eligible professionals who are meaningful users of certified EHR technology. We account for EHR incentive payments utilizing the gain contingency model. Pursuant to the gain contingency model, we recognize EHR incentive payments when the specified meaningful use criteria have been satisfied, as all contingencies in estimating the amount of the incentive payments to be received are resolved. For the year ended December 31, 2012 we recognized approximately $2.3 million of EHR revenues.

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        Early extinguishment of debt.    We incurred approximately $4.5 million from the early extinguishment of debt as a result of the prepayment of the $265.4 million in senior secured credit facility—Term Loan B and prepayment of $63.0 million in senior secured credit facility—Revolving credit portion, which included the write-offs of $3.7 million in deferred financing costs and $0.8 million in original issue discount costs.

        Fair value adjustment of earn-out liability and noncontrolling interests-redeemable.    On March 1, 2011, we purchased the remaining 67% interest in MDLLC from Bernardo Dosoretz as well as interests in the subsidiaries of MDLLC from Alejandro Dosoretz and Bernardo Dosoretz, resulting in an ownership interest of approximately 91% in the underlying radiation oncology practices located in South America, Central America, Mexico and the Caribbean. We also purchased an additional 61% interest in Clinica de Radioterapia La Asuncion S.A. from Bernardo Dosoretz, resulting in an ownership interest of 80%. The Company recorded an estimated contingent earn out payment totaling $2.3 million at the time of the closing of these acquisitions. The earn out payment is contingent upon certain acquired centers attaining earnings before interest, taxes, depreciation and amortization targets, is due 18 months subsequent to the transaction closing, and is payable through Company financing and issuance of equity units. At December 31, 2012, we estimated the fair value of the contingent earn out liability and increased the liability due to the seller to approximately $3.4 million. We recorded the $1.0 million to expense in the fair value adjustment caption in the consolidated statements of operations and comprehensive loss.

        On November 4, 2011, we purchased an 80% interest in an operating entity, which operates 1 radiation treatment center in Argentina; an 80% interest in another operating entity, which operates 3 radiation treatment centers in Argentina; and a 96% interest in an operating entity, which operates 1 radiation treatment center in Argentina. In November 2012, we exercised our purchase option to purchase the remaining interest for approximately $1.4 million and recorded the adjustment of $0.2 million to the purchase option as an expense in the fair value adjustment of the noncontrolling interests-redeemable in the consolidated statements of operations and comprehensive loss.

        Impairment loss.    During the third quarter of 2012, we completed an interim impairment test for goodwill and indefinite-lived intangible assets as a result of our review of growth expectations and the release of the final rule issued on the physician fee schedule for 2013 by CMS on November 1, 2012, which included certain rate reductions on Medicare payments to freestanding radiation oncology providers as well as the changes in treatment patterns and volumes in prostate cancer as a result of the slowing rate of men diagnosed and referred to treatment regimens, as a result of the Preventative Services Task Force report issued in May 2012 recommending against routine PSA screenings for healthy men, as well as suggested changes in treatment pattern for low risk prostate cancer away from definitive treatment. In performing this test, we assessed the implied fair value of our goodwill and intangible assets. As a result, we recorded an impairment loss of approximately $69.9 million during the third quarter of 2012 primarily relating to goodwill impairment in certain of our reporting units, including Mid East United States (Northwest Florida, North Carolina, Southeast Alabama, South Carolina), Central South East United States (Delmarva Peninsula, Central Maryland, Central Kentucky, South New Jersey), California, South West United States (central Arizona and Las Vegas, Nevada), and Southwest Florida of approximately $69.8 million. In addition, during the third quarter of 2012, an impairment loss of approximately $0.1 million was recognized related to the impairment of certain leasehold improvements of a planned radiation treatment facility office relocation in Monroe, Michigan in the Northeast U.S. region.

        During the fourth quarter of 2012, we completed our annual impairment test for goodwill and indefinite-lived intangible assets. In performing this test, we assessed the implied fair value of our goodwill and intangible assets. As a result, we recorded an impairment loss of approximately $11.1 million during the fourth quarter of 2012 primarily relating to goodwill impairment in certain of our reporting units, including Central South East United States (Delmarva Peninsula, Central

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Maryland, Central Kentucky, South New Jersey), and Southwest Florida of approximately $10.8 million. In addition, during the fourth quarter of 2012, an impairment loss of approximately $0.1 million was recognized related to the impairment of certain leasehold improvements in the Delmarva Peninsula local market and approximately $0.2 million related to a consolidated joint venture in the Central Maryland local market.

        During the third quarter of 2011, we completed an interim impairment test for goodwill and indefinite-lived intangible assets as a result of our review of growth expectations and the release of the final rule issued on the physician fee schedule for 2012 by CMS on November 1, 2011, which included certain rate reductions on Medicare payments to freestanding radiation oncology providers. In performing this test, we assessed the implied fair value of our goodwill and intangible assets. As a result, we incurred an impairment loss of approximately $237.6 million in 2011 primarily relating to goodwill and trade name impairment in certain of our reporting units, including North East United States (New York, Rhode Island, Massachusetts and southeast Michigan), California, Southwest U.S. (Arizona and Nevada) , the Florida east coast, Northwest Florida and Southwest Florida of approximately $234.9 million and an impairment loss incurred of approximately $2.7 million in 2011 related to our write-off of our 45% investment interest in a radio-surgery center in Rhode Island due to continued operating losses since its inception in 2008.

        During the fourth quarter of 2011, we decided to rebrand our current trade name of 21st Century Oncology. As a result of the rebranding initiative and concurrent with our annual impairment test for goodwill and indefinite-lived intangible assets, we incurred an impairment loss of approximately $121.6 million. Approximately $49.8 million of the $121.6 million related to the trade name impairment as a result of our rebranding initiative. The remaining $71.8 million of impairment related to goodwill in certain of our reporting units, including North East United States (New York, Rhode Island, Massachusetts and southeast Michigan), California and Southwest U.S. (Arizona and Nevada). The remaining domestic U.S. trade name of approximately $4.6 million will be amortized over its remaining useful life through December 31, 2012. We incurred approximately $0.9 million in amortization expense during the fourth quarter. In addition, we impaired certain deposits on equipment of approximately $0.7 million and $0.8 million in leasehold improvements relating to a planned radiation treatment facility office closing in Baltimore, Maryland.

        Loss on investments.    During the fourth quarter of 2011, we incurred a loss on our 50% investment in an unconsolidated joint venture in a freestanding radiation facility in West Palm Beach, Florida of approximately $0.5 million. The loss on our investment in the joint venture was offset by a gain on the sale of an investment in a primary care physician practice of approximately $0.3 million. Proceeds from the sale of the investment was approximately $1.0 million.

        Gain on fair value adjustment of previously held equity investment.    As result of the acquisition of MDLLC, in which we acquired an effective ownership interest of approximately 91.0% on March 1, 2011, we recorded a gain of approximately $0.2 million to adjust our initial investment in the joint venture to fair value.

        Loss on foreign currency derivative contracts.    We are exposed to a significant amount of foreign exchange risk, primarily between the U.S. dollar and the Argentine Peso. This exposure relates to the provision of radiation oncology services to patients at our Latin American operations and purchases of goods and services in foreign currencies. We maintain four foreign currency derivative contracts which mature on a quarterly basis. In 2012 and 2011, the expiration of the December 28, 2012 foreign currency derivative contract and the mark to market valuation of the remaining contracts resulted in a loss of approximately $1.2 million and $0.7 million, respectively.

        Income taxes.    Our effective tax rate was (3.1)% in fiscal 2012 and 6.8% in fiscal 2011. The change in the effective rate in 2012 compared to the same period of the year prior is primarily the result of the reduction of the deferred tax liability on the amount of goodwill and trade name impaired in the third

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quarter of 2011, the 2012 benefit related to the termination of the interest rate swap, the 2012 accrual of US Federal penalties and interest proposed by the IRS related to the 2007-2008 examination, the 2011 benefit for the release of certain state reserves, our application of ASC 740-270 to exclude certain jurisdictions (U.S. and certain states) for which we are unable to benefit from losses that are not more likely than not to be realized and the mix of earnings and tax rates across various tax jurisdictions. As a result, on an absolute dollar basis, the expense for income taxes changed by $29.9 million from the income tax benefit of $25.4 million in 2011 to an income tax expense of $4.5 million in 2012.

        Our future effective tax rates could be affected by changes in the relative mix of taxable income and taxable loss jurisdictions, changes in the valuation of deferred tax assets or liabilities, or changes in tax laws or interpretations thereof. We monitor the assumptions used in estimating the annual effective tax rate and make adjustments, if required, throughout the year. If actual results differ from the assumptions used in estimating our annual effective tax rates, future income tax expense (benefit) could be materially affected.

        In addition, we are periodically under audit by federal, state, or local authorities in the areas of income taxes and other taxes. These audits include questioning the timing and amount of deductions and compliance with federal, state, and local tax laws. We regularly assess the likelihood of adverse outcomes from these audits to determine the adequacy of our provision for income taxes. To the extent we prevail in matters for which accruals have been established or are required to pay amounts in excess of such accruals, the effective tax rate could be materially affected.

        Net loss.    Net loss decreased by $198.8 million, from $349.9 million in net loss in 2011 to $151.1 million net loss in 2012. Net loss represents 54.3% of total revenues in 2011 and 21.9% of total revenues in 2012.

Liquidity and Capital Resources

        We are highly leveraged. As of December 31, 2013, we had $1.0 billion of long-term debt and other long-term liabilities outstanding. Over the next year, the interest and principal payments due under our various debt agreements are approximately $95.3 million and $17.5 million, respectively. As of December 31, 2013, we have $45.7 million, available on our revolving credit facility.

        Our high level of debt could have adverse effects on our business and financial condition. Specifically, our high level of debt could have important consequences, including the following:

    making it more difficult for us to satisfy our obligations with respect to our debt;

    limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

    requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes;

    increasing our vulnerability to general adverse economic and industry conditions;

    limiting our flexibility in planning for and reacting to changes in the industry in which we compete;

    placing us at a disadvantage compared to other, less leveraged competitors; and

    increasing our cost of borrowing.

    Our ability to make scheduled payments on and to refinance our indebtedness depends on and is subject to our financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and other factors beyond our control, including the availability of financing in the international banking and capital markets.

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        We have several initiatives designed to increase revenue and profitability through strategic acquisitions, improvements in commercial payer contracting, development and expansion of our integrated cancer care model, and realignment of physician compensation arrangements.

        Although we are significantly leveraged, we expect that the current cash balances, liquidity from our revolver, and cash generated from operations will be sufficient to meet working capital, capital expenditure, debt service, and other cash needs for the next year; however, there can be no assurances that we will be able to generate sufficient cash flows to fund our operations and service our debt for the next year.

        Our principal capital requirements are for working capital, acquisitions, medical equipment replacement and expansion and de novo treatment center development. Working capital and medical equipment are funded through cash from operations, supplemented, as needed, by lease lines of credit. Borrowings under these lease lines of credit are recorded on our balance sheets. The construction of de novo treatment centers is funded directly by third parties and then leased to us. We finance our operations, capital expenditures and acquisitions through a combination of borrowings and cash generated from operations.

Cash Flows From Operating Activities

        Net cash provided by operating activities for the years ended December 31, 2011 and 2012 was $44.8 million, $16.1 million, respectively. Net cash used in operating activities for the year ended December 31, 2013 was $11.6 million.

        Net cash used in operating activities decreased by $27.7 million from $16.1 million in cash provided by operating activities in 2012 to $11.6 million in cash used in operating activities in 2013 predominately due to a decrease in cash flow due to the reductions in RVUs for many of our treatment codes effective with the 2013 physician fee schedule and increased interest costs. On May 10, 2012, we issued $350.0 million in aggregate principal amount of 87/8% Senior Secured Second Lien Notes due 2017. We used the proceeds to repay our existing senior secured revolving credit facility and the Term Loan B portion of our senior secured credit facilities, which were prepaid in their entirety, cancelled and replaced with the new Revolving Credit Facility, and to pay related fees and expenses. We continue to see improvements in our cash collections from our accounts receivable with our days sales outstanding improving from 34 days to 31 days.

        Cash at December 31, 2013 held by our foreign subsidiaries was $3.6 million. We consider these cash flows to be permanently invested in our foreign subsidiaries and therefore do not anticipate repatriating any excess cash flows to the U.S. We anticipate we can adequately fund our domestic operations from cash flows generated solely from our U.S. business. We believe that the magnitude of our growth opportunities outside of the U.S. will cause us to continuously reinvest foreign earnings. We do not require access to the earnings and cash flow of our international subsidiaries to fund our U.S. operations.

        Net cash provided by operating activities decreased by $28.7 million from $44.8 million in 2011 to $16.1 million in 2012 predominately due to increased interest costs. In March 2011, we issued $50.0 million in senior subordinated notes due 2017 and $16.25 million senior subordinated notes due to the seller in the MDLLC transaction. In 2012 and 2011, we wrote-off approximately $81.0 million and $360.6 million, respectively in goodwill, trade name and other investments as a result of our interim testing of our goodwill and indefinite-lived intangible assets. We continue to see improvements in our cash collections from our accounts receivable with our days sales outstanding improving from 39 days to 34 days.

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        Cash at December 31, 2012 held by our foreign operating subsidiaries was $4.6 million. We consider these cash flows to be permanently invested in our foreign operating subsidiaries and therefore do not anticipate repatriating any excess cash flows to the U.S. We anticipate we can adequately fund our domestic operations from cash flows generated solely from our U.S. business. Of the $4.6 million of cash held by our foreign operating subsidiaries at December 31, 2012, $0.4 million is held in U.S. dollars, $0.4 million of which is held at banks in the United States, with the remaining held in foreign currencies in foreign banks. We believe that the magnitude of our growth opportunities outside of the U.S. will cause us to continuously reinvest foreign earnings. We do not require access to the earnings and cash flow of our international subsidiaries to fund our U.S. operations.

Cash Flows From Investing Activities

        Net cash used in investing activities for 2011, 2012, and 2013 was $96.8 million, $57.3 million, and $118.0 million, respectively.

        Net cash used in investing activities increased by $60.7 million from $57.3 million in 2012 to $118.0 million in 2013. In 2013, net cash used in investing activities was impacted by approximately $0.8 million in cash paid for the assets of several physician practices in Arizona, New Jersey and North Carolina, and approximately $17.7 million in cash paid for the assets of five radiation oncology practices and a urology group located in Lee and Collier Counties in Southwest Florida in May 2013. In June 2013, we contributed our Casa Grande, Arizona radiation physician practice and approximately $5.0 million to purchase a 55.0% interest in a joint venture. In June 2013, we entered into a "stalking horse" investment agreement to acquire OnCure Holdings, Inc. (together with its subsidiaries, "OnCure") upon effectiveness of its plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code for approximately $125.0 million, (excluding capital leases, working capital and other adjustments). The purchase price included $42.5 million in cash and up to $82.5 million in assumed debt ($7.5 million of assumed debt will be released assuming certain OnCure centers achieve a minimum level of EBITDA). We funded an initial deposit of approximately $5.0 million into an escrow account subject to the working capital adjustments.

        On October 25, 2013, we completed the acquisition of OnCure. The transaction was funded through a combination of cash on hand, borrowings from our senior secured credit facility and the issuance of $82.5 million in senior secured notes of OnCure, which accrue interest at a rate of 11.75% per annum and mature January 15, 2017, of which $7.5 million is subject to escrow arrangements and will be released to holders upon satisfaction of certain conditions.

        In 2013, net cash used in investing activities was impacted by approximately $0.5 million in contribution of capital to an unconsolidated joint venture. In June 2013, we sold our 45% interest in an unconsolidated joint venture which operated a radiation treatment center in Providence, Rhode Island for approximately $1.5 million. In July 2013, we purchased the remaining 38.0% interest in a joint venture radiation facility, located in Woonsocket, Rhode Island from a hospital partner for approximately $1.5 million. In July 2013 we purchased a company, which operates a radiation treatment center in Tijuana, Mexico for approximately $1.6 million. In October 2013 we purchase a radiation therapy treatment center in Roanoke Rapids, North Carolina for approximately $2.2 million. During 2013, we entered into foreign exchange option contracts expiring in March 2014 to convert a significant portion of our forecasted foreign currency denominated net income into U.S. dollars to limit the adverse impact of a weakening Argentine Peso against the U.S. dollar. The cost of the option contracts, were approximately $0.2 million.

        Net cash used in investing activities decreased by $39.5 million from $96.8 million in 2011 to $57.3 million in 2012. In 2012, net cash used in investing activities was impacted by approximately $0.9 million in cash paid for the assets of a radiation oncology practice and a medical oncology group located in Asheville, North Carolina in February 2012 and approximately $21.9 million in cash paid for the assets of a radiation oncology practice and two urology groups located in Sarasota/Manatee

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counties in Southwest Florida in March 2012 and the purchase of affiliated integrated cancer care physician practices of approximately $1.7 million. In April 2012 we acquired certain assets utilized in one of the radiation treatment centers acquired in December 2011 located in North Carolina, which operates two radiation treatment centers for approximately $0.4 million. In December 2012, we purchased the remaining 50% interest in an unconsolidated joint venture which operates a freestanding radiation treatment center in West Palm Beach, Florida for approximately $1.0 million. On November 4, 2011, we purchased an 80% interest in an operating entity, which operates 1 radiation treatment center in Argentina; an 80% interest in another operating entity, which operates 3 radiation treatment centers in Argentina; and a 96% interest in an operating entity, which operates 1 radiation treatment center in Argentina. In November 2012, we exercised our purchase option to purchase the remaining interest for approximately $1.4 million. During 2012, we entered into foreign exchange option contracts expiring December 2013 to convert a significant portion of our forecasted foreign currency denominated net income into U.S. dollars to limit the adverse impact of a weakening Argentine Peso against the U.S. dollar. The cost of the option contracts, were approximately $0.7 million. Purchases of property and equipment decreased by $5.9 million from $36.6 million in 2011 to $30.7 million in 2012, as we continue to manage our capital expenditures.

        Historically, our capital expenditures have been primarily for equipment, leasehold improvements and information technology equipment. Total capital expenditures, inclusive of amounts financed through capital lease arrangements, outstanding accounts payable relating to the acceptance and delivery of medical equipment and exclusive of the purchase of radiation treatment centers, were $41.3 million, $38.0 million and $43.8 million in 2011, 2012 and 2013, respectively. Historically, we have funded our capital expenditures with cash flows from operations, borrowings under our senior secured credit facilities and borrowings under lease lines of credit.

Cash Flows From Financing Activities

        Net cash provided by financing activities for 2011, 2012 and 2013 was $48.2 million, $46.4 million and $131.6 million, respectively.

        On October 25, 2013, we completed the acquisition of OnCure. The transaction included the issuance of $82.5 million in senior secured notes of OnCure, which accrue interest at a rate of 11.75% per annum and mature January 15, 2017, of which $7.5 million is subject to escrow arrangements and will be released to holders upon satisfaction of certain conditions. Interest is payable on the Secured Notes on each January 15 and July 15, commencing July 15, 2014.

        On August 28, 2013, we entered into an Amendment Agreement (the "Amendment Agreement") to the credit agreement among us, 21C, the institutions from time to time party thereto as lenders, the Administrative Agent named therein and the other agents and arrangers named therein, dated as of May 10, 2012 (the "Original Credit Agreement" and, as amended and restated by the Amendment Agreement, the "Credit Agreement"). Pursuant to the terms of the Amendment Agreement the amendments to the Original Credit Agreement became effective on August 29, 2013.

        The Credit Agreement provides for credit facilities consisting of (i) a $90 million term loan facility (the "Term Facility") and (ii) a revolving credit facility provided for up to $100 million of revolving extensions of credit outstanding at any time (including revolving loans, swingline loans and letters of credit) (the "Revolving Credit Facility" and together with the Term Facility, the "Credit Facilities"). The Term Facility and the Revolving Credit Facility each have a maturity date of October 15, 2016.

        As a result of the Amendment Agreement, the proceeds of $87.75 million (net of original issue discount of $2.25 million) from the term loan facility was used to pay down approximately $62.5 million in revolver loans and accrued interest and fees of approximately $0.4 million. We incurred approximately $1.4 million in transaction fees and expenses, including legal, accounting and other fees and expenses in connection with the amendment agreement.

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        We had partnership distributions from non-controlling interests of approximately $3.9 million and $2.2 million in 2012 and 2013, respectively.

        On May 10, 2012, we completed an offering of $350.0 million in aggregate principal amount of 87/8% Senior Secured Second Lien Notes due 2017, with an original issue discount of $1.7 million. The proceeds of $348.3 million was used to prepay and cancel $265.4 million in senior secured credit facility—Term Loan B, prepayment of $63.0 million in senior secured credit facility—revolving credit portion and payment of accrued interest and fees of approximately $0.8 million. In addition, we paid approximately $14.4 million of loan costs relating to transaction fees and expenses incurred in connection with the issuance of the 87/8% Senior Secured Second Lien Notes and a new revolving credit facility. The remaining net proceeds were used for general corporate purposes.

        On March 1, 2011, we issued $50 million of 97/8% Senior Subordinated Notes due 2017 pursuant to a Commitment Letter from DDJ Capital Management, LLC. The proceeds of $48.5 million were used (i) to fund the MDLLC acquisition and (ii) to fund transaction costs associated with the MDLLC Acquisition. We incurred approximately $1.6 million in transaction fees and expenses, including legal, accounting and other fees and expenses in connection with the new notes, and an initial purchasers' discount of $0.6 million. On April 1, 2011 we received approximately $6.7 million in capital lease financing from a financial institution to fund previously purchased medical equipment. The terms of the capital lease financing are for five years at an average interest rate of approximately 8%. We also had partnership distributions from non-controlling interests of approximately $4.4 million and $3.9 million in 2011 and 2012, respectively.

        In November 2011, we registered approximately $16.25 million in notes and incurred approximately $0.2 million in transaction fees and expenses, including legal, accounting and other fees and expenses.

Senior Subordinated Notes

        On April 20, 2010, we consummated a debt offering in an aggregate principal amount of $310.0 million of 97/8% senior subordinated notes due 2017, and repaid our existing $175.0 million in aggregate principal amount 13.5% senior subordinated notes due 2015, including accrued and unpaid interest of approximately $6.4 million and the call premium of approximately $5.3 million. The remaining proceeds from the Offering were used to pay down $74.8 million of the Term Loan B and $10.0 million of our revolving credit facility. A portion of the proceeds was placed in a restricted account pending application to finance certain acquisitions, including the acquisitions of a radiation treatment center and physician practices in South Carolina, which were consummated on May 3, 2010. We incurred approximately $11.9 million in transaction fees and expenses, including legal, accounting and other fees and expenses in connection with the Offering, including the initial purchasers' discount of $1.9 million.

        In April 2010, we incurred approximately $10.9 million in early extinguishment of debt as a result of the prepayment of the $175.0 million in senior subordinated notes, which included the call premium payment of approximately $5.3 million, the write-offs of $2.5 million in deferred financing costs and $3.1 million in original issue discount costs.

        On April 22, 2010, affiliates of certain of the initial purchasers of the $310.0 million in aggregate principal amount 97/8% senior subordinated notes due 2017, as lenders under our senior secured revolving credit facility, provided an additional $15.0 million of commitments to the revolving credit portion of our senior secured credit facility increasing the available commitment from $60.0 million to $75.0 million. We paid $2.0 million to Vestar Capital Partners V, L.P. for additional transaction advisory services in respect to the incremental amendments to our existing senior secured revolving credit facility, the additional $15.0 million of commitments to the revolver portion, and the complete refinancing of the senior subordinated notes.

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        On March 1, 2011, we issued $50 million of 97/8% Senior Subordinated Notes due 2017 pursuant to a Commitment Letter from DDJ Capital Management, LLC. The proceeds of $48.5 million were used (i) to fund the MDLLC Acquisition and (ii) to fund transaction costs associated with the MDLLC Acquisition. We incurred approximately $1.6 million in transaction fees and expenses, including legal, accounting and other fees and expenses in connection with the new notes, and an initial purchasers' discount of $0.6 million.

Senior Secured Second Lien Notes

        On May 10, 2012, we issued $350.0 million in aggregate principal amount of 87/8% Senior Secured Second Lien Notes due 2017 (the "Secured Notes").

        The Secured Notes were issued pursuant to an indenture, dated May 10, 2012 (the "Secured Notes Indenture"), the Company, the guarantors signatory thereto and Wilmington Trust, National Association. The Secured Notes are senior secured second lien obligations of the Company and are guaranteed on a senior secured second lien basis by the Company, and each of our domestic subsidiaries to the extent such guarantor is a guarantor of the Company's obligations under the Revolving Credit Facility (as defined below).

        The Secured Notes Indenture contains covenants that, among other things, restrict the ability for us, and certain of our subsidiaries to incur, assume or guarantee additional indebtedness; pay dividends or redeem or repurchase capital stock; make other restricted payments; incur liens; redeem debt that is junior in right of payment to the Secured Notes; sell or otherwise dispose of assets, including capital stock of subsidiaries; enter into mergers or consolidations; and enter into transactions with affiliates. These covenants are subject to a number of important exceptions and qualifications. In addition, in certain circumstances, if the Company sells assets or experiences certain changes of control, it must offer to purchase the Secured Notes.

        We used the proceeds to repay our existing senior secured revolving credit facility and the Term Loan B portion of our senior secured credit facilities, which were prepaid in their entirety, cancelled and replaced with the new Revolving Credit Facility described below, and to pay related fees and expenses. Any remaining net proceeds were used for general corporate purposes.

Senior Secured Notes

        On October 25, 2013, we completed the acquisition of OnCure. The transaction included the issuance of $82.5 million in senior secured notes of OnCure (the "OnCure Notes"), which accrue interest at a rate of 11.75% per annum and mature January 15, 2017, of which $7.5 million is subject to escrow arrangements and will be released to holders upon satisfaction of certain conditions. The OnCure Notes were issued pursuant to an Amended and Restated Indenture (the "OnCure Indenture") of OnCure, with OnCure, as issuer, the subsidiaries of OnCure named therein, as guarantors, the Company, 21C and the subsidiaries of the Company and 21C named therein, as guarantors and Wilmington Trust, National Association, as trustee and collateral agent. The OnCure Notes are senior secured obligations of OnCure and certain of its subsidiaries that guarantee the OnCure Notes and senior unsecured obligations of the Company and its subsidiaries that guarantee the OnCure Notes.

        The OnCure Indenture contains covenants that, among other things, restrict the ability of OnCure, certain of its subsidiaries, the Company, 21C and certain of its subsidiaries to: incur, assume or guarantee additional indebtedness; pay dividends or redeem or repurchase capital stock; make other restricted payments; incur liens; redeem debt that is junior in right of payment to the OnCure Notes; sell or otherwise dispose of assets, including capital stock of subsidiaries; enter into mergers or consolidations; and enter into transactions with affiliates. These covenants are subject to a number of important exceptions and qualifications. In addition, in certain circumstances, if OnCure or the

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Company sell assets or experience certain changes of control, they must offer to purchase the OnCure Notes.

Amended and Restated Credit Agreement

        On May 10, 2012, we also entered into the Credit Agreement (the "Credit Agreement") among 21C, as borrower, the Company, Wells Fargo Bank, National Association, as administrative agent (in such capacity, the "Administrative Agent"), collateral agent, issuing bank and as swingline lender, the other agents party thereto and the lenders party thereto. On August 28, 2013, we entered into the Amendment Agreement to the credit agreement among the Company, 21C, the institutions from time to time party thereto as lenders, the Administrative Agent named therein and the other agents and arrangers named therein, dated as of May 10, 2012 (the "Original Credit Agreement" and, as amended and restated by the Amendment Agreement, the "Credit Agreement"). Pursuant to the terms of the Amendment Agreement the amendments to the Original Credit Agreement became effective on August 29, 2013.

        The Credit Agreement provides for credit facilities consisting of (i) a $90 million term loan facility (the "Term Facility") and (ii) a revolving credit facility provided for up to $100 million of revolving extensions of credit outstanding at any time (including revolving loans, swingline loans and letters of credit) (the "Revolving Credit Facility" and together with the Term Facility, the "Credit Facilities"). The Term Facility and the Revolving Credit Facility each have a maturity date of October 15, 2016.

        Loans under the Revolving Credit Facility and the Term Facility are subject to the following interest rates:

            (a)   for loans which are Eurodollar loans, for any interest period, at a rate per annum equal to (i) a floating index rate per annum equal to (A) the rate per annum determined on the basis of the rate for deposits in dollars for a period equal to such interest period commencing on the first day of such interest period appearing on Reuters Screen LIBOR01 Page as of 11:00 A.M., London time, two business days prior to the beginning of such interest period divided by (B) 1.0 minus the then stated maximum rate of all reserve requirements applicable to any member bank of the Federal Reserve System in respect of liability funding or liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D) (provided that solely with respect to loans under the Term Facility, such floating index rate shall not be less than 1.00% per annum), plus (ii) an applicable margin (A) based upon a total leverage pricing grid for loans under the Revolving Credit Facility or (B) equal to 6.50% per annum for loans under the Term Facility; and

            (b)   for loans which are base rate loans, at a rate per annum equal to (i) a floating index rate per annum equal to the greatest of (A) the Administrative Agent's prime lending rate at such time, (B) the overnight federal funds rate at such time plus 1/2 of 1%, and (C) the Eurodollar Rate for a Eurodollar loan with a one-month interest period commencing on such day plus 1.00% (provided that solely with respect to loans under the Term Facility, such floating index rate shall not be less than 2.00% per annum), plus (ii) an applicable margin (A) based upon a total leverage pricing grid for loans under the Revolving Credit Facility or (B) equal to 5.50% per annum for loans under the Term Facility.

        We will pay certain recurring fees with respect to the Credit Facilities, including (i) fees on the unused commitments of the lenders under the Revolving Credit Facility, (ii) letter of credit fees on the aggregate face amounts of outstanding letters of credit and (iii) administration fees.

        The Credit Agreement contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting the ability (subject to various exceptions) of 21C and certain of its subsidiaries to: incur additional indebtedness (including guarantee obligations); incur liens; engage in mergers or other fundamental changes; sell certain property or assets; pay dividends of other distributions; consummate acquisitions; make investments, loans and advances; prepay certain

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indebtedness, change the nature of their business; engage in certain transactions with affiliates; and incur restrictions on the ability of 21C's subsidiaries to make distributions, advances and asset transfers. In addition, as of the last business day of each month, 21C will be required to maintain a certain minimum amount of unrestricted cash and cash equivalents plus availability under the Revolving Credit Facility of not less than $15.0 million.

        The Credit Agreement contains customary events of default, including with respect to nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty when made; failure to perform or observe covenants; cross default to other material indebtedness; bankruptcy and insolvency events; inability to pay debts; monetary judgment defaults; actual or asserted invalidity or impairment of any definitive loan documentation and a change of control.

        The obligations of 21C under the Credit Facilities are guaranteed by the Company and certain direct and indirect wholly-owned domestic subsidiaries of 21C.

        The Credit Facilities and certain interest rate protection and other hedging arrangements provided by lenders under the Credit Facilities or its affiliates are secured on a first priority basis by security interests in substantially all of 21C's and each guarantor's tangible and intangible assets (subject to certain exceptions).

        The Revolving Credit Facility requires that we comply with certain financial covenants, including:

 
  Requirement at
December 31, 2013
  Level at
December 31, 2013

Minimum permitted unrestricted cash and cash equivalents plus availability under the Revolving Credit Facility

  >$15.0 million   $57.7 million

        The Revolving Credit Facility also requires that we comply with various other covenants, including, but not limited to, restrictions on new indebtedness, asset sales, capital expenditures, acquisitions and dividends, with which we were in compliance as of December 31, 2013.

        On April 15, 2014, we obtained a waiver of borrowing conditions due to a default of not providing audited financial statements for the year ended December 31, 2013 within 90 days after year end. We paid the administrative agent for the account of the Revolving Lenders a fee equal to 0.125% of such Lender's aggregate Commitments. The Senior Revolving Credit Facility provides for a 30 day cure period for the filing of the audited annual financial statements. The default was cured with the provision of the audited financial statements to the administrative agent on April 30, 2014.

        We believe available borrowings under our credit facilities, together with our cash flows from operations, will be sufficient to fund our currently anticipated operating requirements. To the extent available borrowings and cash flows from operations are insufficient to fund future requirements, we may be required to seek additional financing through additional increases in our senior secured credit facilities, negotiate additional credit facilities with other lenders or institutions or seek additional capital through private placements or public offerings of equity or debt securities. No assurances can be given that we will be able to extend or increase our senior secured credit facilities, secure additional bank borrowings or lease line of credit or complete additional debt or equity financings on terms favorable to us or at all. Our ability to meet our funding needs could be adversely affected if we experience a decline in our results of operations, or if we violate the covenants and other restrictions to which we are subject under our senior secured credit facilities.

Finance Obligation

        We lease certain of our treatment centers (each, a "facility" and, collectively, the "facilities") and other properties from partnerships that are majority-owned by related parties (each, a "related party lessor" and, collectively, the "related party lessors"). See "Certain Relationships and Related Party Transactions." The related party lessors construct the facilities in accordance with our plans and

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specifications and subsequently lease these facilities to us. Due to the related party relationship, we are considered the owner of these facilities during the construction period pursuant to the provisions of Accounting Standards Codification ("ASC") 840-40, "Sale-Leaseback Transactions" ("ASC 840-40"). In accordance with ASC 840-40, we record a construction in progress asset for these facilities with a corresponding finance obligation during the construction period. These related parties guarantee the debt of the related party lessors, which is considered to be "continuing involvement" pursuant to ASC 840-40. Accordingly, these leases did not qualify as a normal sale-leaseback at the time that construction was completed and these facilities were leased to us. As a result, the costs to construct the facilities and the related finance obligation are recorded on our consolidated balance sheets after construction was completed. The construction costs are included in "Real Estate Subject to Finance Obligation" in the consolidated balance sheets and the accompanying notes, included in this Annual Report on Form 10-K. The finance obligation is amortized over the lease during the construction period term based on the payments designated in the lease agreements.

Billing and Collections

        Our billing system in the U.S. utilizes a fee schedule for billing patients, third-party payers and government sponsored programs, including Medicare and Medicaid. Fees billed to government sponsored programs, including Medicare and Medicaid, and fees billed to contracted payers and self pay patients (not covered under other third party payer arrangements) are automatically adjusted to the allowable payment amount at time of billing. In 2009, we updated our billing system to include fee schedules on approximately 98% of all payers and developed a blended rate allowable amount on the remaining payers. As a result of this change in 2009, fees billed to all payers are automatically adjusted to the allowable payment at time of billing.

        Insurance information is requested from all patients either at the time the first appointment is scheduled or at the time of service. A copy of the insurance card is scanned into our system at the time of service so that it is readily available to staff during the collection process. Patient demographic information is collected for both our clinical and billing systems.

        It is our policy to collect co-payments from the patient at the time of service. Insurance benefit information is obtained and the patient is informed of their deductible and co-payment responsibility prior to the commencement of treatment.

        Charges are posted to the billing system by coders in our offices or in our central billing office. After charges are posted, edits are performed, any necessary corrections are made and billing forms are generated, then sent electronically to our clearinghouse whenever electronic submission is possible. Any bills not able to be processed through the clearinghouse are printed and mailed from our print mail service. Statements are automatically generated from our billing system and mailed to the patient on a regular basis for any amounts still outstanding from the patient. Daily, weekly and monthly accounts receivable analysis reports are utilized by staff and management to prioritize accounts for collection purposes, as well as to identify trends and issues. Strategies to respond proactively to these issues are developed at weekly and monthly team meetings. Our write-off process requires manual review and our process for collecting accounts receivable is dependent on the type of payer as set forth below.

Medicare, Medicaid and Commercial Payer Balances

        Our central billing office staff expedites the payment process from insurance companies and other payers via electronic inquiries, phone calls and automated letters to ensure timely payment. Our billing system generates standard aging reports by date of billing in increments of 30 day intervals. The collection team utilizes these reports to assess and determine the payers requiring additional focus and collection efforts. Our accounts receivable exposure on Medicare, Medicaid and commercial payer balances are largely limited to denials and other unusual adjustments. Our exposure to bad debts on balances relating to these types of payers over the years has been insignificant.

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        In the event of denial of payment, we follow the payer's standard appeals process, both to secure payment and to lobby the payers, as appropriate, to modify their medical policies to expand coverage for the newer and more advanced treatment services that we provide which, in many cases, is the payer's reason for denial of payment. If all reasonable collection efforts with these payers have been exhausted by our central billing office staff, the account receivable is written-off.

Self-Pay Balances

        We administer self-pay account balances through our central billing office and our policy is to first attempt to collect these balances although after initial attempts we often send outstanding self-pay patient claims to collection agencies at designated points in the collection process. In some cases monthly payment arrangements are made with patients for the account balance remaining after insurance payments have been applied. These accounts are reviewed monthly to ensure payments continue to be made in a timely manner. Once it has been determined by our staff that the patient is not responding to our collection attempts, a final notice is mailed. This generally occurs more than 120 days after the date of the original bill. If there is no response to our final notice, after 30 days the account is assigned to a collection agency and, as appropriate, recorded as a bad debt and written off. We also have payment arrangements with patients for the self-pay portion due in which monthly payments are made by the patient on a predetermined schedule. Balances under $50 are written off but not sent to the collection agency. All accounts are specifically identified for write-offs and accounts are written off prior to being submitted to the collection agency.

Acquisitions and Developments

        The following table summarizes our growth in treatment centers and the local markets in which we operate for the periods indicated:

 
  Year Ended
December 31,
 
 
  2011   2012   2013  

Treatment centers at beginning of period

    95     127     126  

Internally developed / reopened

    1     2     3  

Transitioned to freestanding

        2      

Internally (consolidated / closed / sold)

    (5 )   (3 )   (7 )

Acquired

    33     2     38  

Hospital-based / other groups

    3     (2 )   3  

Hospital-based (ended / transitioned)

        (2 )    
               
               

Treatment centers at period end

    127     126     163  
               
               

        On March 1, 2011, we purchased the remaining 67% interest in MDLLC from Bernardo Dosoretz as well as interests in the subsidiaries of MDLLC from Alejandro Dosoretz and Bernardo Dosoretz, resulting in an ownership interest of approximately 91% in the underlying radiation oncology practices located in South America, Central America, Mexico and the Caribbean. The Company also purchased an additional 61% interest in Clinica de Radioterapia La Asuncion S.A. from Bernardo Dosoretz, resulting in an ownership interest of 80%. The Company consummated these acquisitions for a combined purchase price of approximately $82.7 million, comprised of $47.5 million in cash, 25 common units of Parent immediately exchanged for 13,660 units of 21CI's non-voting preferred equity units and 258,955 units of 21CI's class A equity units totaling approximately $16.25 million, and issuance of a 97/8% note payable, due 2017 totaling approximately $16.05 million to the seller and an estimated contingent earn out payment totaling $2.3 million, and issuance of real estate located in Costa Rica totaling $0.6 million. The earn out payment is contingent upon certain acquired centers attaining earnings before interest, taxes, depreciation and amortization targets, is due 18 months

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subsequent to the transaction closing, and is payable through Company financing and issuance of equity units.

        In June 2011, we entered into an outpatient radiation therapy management services agreement with a medical group to manage its radiation oncology treatment site in London, Kentucky.

        In July 2011, we entered into a revised facility management services agreement with an existing provider in Michigan. The provider will become a subsidiary of a larger medical practice group, in which we will continue the management of the radiation oncology practices in Michigan. This arrangement became effective during the fourth quarter of 2011.

        In August 2011, we completed a replacement de novo radiation treatment facility in Alabama. This facility replaces an existing radiation treatment facility in which we are now providing consult services.

        On August 29, 2011, we acquired the assets of a radiation treatment center located in Redding, California, for approximately $9.6 million. The acquisition of the Redding facility further expands our presence into the Northern California market.

        In September 2011, we entered into a professional services agreement with a hospital district in Broward County, Florida to provide professional services at two sites within the hospital district. In March 2012, we entered into a license agreement with the North Broward Hospital District to license the space and equipment and assume responsibility for the operation of the two radiation therapy departments at Broward General Medical Center and North Broward Medical Center as part of our value added services offering. The license agreement runs for an initial term of ten years, with three separate five year renewal options. We recorded approximately $4.3 million of tangible assets relating to the use of medical equipment pursuant to the license agreement.

        On November 4, 2011, we purchased an 80% interest in an operating entity, which operates 1 radiation treatment center in Argentina; an 80% interest in another operating entity, which operates 3 radiation treatment centers in Argentina; and a 96% interest in an operating entity, which operates 1 radiation treatment center in Argentina. The combined purchase price of the ownership interests totals approximately $7.4 million, comprised of $2.1 million in cash, seller financing totaling approximately $4.0 million payable over 24 monthly installments, commencing January 2012, and a purchase option totaling approximately $1.3 million. The acquisition of these operating treatment centers expands our presence in the international markets. In November 2012, we exercised our purchase option to purchase the remaining interest for approximately $1.4 million.

        On December 22, 2011, we acquired the interest in an operating entity which operates two radiation treatment centers in located in North Carolina, for approximately $6.3 million, including an earn-out provision of approximately $0.4 million contingent upon maintaining a certain level of patient volume. On April 16, 2012 we acquired certain additional assets utilized in one of the radiation oncology centers for approximately $0.4 million including an earn-out provision of approximately $0.4 million contingent upon maintaining a certain level of patient volume. The acquisition of the two radiation treatment centers further expands our presence into the eastern North Carolina market.

        During 2011, we acquired the assets of several physician practices in Florida and the non-professional practice assets of several North Carolina physician practices for approximately $0.4 million. The physician practices provide synergistic clinical services to our patients in the respective markets in which we provide radiation therapy treatment services.

        On February 6, 2012, we acquired the assets of a radiation oncology practice and a medical oncology group located in Asheville, North Carolina for approximately $0.9 million. The acquisition of the radiation oncology practice and the medical oncology group, further expands our presence in the Western North Carolina market and builds on the our integrated cancer care model.

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        In March 2012, we entered into a license agreement with the North Broward Hospital District to license the space and equipment and assume responsibility for the operation of the two radiation therapy departments at Broward General Medical Center and North Broward Medical Center as part of our value added services offering. The license agreement runs for an initial term of ten years, with three separate five year renewal options. We recorded approximately $4.3 million of tangible assets relating to the use of medical equipment pursuant to the license agreement.

        On March 30, 2012, we acquired the assets of a radiation oncology practice for $26.0 million and two urology groups located in Sarasota/Manatee counties in Southwest Florida for approximately $1.6 million, for a total purchase price of approximately $27.6 million, comprised of $21.9 million in cash and assumed capital lease obligation of approximately $5.7 million. The acquisition of the radiation oncology practice and the two urology groups, further expands our presence in the Sarasota/Manatee counties and builds on our integrated cancer care model.

        On August 22, 2012, we opened a de novo radiation treatment center in Argentina. The development of this radiation treatment center further expands our presence in the Latin America market.

        In December 2012, we purchased the remaining 50% interest in an unconsolidated joint venture which operates a freestanding radiation treatment center in West Palm Beach, Florida for approximately $1.1 million.

        During 2012, we acquired the assets of several integrated cancer care physician practices in Arizona, California and Florida for approximately $1.7 million. The physician practices provide synergistic clinical services and an integrated cancer care service to our patients in the respective markets in which we provide radiation therapy treatment services.

        On May 25, 2013, we acquired the assets of 5 radiation oncology practices and a urology group located in Lee/Collier counties in Southwest Florida for approximately $28.5 million, comprised of $17.7 million in cash, seller financing note of approximately $2.1 million and assumed capital lease obligations of approximately $8.7 million. The acquisition of the 5 radiation treatment centers and the urology group further expands our presence into the Southwest Florida market and builds on our integrated cancer care model.

        In June 2013, we sold our 45% interest in an unconsolidated joint venture which operated a radiation treatment center in Providence, Rhode Island in partnership with a hospital to provide stereotactic radio-surgery through the use of a cyberknife for approximately $1.5 million.

        In June 2013, we contributed our Casa Grande, Arizona radiation physician practice, ICC practice and approximately $5.0 million to purchase a 55.0% interest in a joint venture which included an additional radiation physician practice and an expansion of an integrated cancer care model that includes medical oncology, urology and dermatology.