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21ST CENTURY ONCOLOGY HOLDINGS, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

 

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, 2014

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, 2015, 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

   
1
 

Item 1A. Risk Factors

    28  

Item 1B. Unresolved Staff Comments

    52  

Item 2. Properties

    52  

Item 3. Legal Proceedings

    53  

Item 4. Mine Safety Disclosures

    54  

PART II

 

 

 

 

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

   
55
 

Item 6. Selected Financial Data

    57  

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

    60  

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

    99  

Item 8. Financial Statements and Supplementary Data

    99  

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

    100  

Item 9A. Controls and Procedures

    100  

Item 9B. Other Information

    102  

PART III

 

 

 

 

Item 10. Directors, Executive Officers and Corporate Governance

   
103
 

Item 11. Executive Compensation

    108  

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

    119  

Item 13. Certain Relationships and Related Transactions, and Director Independence

    121  

Item 14. Principal Accounting Fees and Services

    127  

PART IV

 

 

 

 

Item 15. Exhibits and Financial Statement Schedules

   
128
 

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 statements 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, 2014, was comprised of approximately 794 community-based physicians in the fields of radiation oncology, medical oncology, breast, gynecological and general surgery, and urology. Our physicians provide medical services at approximately 391 locations, including our 180 radiation therapy centers, of which 50 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 36 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 outcomes. In support of our physicians, we develop and invest in medical management software, training programs and business enterprise systems to allow for rapid diffusion of clinical initiatives resulting in continuous quality improvement. In addition, we maintain strong research relationships with academic centers of excellence and research groups, providing us with access to cutting edge treatments and allowing us to make them available to our patients years in advance of their commercial introduction. As a result, we attract and retain talented physician leaders by providing opportunities to work in a stimulating clinical environment 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 the potential for value-based reimbursement, we built a complete and integrated cancer care platform to better meet the needs of patients, physicians and payers. 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,

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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 2.6 times larger than our next largest competitor, based on average treatments per day. Domestically, we treat over 23,000 cases and perform over 790,000 treatments annually. 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 in 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—Capitalized 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 collaborative relationships with key payers and 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.

        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 demand created by a significantly underserved patient population, increased detection, a growing middle-class and expanded insurance access. MDLLC provided us an opportunity for enhanced growth rates and diversified payment sources.

    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 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.

        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

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clinical capabilities continue to distinguish us from our competition. 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. 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.

    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, 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. 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, 2014, we generated total revenues of $1.0 billion. During this time period, 90.3% of our net revenue was derived in North America, and 9.7% in Latin America.

        In October 2013, we closed on our acquisition of OnCure Holdings, Inc. (together with its subsidiaries, "OnCure"), which comprises 33 radiation therapy centers and 11 radiation oncology physician groups in Florida, California and Indiana (the "OnCure Acquisition"). In addition, on February 10, 2014, we completed our investment in Florida-based SFRO Holdings, LLC (together with its subsidiaries, "SFRO"), acquiring 65% of the equity interests 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").

        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. On February 21, 2008, we consummated the merger of a wholly owned subsidiary of 21CH with and into 21C, with 21C as the surviving corporation and as wholly owned subsidiary of 21CH (the "Merger"). 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

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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 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. 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 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. 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

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value-based payment models. A growing number of health systems are entering into strategic partnerships with select provider organizations, such as ours, in order to achieve these goals.

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 finding employment in hospitals or affiliating with larger group practices like ours. 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.

        The radiation therapy and related physician specialist landscape is highly fragmented. In 2013, there were approximately 2,340 locations providing radiation therapy in the United States, of which approximately 1,100 were freestanding, or non-hospital based, treatment centers. The Company holds 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 approximately 50% a decade ago. The Latin American radiation therapy market is similarly fragmented with most competition coming from hospitals and smaller local groups. In Argentina, we are the largest radiation therapy provider. 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).

        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 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

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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.

        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 intensity modulated radiation therapy ("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.

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Technologies
  Description

Gamma Function

  A proprietary capability that enables precise calculation of the actual amount of radiation dose delivered during a treatment. Gamma Function also enables the quantitative comparison between the actual radiation dose delivered and the planned radiation dose. This technology furthermore reports discrepancies in planned-to-actual dose to the physician and provides useful information to assist in the physician's clinical decision-making.

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

   

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.


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. 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.

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. The landscape of radiation therapy and related physician specialists is highly fragmented. In 2013, there were approximately 2,340 locations providing radiation therapy in the United States, of which approximately 1,100 were freestanding, or non-hospital based, treatment centers. The Company holds 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 from hospitals and smaller local groups.

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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. We continue to pursue de novo centers, acquisitions, joint ventures and hospital partnerships to facilitate expansion in existing and new Latin American markets. 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 will generate additional sources of revenue outside the reimbursement system. Examples include management of the oncology service line in hospitals, participation in clinical trials and monetization of our historical data.


Operations

        We have over 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, 2014, in 22 of our treatment centers other cancer care specialists are co-located with our radiation therapy specialists.

        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. 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.

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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.

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, Chief Compliance Officer and certified professional coders work together to establish universal coding and billing rules and procedures. In each treatment center, our certified coders are in charge of executing these rules and procedures. To provide an external check on the integrity of the coding process, we conduct internal audits and periodically retain the services of an external consultant to review and assess our coding procedures and processes. Billing and collection functions are performed centrally. In an effort to improve collections, we have increased efforts to confirm patient eligibility with payers, verify insurance coverage, and facilitate payment plans.

Management Information Systems

        We utilize centralized management information systems to closely monitor each treatment center's operations and financial performance. Our systems track patient data, physician productivity, coding, and billing. The systems allow us to perform budget analyses, historical financial comparisons, and treatment center benchmarking, enabling management to actively evaluate performance. We have also developed a proprietary image and text retrieval system, which facilitates the storage and review of patient medical charts and films. We periodically review our management information systems for possible refinements.

Maintenance and Physics Departments

        We have established maintenance and physics departments to standardize the acquisition, installation, calibration, use, maintenance and replacement of our linear accelerators, simulators and related equipment. Our engineers, in conjunction with manufacturers' representatives, perform preventive maintenance, repairs and installations. This enables our treatment centers to ensure quality, maximize equipment productivity and minimize downtime. 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.

Total Quality Management Program

        We strive to achieve total quality management throughout our organization. Our treatment centers have a standardized total quality management program consisting of programs that monitor the design of the individual treatment plans, and that ensure the validation of radiation therapy equipment. Each of our new radiation oncologists is assigned to a senior radiation oncologist who reviews each patient's

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course of treatment. 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. 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. We maintain a proprietary database of information on over 158,000 patients. The data collected includes information on tumor characteristics which can be used to conduct research, measure quality outcomes and improve patient care. In 2014, our radiation oncologists published approximately 830 articles in peer reviewed journals and 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.

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. Since opening in 1989, the school has produced 159 graduates, 75 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, 2014, a total of 22 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 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"), 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 Office of Inspector General of the U.S. Department of Health and Human Services (the "OIG"). As part of this compliance program, we adopted a code of ethics and have a full-time compliance officer. Our

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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. 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, 2014, we owned, operated and managed 180 treatment centers in our 6 domestic divisions and our international markets of which:

    34 were internally developed;

    135 were acquired (including three which were transitioned from professional/other to freestanding); and

    11 are operated under professional and other service arrangements.

        Of the 180 total centers, 50 are operated in partnership with health systems and other clinics and community-based sites. In the United States, 40 of these centers are either based on a hospital campus or affiliated with a hospital system, and in Latin America, 10 of these centers are either based on a hospital campus or affiliated with a hospital system.

Internally Developed

        As of December 31, 2014, we operated 34 internally developed treatment centers located in Alabama, Argentina, Arizona, California, El Salvador, Florida, Massachusetts, Michigan, Nevada, New Jersey, New York and Rhode Island. In 2013, we opened a de novo treatment center in Troy, Michigan and in Argentina. In 2014, we opened a de novo facility in Riverhead, New York. Our newly developed treatment centers typically achieve positive cash flow within six to fifteen months after opening.

Acquired Treatment Centers

        As of December 31, 2014, we operated 135 acquired treatment centers located in Alabama, Arizona, California, Florida, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, South Carolina and West Virginia, including 33 acquired treatment centers in South America, Central America, Mexico and the Caribbean. Since January 1, 2012, we have acquired 64 treatment centers. Of the 64 acquired treatment centers, two were acquired in 2012, 37 were acquired in 2013, and 25 were acquired in 2014. As part of our ongoing acquisition strategy, we continually evaluate potential opportunities.

Professional and Other Group Treatment Centers

        As of December 31, 2014, we operated 11 of our treatment centers pursuant to professional and other service arrangements. 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. We are responsible for billing patients, hospitals and third-party payers for services rendered by our radiation oncologists.

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, 2012, 2013 and 2014 approximately 19.4%, 18.4% and 14.7% 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.

        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. 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 earnings before interest, taxes, depreciation and amortization ("EBITDA").


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.

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        We have 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. As of December 31, 2014 we have 25 physician liaisons.


Employees

        As of December 31, 2014, we employed approximately 4,630 employees, including approximately 856 employees in our international markets. As of December 31, 2014, we were affiliated with 175 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. Approximately 420 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, 173 urologists, 50 surgeons and surgical oncologists, 43 medical oncologists and eight gynecological and other oncologists, five pathologists, 10 pulmonologists, and three dermatologists.


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, 2014, 62 of our 144 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 is also reinsured for excess claims-made coverage through Lloyd's of London. In addition, we currently maintain multiple layers of umbrella coverage through our commercial general liability insurance policies. We also maintain insurance for Directors and Officers liability insurance; employment practices liability insurance; and fiduciary 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

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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 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

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    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 an Audit and 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 45%, 45% and 42% of our net patient service revenue for 2012, 2013 and 2014, 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.

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 non governmental-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,

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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 "DOJ"), 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.

        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;

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    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 U.S. Department of Health and Human Services ("DHHS") has discretion in setting the amount of a civil monetary penalty, 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 civil monetary penalty 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 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.

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        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

    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

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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 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 designated health services ("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

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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.

        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 Health Care Reform Act requires referring physicians under Stark 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 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.

        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

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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 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

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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 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

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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.

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.

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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

        We derived approximately 45%, 45% and 42% of our net patient service revenue for the years ended December 31, 2012, 2013 and 2014, respectively, from payments made by government sponsored healthcare programs. We provide a full range of services, some of which are reimbursed as "professional" services, and some of which are reimbursed as "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.

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Recent Developments

Northwest Cancer Clinic Joint Venture and Rhode Island radiation facility acquisition

        On January 2, 2015, our wholly owned subsidiary, 21st Century Oncology of Washington, LLC, entered into a joint venture with Northwest Cancer Clinic, LLC ("NWCC"). 21st Century Oncology of Washington, LLC owns 80% in the newly formed joint venture entity, and NWCC's current physician leader, Sheila Rege, M.D., will hold a 20% equity interest in the newly-formed entity. The strategic alliance with NWCC and our partnership with its highly regarded physicians in a joint effort to continue to provide superior quality cancer care to patients in the Tri-Cities area. This transaction both expands 21C's geographical reach into a new market, further broadening our ability to deliver best-in-class cancer care, and to align ourselves with key physicians who share our vision. Through the alliance in a radiation oncology facility located in Kennewick, WA, 21C will enter into a new market in the Northwestern U.S., one of the fastest growing regions in the country, with future expansion opportunities via satellite offices in the region. Our NWCC partnership will enable us to deliver the best integrated cancer care at academic quality while providing unparalleled value to our growing patient population worldwide.

        On January 6, 2015, we acquired the assets of a radiation oncology practice located in Warwick, Rhode Island. This acquisition further expands our presence in Rhode Island.

        We believe that both the Northwest Cancer Clinic Joint Venture and Rhode Island radiation facility acquisition 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 182 treatment centers, including 146 centers located in 17 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 45%, 45% and 42% of our U.S. net patient service revenue for the years ended December 31, 2012, 2013 and 2014, respectively, consisted of payments from Medicare and Medicaid. Only a small percentage of that revenue resulted from Medicaid patients, equaling approximately 2.7%, 2.7%, and 2.2% for the years ended December 31, 2012, 2013 and 2014, respectively. In addition, Medicare Advantage represents approximately 13% of our 2014 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 and 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%. 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 final Medicare 2014 Physician Fee Schedule, CMS did finalize its proposal to revise the Medicare Economic Index ("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.

        In the proposed Medicare 2015 Physician Fee Schedule, CMS proposed to reduce payments for radiation oncology by 4% overall. This reduction related primarily to a proposal to remove the radiation treatment vault as a direct cost input for radiation treatment delivery codes. Because the proposal only applied to freestanding settings, the cut to freestanding centers would likely have been closer to 5%, while hospital based radiation oncologists would have received an increase in payment under the proposal. In the final Medicare 2015 Physician Fee Schedule, CMS did not finalize its proposal to remove the radiation treatment vault as a direct cost input for radiation treatment delivery codes. As a result, the net impact of the Final Rule to radiation oncology and freestanding radiation

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therapy centers is approximately neutral overall. In the Final rule, CMS also indicated it would review the family of radiation treatment delivery codes in the CY 2016 Physician Fee Schedule Proposed Rule.

        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 Sustainable Growth Rate ("SGR"). For the last several years, the SGR policy has threatened significant cuts to the CF, although Congress has consistently delayed those cuts. 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. Due to budget neutrality requirements from certain policies in the final Medicare 2015 Physician Fee Schedule, the 2015 conversion factor has been slightly adjusted to $35.7547, assuming no SGR cuts.

        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 was subsequently 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. 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 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 Quality 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.

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        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 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 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.

        In addition, King v. Burwell is scheduled to be argued before the Supreme Court this year. Petitioners in this case argue that the Health Care Reform Act only subsidizes coverage through an exchange established by a state. Depending on the outcome of the case, subsidies for healthcare coverage in the states that use federal exchanges could be at risk.

        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.

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

        We estimate that approximately 54%, 54% and 57% of our net patient service revenue for the years ended December 31, 2012, 2013 and 2014, respectively, was derived from commercial payers such as managed care organizations and private health insurance programs as well as individuals. As of December 31, 2014, we have over 1,000 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 benefit plans are typically lower than those for preferred provider organization or other benefit plans that offer broader provider access. 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

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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 no 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 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

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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 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.

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. 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

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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 employ 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. We have received 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 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 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.

        On February 18, 2014, we were served with subpoenas from the OIG 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

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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 were served with another subpoena from the OIG on January 22, 2015, requesting additional documents related to this matter for the period from January 1, 2005 up through the production of documents responsive to the February 2014 subpoena. We have recorded a liability for this matter of approximately $4.7 million and $5.1 million that is included in accrued expenses in our consolidated balance sheet as of December 31, 2013 and 2014, respectively. 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 $10.3 million.

        We received two Civil Investigative Demands ("CIDs"), one on October 22, 2014 addressed to 21C and one on October 31, 2014 addressed to SFRO, from the DOJ pursuant to the False Claims Act. The CIDs request information concerning allegations that we knowingly billed for services that were not medically necessary and for services not rendered and appear to be focused on GAMMA services (which are dosimetry calculations performed during the course of radiation therapy). The CIDs cover the period from January 1, 2009 to the present. Among other information requests, the CIDs request certain documents and information related to the administration of radiation therapy; selection of various radiation therapies and GAMMA services. Our total billings to federal health care programs including Medicare, Medicare Advantage and Medicaid for GAMMA services from January 1, 2009 to December 31, 2014 are approximately $68.4 million. It is not possible to predict when these matters will be resolved or what impact they might have on our consolidated financial position, results of operations or cash flow.

        Based on reviews performed to date, we do not believe that we or our physicians knowingly submitted false claims in violation of applicable statutory or regulatory requirements. We are cooperating fully with the subpoena requests and the DOJ's investigation.

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 45%, 45%, and 42% of our U.S. net patient service revenue for the years ended December 31 2012, 2013 and 2014, respectively, consisted of payments from Medicare and Medicaid programs. In addition, Medicare Advantage represents approximately 13% of our 2014 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.

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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 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 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.

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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.

        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., MRI, CT and 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" 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. If any of these state or similar 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.

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        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.

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, 2014, we have acquired 57 treatment centers, acquired 6 professional/other centers, developed 4 treatment centers, developed 1 professional/other center and transitioned 1 acquired professional/other centers to freestanding treatment centers, all of which includes our acquisitions of OnCure which we completed on October 25, 2013 and SFRO on February 10, 2014. 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

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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.

        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 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.

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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;

    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 2012, 2013 and 2014, $132.8 million, $131.9 million and $139.5 million, respectively, of our net patient service revenue was derived from administrative services agreements, as opposed to $553.4 million, $584.1 million and $807.4 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

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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 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

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    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 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.

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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 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 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 27 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;

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    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.

        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.

        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.

        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 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. dollars. Those approvals are administered by the Argentine Central Bank through the Mercado Unico Libre de Cambios, which is the only market where exchange transactions may be lawfully made.

        During January 2014 the Argentinean Peso exchange rate against the U.S. Dollar increased by approximately 23%, from 6.52 Argentinean Pesos per U.S. Dollar as of December 31, 2013 to approximately 8.0 Argentinean Pesos per U.S. Dollar. Since January 2014, the depreciation of the Argentine Peso has been low with, the Argentinean Peso exchange rate ended the year on December 31, 2014 at 8.55 Argentine Pesos per U.S. Dollar.

        Our international subsidiaries accounted for $81.2 million, $90.9 million and $99.4 million or 11.7%, 12.3% and 9.7%, of our revenues for the years ended December 31, 2012, 2013 and 2014, respectively.

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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. dollars. Those approvals are administered by the Argentine Central Bank through the Mercado Unico y Libre de Cambios, 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.

Latin America, including Argentina, has experienced adverse economic conditions.

        Latin American countries have historically experienced uneven periods of economic growth, as well as recession, periods of high inflation and economic instability. Currently, as a consequence of adverse economic conditions in global markets and diminishing commodity prices, many of the economies of Latin American countries have slowed their rates of growth, and some have entered mild recessions. The duration and severity of this slowdown is hard to predict and could adversely affect our business, financial condition, and results of operations. Additionally, certain countries have experienced or are currently experiencing severe economic crises, including Argentina, which may still have future effects.

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        During 2001 and 2002, Argentina went through a period of severe political, economic and social crisis. Among other consequences, the crisis resulted in the Argentine government defaulting on its foreign debt obligations, introducing emergency measures and numerous changes in economic policies that affected utilities and many other sectors of the economy, and suffering a significant real devaluation of the peso, which in turn caused numerous Argentine private sector debtors with foreign currency exposure to default on their outstanding debt.

        In the first half of 2005, Argentina restructured part of the sovereign debt it defaulted; however, a number of creditors refused to approve the restructuring and litigation brought by these holdout creditors ensued. This litigation initiated by these holdout creditors has persisted to this day. On June 16, 2014, the U.S. Supreme Court rejected an Argentine appeal and decided to leave in place a lower court ruling in favor on the holdout creditors, which held that the Argentine government is prohibited from making payments on its restructured debt unless it also pays the holdout creditors, who have previously refused to accept its debt restructuring offers, the amount owed to them.

        In July 2014, Argentina and the holdout creditors failed to reach an agreement on the restructuring of this debt. As a result, the Argentine government was prohibited from making certain bond payments. The full consequences of this on Argentina's political and economic landscape, and on the Company, are still unclear. We cannot provide any assurance that inflation, fluctuations in the value of the peso, the implementation of additional foreign currency restrictions and/or other future economic, social and political developments in Argentina resulting from this current Argentine sovereign debt crisis or the difficult economic conditions that current exist in Argentina, over which we have no control, will not adversely affect our business, financial condition or results of operations, including our ability to pay our debts at maturity.

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

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    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 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 48.1% and 58.8% of the total assets on our balance sheet as of December 31, 2014 and 2013, 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, 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. For the year ended December 31, 2014, we wrote-off approximately $229.5 million in goodwill, and other investments as a result of our interim impairment testing of our goodwill.

We have addressed previous material weaknesses with respect to our internal controls and have identified an additional material weaknesses in our internal controls, which could, if not sufficiently remediated, result in material misstatements in our consolidated 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

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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 consolidated financial statements.

        In March 2014, we identified two material weaknesses 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 OIG. We have taken steps since then to remediate the internal control weaknesses, such that at September 30, 2014, our controls over the identification and accounting for loss contingencies operated effectively. We implemented a 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. 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 consolidated financial statements.

        Effective February 10, 2014, we completed the acquisition of SFRO. The facilities acquired as part of the SFRO Acquisition utilize different information technology systems from our other facilities. We are currently integrating our internal control processes at SFRO. Although the SFRO acquisition has been excluded from our assessment of and conclusion on the effectiveness of our internal control over financial reporting, we have concluded there are material weakness related to the integration of SFRO into our control environment as of December 31, 2014. Specifically, we did not maintain appropriate segregation of duties over cash, adequate access controls with regard to financial applications, or adequate controls over the processing of expenditures. We are in the process of developing and implementing a remediation plan to address the material weaknesses related to the SFRO integration.

        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 consolidated 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 39%, 39% and 45% of our freestanding radiation revenues during the years ended December 31 2012, 2013 and 2014, respectively. Our treatment centers are also concentrated in the states of California and North Carolina, which accounted for approximately 13.0% and 5.9%, respectively, of our freestanding radiation revenues for the year ended December 31, 2014. 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.

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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, 2014, we have 62 radiation treatment centers located in Florida. Our Florida centers accounted for approximately 39%, 39% and 45% of our freestanding radiation revenues during the years ended December 31 2012, 2013 and 2014, respectively. Our California centers are located in areas that are known to experience earthquakes from time to time, some of which have been severe. 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 which 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.

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 2012, 2013 and 2014, we paid an aggregate of $21.6 million, $22.9 million and $28.8 million, respectively, under certain of our related party agreements, including leases, and malpractice insurance premiums and we received $62.5 million, $72.1 million and $75.8 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.

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        Additionally, we lease 36 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 2012, 2013 and 2014, 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 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 "Item 13. Certain Relationships and Related Transactions, and Director Independence."

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

        The Chairman of the 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. 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 the DHHS to establish a program for designating and publishing a list of such certification organizations.

        Of our 144 U.S. treatment centers, 98 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

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litigation against us, see "Item 3. 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, 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 $967.1 million of total debt outstanding as of December 31, 2014. 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.

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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 $90 million term loan facility (the "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.

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 80% 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 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.

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        On September 26, 2014, in connection with an equity investment in the Company made by Canada Pension Plan Investment Board ("CPPIB" or the "Majority Preferred Holders"), we entered into a Second Amended and Restated Securityholders Agreement (the "Amended Securityholders Agreement"). The Amended Securityholders Agreement amends and restates the existing securityholders agreement such that, among other things, the Company's Board of Directors is comprised of (i) two managers nominated by CPPIB, (ii) three managers nominated by funds affiliated with Vestar and (iii) Dr. Daniel E. Dosoretz and one manager he nominated after consultation with Vestar and CPPIB, subject to certain ongoing security ownership provisions.

        The holders of a majority of the outstanding preferred stock will have customary consent rights and will be entitled to vote together with the holders of the Company's common stock on an as-converted basis under certain circumstances.

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, 2014 we provided radiation therapy services in 180 treatment centers in 16 states and in Latin America, Central America, Mexico, and the Caribbean. We own the real estate on which two of our treatment centers are located. We lease land and space at 167 treatment center locations, of which in 36 of these locations, certain of our directors, executive officers and equityholders have an ownership interest. These leases expire at various dates between 2015 and 2044 and are typically structured with renewal options. Also, 11 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

    22   South Carolina     1  

Florida

    62   West Virginia     3  

Indiana

    4   Argentina     26  

Kentucky

    4   Costa Rica     2  

Maryland

    4   Dominican Republic     3  

Massachusetts

    2   El Salvador     1  

Michigan

    6   Guatemala     2  

Nevada

    4   Mexico     2  

New Jersey

    4            

New York

    5   Total     180  

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Item 3.    Legal Proceedings

        We operate in a highly regulated and litigious industry. As a result, we are involved in disputes, litigation, and regulatory matters incidental to our operations, including governmental investigations, personal injury lawsuits, employment claims, and other matters arising out of the normal conduct of business.

        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 knew or should have known they were submitting 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. If the Company is found to have violated the False Claims Act, it could also 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 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 consolidated financial position, results of operations and liquidity.

        Governmental agencies and their agents, such as the Medicare Administrative Contractors, as well as the 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 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 consolidated financial position, results of operations and liquidity.

        On February 18, 2014, we were served with subpoenas from the OIG 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 FISH laboratory tests ordered by certain of our employed physicians and performed by us. We were served with another subpoena from the OIG on January 22, 2015, requesting additional documents related to this matter for the period from January 1, 2005 up through the production of documents responsive to the February 2014 subpoena. We have recorded a liability for this matter of approximately $4.7 million and $5.1 million that is included in accrued expenses in our consolidated balance sheet as of December 31, 2013 and 2014, respectively. 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 $10.3 million.

        We received two CIDs from the DOJ, one on October 22, 2014 addressed to 21C and one on October 31, 2014 addressed to SFRO, pursuant to the False Claims Act. The CIDs request information concerning allegations that we knowingly billed for services that were not medically necessary and for services not rendered and appear to be focused on GAMMA services (which are dosimetry calculations performed during the course of radiation therapy). The CIDs cover the period from January 1, 2009 to

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the present. Among other information requests, the CIDs request certain documents and information related to the administration of radiation therapy; selection of various radiation therapies and GAMMA services. Our total billings to federal health care programs including Medicare, Medicare Advantage and Medicaid for GAMMA services from January 1, 2009 to December 31, 2014 are approximately $68.4 million. It is not possible to predict when these matters will be resolved or what impact they might have on our consolidated financial position, results of operations or cash flow.

        Based on reviews performed to date, we do not believe that we or our physicians knowingly submitted false claims in violation of applicable statutory or regulatory requirements. We are cooperating fully with the subpoena requests and the DOJ's investigation.

        In addition to the matters described below, we are involved in various 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.

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, 2015, 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, 2014 under the 21CI equity-based incentive plan, as amended. For a description of the plan, please see note 19 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

              Non-voting preferred equity units: 2,924

              Voting Class A equity units: 51,854

              Non-voting MEP equity units: 274,634

    N/A     N/A   Non-voting Class M equity units: 33,500

              Non-voting Class O equity units: 27,194

Equity compensation plans not approved by security holders

    N/A     N/A   N/A

TOTAL

             

Non-voting preferred equity units: 2,924

              Voting Class A equity units: 51,854

              Non-voting MEP equity units: 274,634

          Non-voting Class M equity units: 33,500

              Non-voting Class O equity units: 27,194

Unregistered Sales of Equity Securities

        On September 26, 2014, we issued to CPPIB, in a private placement, an aggregate of 385,000 newly issued shares of our Series A Convertible Redeemable Preferred Stock, par value $0.001 per share (the "Series A Preferred Stock"), for a purchase price of $325.0 million.

        The issuance of the securities described above were deemed to be exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), under either (1) Section 4(a)(2) of the Securities Act as transactions by an issuer not involving any public offering or (2) Regulation S under the Securities Act as transactions outside the United States to non-U.S. persons. CPPIB is not a

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"U.S. person" within the meaning of Regulation S under the Securities Act or acting for the account or benefit of U.S. persons.

        As further described in Note 13 to our consolidated financial statements, the Series A Preferred Stock is mandatorily convertible into common stock, par value $0.01 per share, of the Company upon the occurrence of a qualifying initial public offering of the Company or a qualifying merger, in each case at the conversion prices set forth in the Certificate of Designations of Series A Convertible Preferred Stock (the "Certificate of Designations"). The Series A Preferred Stock also becomes convertible on the tenth anniversary of issuance at the option of either the Company or CPPIB. Absent a qualifying initial public offering or qualifying merger, the conversion price shall be determined upon appraisal.

Repurchases of Equity Securities

        Neither the Company nor 21CI repurchased any equity securities during 2014.

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Item 6.    Selected Financial Data

        The following selected historical consolidated financial data as of December 31, 2014 and 2013 and for the years ended December 31, 2012 to 2014 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, 2010 to December 31, 2011 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.

(in thousands):
  Year ended
December 31,
2010
  Year ended
December 31,
2011
  Year ended
December 31,
2012
  Year ended
December 31,
2013
  Year ended
December 31,
2014
 

Consolidated Statements of Operations and Comprehensive Loss Data:

                               

Net patient service revenue

  $ 535,913   $ 638,690   $ 686,216   $ 715,999   $ 946,897  

Management fees

                11,139     67,012  

Other revenue

    8,050     6,027     7,735     9,378     12,513  

Total revenues

    543,963     644,717     693,951     736,516     1,026,422  

Salaries and benefits

    282,302     326,782     372,656     409,352     545,025  

Medical supplies

    43,027     51,838     61,589     64,640     97,367  

Facility rent expenses

    27,885     33,375     39,802     45,565     63,048  

Other operating expenses

    27,103     33,992     38,988     45,629     61,735  

General and administrative expenses

    65,798     81,688     82,236     106,887     135,257  

Depreciation and amortization

    46,346     54,084     64,893     65,195     86,701  

Provision for doubtful accounts

    8,831     16,117     16,916     12,146     18,713  

Interest expense, net

    58,505     60,656     77,494     86,747     113,279  

Electronic health records incentive income

            (2,256 )   (1,698 )   (2,783 )

Fair value adjustment of earn-out liability

            1,219     130     1,627  

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     135  

Loss on investments

        250              

Gain on fair value adjustment of previously held equity interest

        (234 )            

Loss on foreign currency transactions

        106     339     1,283     557  

Loss (gain) on foreign currency derivative contracts            

        672     1,165     467     (4 )

Early extinguishment of debt

    10,947         4,473         8,558  

Impairment loss

    97,916     360,639     81,021         229,526  

Equity initial public offering expenses

                    4,905  

Fair value adjustment of embedded derivative

                    837  

Total expenses

    670,563     1,019,965     840,535     835,196     1,364,483  

Loss before income taxes

    (126,600 )   (375,248 )   (146,584 )   (98,680 )   (338,061 )

Income tax (benefit) expense

    (12,810 )   (25,365 )   4,545     (20,432 )   5,159  

Net loss

    (113,790 )   (349,883 )   (151,129 )   (78,248 )   (343,220 )

Net income attributable to noncontrolling interests

    (1,698 )   (3,558 )   (3,079 )   (1,966 )   (6,030 )

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

  $ (115,488 ) $ (353,441 ) $ (154,208 ) $ (80,214 ) $ (349,250 )

Balance Sheet Data (at end of period):

                               

Cash and cash equivalents

    13,977     10,177     15,410     17,462     99,167  

Working capital(1)

    19,076     19,929     24,262     9,057     76,135  

Total assets

    1,236,330     998,592     922,301     1,128,191     1,146,724  

Finance obligations

    8,568     14,266     17,192     20,650     24,043  

Total debt

    598,831     679,033     762,368     991,666     967,121  

Total equity (deficit)

    508,208     177,294     18,467     (79,218 )   (456,610 )

Other Financial Data:

   
 
   
 
   
 
   
 
   
 
 

Ratio of earnings to fixed charges(2)

                     

Deficiency to cover fixed charges(3)

    128,292     377,137     148,837     100,171     368,889  

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

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(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, imputed dividends and accretion of Series A convertible redeemable preferred stock and (ii) fixed charges is defined as interest expense (including capitalized interest, of which we have 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.

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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 ICC services. Our physicians provide comprehensive, academic quality, cost-effective coordinated care for cancer patients in personal and convenient community settings. 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, 2014, was comprised of approximately 794 community-based physicians in the fields of radiation oncology, medical oncology, breast, gynecological and general surgery, and urology. Our physicians provide medical services at approximately 391 locations, including our 180 radiation therapy centers. Of the 180 treatment centers, 34 treatment centers were internally developed and 135 were acquired (including three which were transitioned from professional and other arrangements to freestanding). 50 radiation therapy centers operate in partnership with health systems and other clinics and community-based sites. Our 144 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: Alabama, Arizona, California, Florida, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, South Carolina, Rhode Island, and West Virginia. Our 36 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 RVUs (a standard measure of value used in the U.S. Medicare reimbursement formula for physician services) delivered per day in our freestanding centers;

    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;

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    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 image guided radiation therapy ("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, 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 U.S. domestic net patient service revenue we earned based upon the patients' primary insurance by category of payer in our last three fiscal years.

 
  Year Ended December 31,  
U.S. Domestic
  2012   2013   2014  

Payer

                   

Medicare

    42.6 %   41.9 %   39.8 %

Commercial

    53.6     54.3     57.1  

Medicaid

    2.7     2.7     2.2  

Self pay

    1.1     1.1     0.9  

Total U.S. domestic net patient service revenue

    100.0 %   100.0 %   100.0 %

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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 2.2% of our U.S. net patient service revenue for the year ended December 31, 2014.

        In the final Medicare 2013 Physician Fee Schedule, CMS reduced payments for radiation oncology by 7%. 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 final Medicare 2014 Physician Fee Schedule, CMS did finalize its proposal to revise the MEI [–2% impact], CMS also incorporated updated 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.

        In the proposed Medicare 2015 Physician Fee Schedule, CMS proposed to reduce payments for radiation oncology by 4% overall. This reduction related primarily to a proposal to remove the radiation treatment vault as a direct cost input for radiation treatment delivery codes. Because the proposal only applied to freestanding settings, the cut to freestanding centers would likely have been closer to 5%, while hospital based radiation oncologists would have received an increase in payment under the proposal. In the final Medicare 2015 Physician Fee Schedule, CMS did not finalize its proposal to remove the radiation treatment vault as a direct cost input for radiation treatment delivery codes. As a result, the net impact of the Final Rule to radiation oncology and freestanding radiation therapy centers is approximately neutral overall. In the Final rule, CMS also indicated it would review the family of radiation treatment delivery codes in the FY 2016 Physician Fee Schedule Proposed Rule.

        Medicare reimbursement rates for all procedures under Medicare ultimately are determined by a formula which takes into account a 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 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. Due to budget neutrality requirements from certain policies in the final Medicare 2015 Physician Fee Schedule, the 2015 conversion factor has been slightly adjusted to $35.7547, assuming no SGR cuts.

        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 was subsequently 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.

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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, 2014 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.

Other Material Factors

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

    our substantial indebtedness;

    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

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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, 2012, 2013 and 2014

        For the year ended December 31, 2014, our total revenues grew by approximately 39.4%, over the prior year, while our total revenues for the year ended December 31, 2013 grew by approximately 6.1% over the prior year. For the years ended December 31, 2014, 2013, and 2012, we had total revenues of $1,026.4 million, $736.5 million and $694.0 million, respectively.

        For the years ended December 31, 2014, 2013, and 2012, net patient service revenue comprised 92.3%, 97.2% and 98.9%, 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 Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 810, "Consolidiation" ("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 2014, 2013 and 2012, 14.7%, 18.4% and 19.4%, 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, 2014, 2013, and 2012, revenue from the professional-only component of radiation therapy and revenue from our ICC physician practices, comprised approximately 31.0%, 29.8%, and 28.7%, 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 years ended December 31, 2014 and 2013, management fees comprised 6.5% and 1.5%, respectively of our total revenues. These management fees are as a result of the OnCure transaction, which closed on October 25, 2013.

        For the years ended December 31, 2014, 2013, and 2012, other revenue comprised approximately 1.2%, 1.3% and 1.1%, 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.

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

 
  Years Ended
December 31,
   
  Years Ended
December 31,
   
 
United States
  2012   2013   % Change   2013   2014   % Change  

Number of treatment days

    255     255     0.0 %   255     255     0.0 %

Total RVUs—freestanding centers

    11,483,600     11,615,189     1.1 %   11,615,189     15,919,121     37.1 %

RVUs per day—freestanding centers

    45,034     45,550     1.1 %   45,550     62,428     37.1 %

Percentage change in RVUs per day—freestanding centers—same store basis

    (6.3 )%   (3.5 )%         (3.5 )%   (0.4 )%      

Total treatments—freestanding centers

    493,330     546,951     10.9 %   546,951     796,067     45.5 %

Treatments per day—freestanding centers

    1,935     2,145     10.9 %   2,145     3,122     45.5 %

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

    (3.9 )%   (6.2 )%         (6.2 )%   2.5 %      

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

    2.0 %   4.3 %         4.3 %   2.6 %      

Percentage change in freestanding revenues same store basis

    (2.1 )%   (2.2 )%         (2.2 )%   5.1 %      

Total radiation oncology cases completed*

    19,885     21,928     10.3 %   21,928     31,440     43.4 %

Revenue per radiation oncology case

  $ 19,921   $ 19,058         $ 19,058   $ 18,749        

Treatment centers—freestanding (global)

    121     155     28.1 %   155     169     9.0 %

Treatment centers—hospital / other groups (global)

    5     8     60.0 %   8     11     37.5 %

Total treatment centers

    126     163     29.4 %   163     180     10.4 %

Days sales outstanding at quarter end

    34     31           31     37        

United States

   
 
   
 
   
 
   
 
   
 
   
 
 

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

 
$

199,097
 
$

219,721
       
$

219,721
 
$

318,047
       

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

  $ 686,216   $ 731,171         $ 731,171   $ 1,035,822        

*
Total cases completed represents a count of patients that have completed their course of treatment. Total case counts are based on legacy and acquired clinical systems.

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        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
  2012   2013   % Change   2013   2014   % Change  

Total number of new cases

    15,229     16,090     5.7 %   16,090     17,756     10.4 %

Revenue per radiation oncology case

  $ 5,382   $ 5,659         $ 5,659   $ 5,588        

International

        Comparison of the Years Ended December 31, 2013 and 2014.    MDLLC's total revenues increased $8.5 million, or 9.4%, from $90.9 million to $99.4 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. Total revenue was positively impacted by $2.2 million of revenue from the acquisition of a center in Guatemala City, Guatemala in January 2014, growth in cases and an improvement in treatment mix, and less depreciation in the Argentine Peso as compared to the same period in 2013. Case growth increased by 1,666 or 10.4% 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 versus 2D treatments as compared to the same period in 2013.

        Facility gross profit increased $5.7 million, or 11.6% from $49.5 million to $55.2 million for the year ended December 31, 2014 as compared to the year ended December 31, 2013. Facility-level gross profit as a percentage of total revenues increased to 55.5% from 54.4%. Increases in facility rent, and incremental depreciation expense relating to our continued growth and investment in Latin America, expenses incurred related to construction of two new centers, one which opened in October 2014 in the Dominican Republic and one which is anticipated to open in the first half of 2015 in Mexico, as well as local inflation was offset by flat physician compensation and modest growth in salaries and benefits and medical supplies.

        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.

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        The following table presents summaries of results of operations for the years ended December 31, 2012, 2013 and 2014 (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,  
 
  2012   2013   2014  

Revenues:

                                     

Net patient service revenue

  $ 686,216     98.9 % $ 715,999     97.2 % $ 946,897     92.3 %

Management fees

            11,139     1.5     67,012     6.5  

Other revenue

    7,735     1.1     9,378     1.3     12,513     1.2  

Total revenues

    693,951     100.0     736,516     100.0     1,026,422     100.0  

Expenses:

                                     

Salaries and benefits

    372,656     53.7     409,352     55.6     545,025     53.1  

Medical supplies

    61,589     8.9     64,640     8.8     97,367     9.5  

Facility rent expenses

    39,802     5.7     45,565     6.2     63,048     6.1  

Other operating expenses

    38,988     5.6     45,629     6.2     61,735     6.0  

General and administrative expenses

    82,236     11.9     106,887     14.5     135,257     13.2  

Depreciation and amortization

    64,893     9.4     65,195     8.9     86,701     8.4  

Provision for doubtful accounts

    16,916     2.4     12,146     1.6     18,713     1.8  

Interest expense, net

    77,494     11.2     86,747     11.8     113,279     11.0  

Electronic health records incentive income

    (2,256 )   (0.3 )   (1,698 )   (0.2 )   (2,783 )   (0.3 )

Impairment loss

    81,021     11.7             229,526     22.4  

Early extinguishment of debt

    4,473     0.6             8,558     0.8  

Equity initial public offering expenses

                    4,905     0.5  

Loss on sale leaseback transaction

            313         135      

Fair value adjustment of earn-out liability

    1,219     0.2     130         1,627     0.2  

Fair value adjustment of embedded derivative

                    837     0.1  

Gain on the sale of an interest in a joint venture

            (1,460 )   (0.2 )        

Loss on foreign currency transactions

    339         1,283     0.2     557     0.1  

Loss (gain) on foreign currency derivative contracts

    1,165     0.2     467     0.1     (4 )    

Total expenses

    840,535     121.2     835,196     113.5     1,364,483     132.9  

Loss before income taxes

    (146,584 )   (21.2 )   (98,680 )   (13.5 )   (338,061 )   (32.9 )

Income tax expense (benefit)

    4,545     0.7     (20,432 )   (2.8 )   5,159     0.5  

Net loss

    (151,129 )   (21.9 )   (78,248 )   (10.7 )   (343,220 )   (33.4 )

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

    (3,079 )   (0.4 )   (1,966 )   (0.3 )   (6,030 )   (0.6 )

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

  $ (154,208 )   (22.3 )% $ (80,214 )   (11.0 )% $ (349,250 )   (34.0 )%

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Comparison of the Years Ended December 31, 2013 and 2014

Revenues

        Total revenues.    Total revenues increased by $289.9 million, or 39.4%, from $736.5 million in 2013 to $1,026.4 million in 2014. Total revenue was positively impacted by $275.6 million due to our expansion into new practices and treatments centers in existing local markets and new local markets during 2013 and 2014 through the acquisition of several urology, medical oncology and surgery practices in Arizona, Florida, Nevada, New Jersey, New York, North Carolina, and Rhode Island and the acquisition of physician radiation practices in Argentina, California, Guatemala, Florida, Indiana, North Carolina, Mexico and the opening of three de novo centers as follows:

Date
  Sites   Location   Market   Type

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

January 2014

   
1
 

Guatemala

 

International (Guatemala)

 

Acquisition

February 2014

   
17
 

Miami/Dade/Palm Beach/Broward counties—Florida

 

Miami/Dade/Palm Beach/Broward counties—Florida

 

Acquisition—SFRO
Freestanding

February 2014

   
4
 

Miami/Dade/Palm Beach/Broward counties—Florida

 

Miami/Dade/Palm Beach/Broward counties—Florida

 

Acquisition—SFRO
professional / other

February 2014

   
1
 

Westchester/Bronx/Long Island—New York

 

Westchester/Bronx/Long Island—New York

 

De Novo

March 2014

   
1
 

Latin America

 

International (Argentina)

 

Acquisition

October 2014

   
1
 

Miami—Florida

 

Miami/Dade County

 

Acquisition

October 2014

   
1
 

Dominican Republic

 

International (Dominican Republic)

 

De Novo

        Revenue from CMS for the 2014 Physician Quality Reporting System ("PQRS") program increased approximately $0.1 million and revenues in our existing local markets and practices increased by approximately $14.2 million.

Expenses

        Salaries and benefits.    Salaries and benefits increased by $135.6 million, or 33.1%, from $409.4 million in 2013 to $545.0 million in 2014. Salaries and benefits as a percentage of total revenues decreased from 55.6% in 2013 to 53.1% in 2014. Additional staffing of personnel and physicians due to our development and expansion in several urology, medical oncology and surgery practices in Arizona, Florida, Nevada, New Jersey, New York, North Carolina and Rhode Island and the acquisitions of treatment centers in new and existing local markets during the latter part of 2013 and 2014 contributed $130.0 million to our salaries and benefits. In December 2013, we implemented a new equity-incentive plan, which decreased stock compensation by approximately $0.5 million in 2014. For existing practices and centers within our local markets, salaries and benefits increased $6.1 million due to increased

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salaries related to our physician liaison program and the expansion of our senior management team and increases in severance payments for terminated employees due to a reduction in workforce and incurred severance payments to certain executives offset by decreases in our compensation arrangements with certain radiation oncologists.

        Medical supplies.    Medical supplies increased by $32.8 million, or 50.6%, from $64.6 million in 2013 to $97.4 million in 2014. Medical supplies as a percentage of total revenues increased from 8.8% in 2013 to 9.5% in 2014. 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 $27.4 million of the increase was related to our development and expansion in several urology, medical oncology and surgery practices in Arizona, Florida, Nevada, New Jersey, New York, North Carolina and Rhode Island and the acquisitions of treatment centers in new and existing local markets during the latter part of 2013 and 2014. In our remaining practices and centers in existing local markets, medical supplies increased by approximately $5.4 million. These pharmaceuticals and chemotherapy medical supplies are principally reimbursable by third-party payers.

        Facility rent expenses.    Facility rent expenses increased by $17.4 million, or 38.4%, from $45.6 million in 2013 to $63.0 million in 2014. Facility rent expenses as a percentage of total revenues decreased from 6.2% in 2013 to 6.1% in 2014. Facility rent expenses consist of rent expense associated with our treatment center locations. Approximately $17.7 million of the increase was related to our development and expansion in several urology, medical oncology and surgery practices in Arizona, Florida, Nevada, New Jersey, New York, North Carolina and Rhode Island and the acquisitions of treatment centers in new and existing local markets during the latter part of 2013 and 2014. Facility rent expense in our remaining practices and centers in existing local markets decreased by approximately $0.3 million.

        Other operating expenses.    Other operating expenses increased by $16.1 million or 35.3%, from $45.6 million in 2013 to $61.7 million in 2014. Other operating expense as a percentage of total revenues decreased from 6.2% in 2013 to 6.0% in 2014. Other operating expenses consist of repairs and maintenance of equipment, equipment rental and contract labor. Approximately $15.2 million of the increase was related to our development and expansion in several urology, medical oncology and surgery practices in Arizona, Florida, Nevada, New Jersey, New York, North Carolina and Rhode Island and the acquisitions of treatment centers in new and existing local markets during the latter part of 2013 and 2014. Approximately $0.9 million increase relates to equipment rental expense relating to medical equipment refinancing.

        General and administrative expenses.    General and administrative expenses increased by $28.4 million or 26.5%, from $106.9 million in 2013 to $135.3 million in 2014. 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 decreased from 14.5% in 2013 to 13.2% in 2014. The net increase of $28.4 million in general and administrative expenses was due to an increase of approximately $19.0 million relating to our development and expansion in several urology, medical oncology and surgery practices in Arizona, Florida, Nevada, New Jersey, New York, North Carolina and Rhode Island and the acquisitions of treatment centers in new and existing local markets during the latter part of 2013 and 2014. In addition, there were increases of approximately $11.9 million related to expenses associated with note-holder negotiations and management of liquidity, approximately $0.3 million related to expenses for consulting services for the CMS 2014 fee schedule, approximately $1.7 million in our remaining practices and treatments centers in our existing local markets offset by decreases in approximately $3.8 million in diligence costs relating to acquisitions and potential acquisitions of physician practices, approximately $0.3 million in litigation settlements with certain physicians and legal and consulting

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costs associated with the Medicare diagnostic matter and approximately $0.4 million in our rebranding initiatives.

        Depreciation and amortization.    Depreciation and amortization increased by $21.5 million or 33.0%, from $65.2 million in 2013 to $86.7 million in 2014. Depreciation and amortization expense as a percentage of total revenues decreased from 8.9% in 2013 to 8.4% in 2014. The change in depreciation and amortization was due to an increase of approximately $23.5 million relating to our development and expansion in several urology, medical oncology and surgery practices in Arizona, Florida, Nevada, New Jersey, New York, North Carolina and Rhode Island and the acquisitions of treatment centers in new and existing local markets during the latter part of 2013 and 2014. An increase in capital expenditures related to our investment in advanced radiation treatment technologies and software maintenance in certain local markets increased our depreciation and amortization by approximately $1.4 million offset by a decrease of approximately $3.4 million in amortization of certain non-compete agreements.

        Provision for doubtful accounts.    The provision for doubtful accounts increased by $6.6 million, or 54.1%, from $12.1 million in 2013 to $18.7 million in 2014. The provision for doubtful accounts as a percentage of total revenues increased from 1.6% in 2013 to 1.8% in 2014. As a result of our recent acquisitions, we continue to make 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.

        Interest expense, net.    Interest expense increased by $26.6 million, or 30.6%, from $86.7 million in 2013 to $113.3 million in 2014. The increase is primarily attributable to additional debt obligations predominately relating to our senior credit facility. As of December 31, 2014, we had approximately $90.0 million outstanding in our Term Facility and $-0- million outstanding in our Revolver Credit Facility. The increase is also attributable to recent acquisitions. Pursuant to the SFRO acquisition, we entered into the SFRO Credit Agreement (as defined below) which provides for a $60 million Term B Loan, $7.9 million Term A Loan, and assumed capital lease obligations. The OnCure transaction included the issuance of $82.5 million in senior secured notes which accrue interest at a rate of 11.75% per annum and additional capital lease financing. On September 26, 2014, a portion of the net proceeds from the issuance of our Series A Preferred Stock was used to repay all outstanding borrowings under our revolving credit facility, repay all obligations under the South Florida Radiation Oncology Term A, Term A-1, and Term B loans, repay certain other debt and capital leases, as well as provide capital for near-term strategic initiatives and general corporate purposes.

        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, 2014 and 2013, we recognized approximately $2.8 million and $1.7 million, respectively of EHR revenues.

        Impairment loss.    As we began to experience some liquidity issues after terminating our previously planned initial public offering, we began to have discussions with an ad hoc group of holders of our outstanding notes. On July 29, 2014, we entered into a Recapitalization Support Agreement (the "Recapitalization Support Agreement"). The Recapitalization Support Agreement set forth the terms through which we expected to either (a) obtain additional liquidity through an equity contribution or

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subordinated debt incurred in a minimum amount of $150 million on or before October 1, 2014 or (b) consummate a Recapitalization consistent with the material terms and conditions described in the term sheet attached to the Recapitalization Support Agreement.

        On September 26, 2014, we entered into the Subscription Agreement with CPPIB (the "Subscription Agreement"), pursuant to which we issued to CPPIB an aggregate of 385,000 shares of our Series A Preferred Stock for a purchase price of approximately $325.0 million. The receipt of these funds satisfied the requirement under the Recapitalization Support Agreement that we obtain additional liquidity through an equity contribution or subordinated debt incurred in a minimum amount of $150 million on or before October 1, 2014.

        We performed an interim impairment test for goodwill and indefinite-lived intangible assets. We completed the first step of the impairment test as of June 30, 2014 and determined that the carrying amount of one of the reporting units exceeded its estimated implied fair value, thereby requiring performance of the second step of the impairment test to calculate the amount of the impairment. In accordance with Intangibles—Goodwill and Other ("ASC 350"), we recorded a preliminary estimated non-cash impairment loss of approximately $182.0 million in the condensed consolidated statements of operations and comprehensive loss during the quarter ended June 30, 2014. We completed the second step of the impairment test and recorded an impairment loss of approximately $46.3 million during the quarter ended September 30, 2014.

        In addition to the goodwill impairment losses noted above, we recorded an impairment loss of approximately $1.2 million during the third quarter of 2014 related to the write-off of our 33.6% investment interest in a development stage proton therapy center located in New York ("NY Proton"). As a result of NY Proton's continued operating losses since its inception in 2010 and our liquidity issues experienced during the quarter ended June 30, 2014, we provided notice to the consortium that we may not be able to provide the full commitment of approximately $10.0 million to this project. Pursuant to the Subscription Agreement entered into with CPPIB on September 26, 2014, we are required to use commercially reasonable efforts to transfer and sell our ownership interest to the consortium or to a third party and transfer the general manager role and any future management services fees to the consortium or a third party.

        Early extinguishment of debt.    We incurred approximately $8.6 million from the early extinguishment of debt as a result of the prepayment of the Term A Loan, Term B Loan, MDLLC Credit Agreement, Note Purchase Agreement (each as defined below), and certain capital leases, which included the write-offs of $2.0 million in deferred financing costs, $2.7 million in original issue discount costs, and $3.8 million in pre-payment penalties, including $0.3 million paid to Theriac Management Investments, LLC ("Theriac") (a related party real estate entity owned by certain of the Company's directors and officers) pursuant to the Note Purchase Agreement.

        Equity initial public offering expenses.    In May, 2014, we determined due to market conditions to postpone the initial public offering of our equity securities. As a result of the postponement and entering into the Recapitalization Support Agreement with Consenting Subordinated Noteholders, we wrote-off approximately $4.9 million in expenses associated with the initial public offering.

        Loss on sale leaseback transaction.    In March 2014, the Company entered into a sale leaseback transaction with a financial institution. The sale leaseback transaction related to medical equipment. Proceeds from the sale were approximately $5.7 million. The Company recorded a loss on the sale leaseback transaction of approximately $0.1 million.

        Fair value adjustment of earn-out liability.    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

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$7.5 million included in other long-term liabilities in the consolidated balance sheets, is subject to escrow arrangements and will be released to holders upon satisfaction of certain conditions (the "earn out payment"). The Company recorded an estimated earn out payment at the time of the closing of the transaction. The earn out payment is contingent upon certain acquired centers attaining earnings before interest, taxes, depreciation and amortization targets, is due on December 31, 2015, and is payable through the issuance of the 11.75% senior secured notes. 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 of earn-out liability caption in the consolidated statements of operations and comprehensive loss. At December 31, 2014, we estimated the fair value of the contingent earn out liability and increased the liability due to the seller by approximately $0.8 million, which is recorded to expense in the fair value adjustment of earn-out liability caption in the consolidated statements of operations and comprehensive loss.

        Pursuant to the SFRO acquisition, we recorded an estimated contingent earn out liability totaling approximately $11.1 million. At December 31, 2014, we estimated the fair value of the contingent earn out liability and increased the liability due to the holders to approximately $11.9 million. We recorded the $0.8 million to expense in the fair value adjustment caption in the consolidated statements of operations and comprehensive loss.

        Fair value adjustment of embedded derivative.    Pursuant to the terms of the Subscription Agreement, immediately following the occurrence of our qualifying initial public offering or a qualifying merger, we will execute and deliver to CPPIB a Warrant Agreement (the "Warrant Agreement") and issue to CPPIB warrants to purchase shares of our common stock having a then-current value of $30 million, at a purchase price of $0.01 per share. The warrants expire on the tenth anniversary of the date of issuance. We evaluated the contingent events that could trigger the conversion of the Series A Preferred Stock to common stock and issuance of warrants and determined that the contingent conversion features qualify as an embedded derivative, requiring bifurcation and classification as a liability, measured at fair value. The Company determined the fair value of the embedded derivative to be, and recorded approximately $15.0 million as of September 30, 2014. As of December 31, 2014 we estimated the fair value of the embedded derivative to be approximately $15.8 million. The $0.8 million change in fair value of the embedded derivative is recorded to expense in the fair value adjustment of embedded derivative caption in the consolidated statements of operations and comprehensive loss.

        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. There were no similar sales during 2014.

        Loss (gain) 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 maintained a foreign currency derivative contract which expired on March 31, 2014. The expiration of the foreign currency derivative contract and the mark to market valuation of the remaining contracts resulted in a gain of $4,000 in 2014 and a loss of approximately $0.5 million in 2013.

        Income taxes.    Our effective tax rate was (1.5)% in fiscal 2014 and 20.8% in fiscal 2013. The change in the effective rate in 2014 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 in 2013 and by the release of previously recorded reserves related to US federal, state and international tax issues and the recording of a noncash impairment charge relating to goodwill in the U.S. domestic reporting segment of $229.5 million during 2014. As a result, on an absolute dollar basis, the expense for income taxes changed by $25.6 million from the income tax benefit of $20.4 million in 2013 to an income tax expense of $5.2 million in 2014.

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        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 increased by $265.0 million, from $78.2 million in net loss in 2013 to $343.2 million net loss in 2014. Net loss represents 10.7% of total revenues in 2013 and 33.4% of total revenues in 2014.

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

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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 PQRS 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 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.

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        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 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.

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        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.

        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.

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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 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 and its subsidiaries, 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., 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 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

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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. Through March 2014, we maintained foreign currency derivative contracts which matured on a quarterly basis. In 2014 and 2013, the expiration of the December 31, 2013 foreign currency derivative contract and the mark to market valuation of the remaining contracts resulted in a gain of approximately $4,000 and loss of $0.5 million, respectively.

        Income taxes.    Our effective tax rate was 20.8% for 2013 and (3.1)% in 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 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.

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Liquidity and Capital Resources

        We are highly leveraged. As of December 31, 2014, we had $967.1 million of long-term debt outstanding. We have experienced and continue to experience losses from operations. We reported a net loss of approximately $343.2 million, $78.2 million, and $151.1 million for the years ended December 31, 2014, 2013, and 2012, respectively.

        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 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 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 are involved in disputes, litigation, and regulatory matters incidental to our operations, including governmental investigations and other matters arising out of the normal conduct of business. The resolution of these matters could have a material adverse effect on our business and financial position.

        On September 26, 2014, we issued to CPPIB, in a private placement, an aggregate of 385,000 newly issued shares of its Series A Convertible Redeemable Preferred Stock for a purchase price of $325.0 million.

        This equity investment provides us with incremental liquidity, reduces our debt, and provides capital to continue to grow our business. As further described in our consolidated financial statements, a portion of the net proceeds from the issuance of our Series A Preferred Stock was used to repay all outstanding borrowings under our revolving credit facility, repay all obligations under the South Florida Radiation Oncology Term A, Term A-1, and Term B loans, repay certain other debt and capital leases, as well as provide capital for near-term strategic initiatives and general corporate purposes.

        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.

        We have several initiatives designed to increase profitability including: (i) fully integrating our recent acquisitions to improve operational performance; (ii) improving commercial payer contracting to

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increase reimbursement; (iii) continued development and expansion of our integrated cancer care model; and (iv) realignment of our physician compensation arrangements to reflect the current reimbursement environment. Although we are significantly leveraged, we expect that the current cash balance, liquidity from our revolver, and cash generated from operations will be sufficient to meet working capital, capital expenditure, debt service, and other cash needs through December 31, 2015.

Cash Flows From Operating Activities

        Net cash provided by operating activities for the years ended December 31, 2012 was $16.1 million. Net cash used in operating activities for the years ended December 31, 2013 and 2014 was $11.6 million and $15.4 million, respectively.

        Net cash used in operating activities increased by $3.8 million from $11.6 million in 2013 to $15.4 million in 2014 predominately due to management of our vendor payables and increased cash flow related to our OnCure and SFRO transactions. In June 2014, we recorded a preliminary impairment loss of approximately $182.0 million as a result of us experiencing some liquidity issues after terminating our previously planned initial public offering. We finalized our goodwill impairment for step two of the process as of September 30, 2014 and recorded an additional $46.3 million in goodwill impairment and $1.2 million in impairment related to our write-off of our 33.6% investment interest in NY Proton. As a result of NY Proton's continued operating losses since its inception in 2010 and our liquidity issues experienced during the quarter ended June 30, 2014, we provided notice to the consortium that we may not be able to provide the full commitment of approximately $10.0 million to this project. Pursuant to the Subscription Agreement entered into with CPPIB on September 26, 2014, we are required to use commercially reasonable efforts to transfer and sell our ownership interest to the consortium or to a third party and transfer the general manager role and any future management services fees to the consortium or a third party.

        Cash at December 31, 2014 held by our foreign subsidiaries was $4.5 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 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 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.

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Cash Flows From Investing Activities

        Net cash used in investing activities for 2012, 2013, and 2014 was $57.3 million, $118.0 million, and $113.5 million, respectively.

        Net cash used in investing activities decreased by $4.5 million from $118.0 million in 2013 to $113.5 in 2014. In 2014, net cash used in investing activities was impacted by approximately $50.2 million in the acquisition of medical practices. On February 10, 2014, we purchased a 65% equity interest in SFRO for approximately $65.5 million, subject to working capital and other customary adjustments. The transaction was primarily funded with the proceeds of a new $60 million term loan facility, $2.0 million seller financing note, and $7.9 million of term loans to refinance existing SFRO debt. In addition, we reflected approximately $11.7 million as restricted cash relating to the SFRO existing debt and an indemnity escrow for the determination of the final purchase price as well as recording $11.1 million as a contingent earn out payment. On April 21, 2014, we purchased the assets of a radiation oncology practice located in Boca Raton, Florida for approximately $0.4 million plus the assumption of approximately $2.7 million of debt. During 2014, we purchased approximately $56.6 million in property and equipment. We have one of the most technically-advanced radiation equipment platforms in the industry. A significant portion of this spend is for growth related projects. This includes the upgrade of technology and equipment at the legacy OnCure centers to expand capacity as well as add SRS capacity, and MDLLC's growth.

        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 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 purchased 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 on June 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.

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        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 $38.0 million, $43.8 million and $77.2 million in 2012, 2013 and 2014, 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 2012, 2013 and 2014 was $46.4 million, $131.6 million and $210.6 million, respectively.

        On January 2, 2014, we sold a 20% share of our Southern New England Regional Cancer Care joint venture each to Care New England Health System ("CNE") and Roger Williams Medical Center. Also during the quarter, CNE acquired a 20% interest in our Roger Williams Medical Center joint venture. We received payments of approximately $1.3 million from the issuance of noncontrolling interests in these joint ventures.

        On February 10, 2014, 21C East Florida and South Florida Radiation Oncology Coconut Creek, LLC ("Coconut Creek"), a subsidiary of SFRO, as borrowers, the several lenders and other financial institutions or entities from time to time parties thereto and Cortland Capital Market Services LLC as administrative agent and collateral agent entered into a new credit agreement (the "SFRO Credit Agreement"). The SFRO Credit Agreement provides for a $60 million Term B Loan in favor of 21C East Florida ("Term B Loan") and $7.9 million Term A Loan in favor of Coconut Creek issued for purposes of refinancing existing SFRO debt ("Term A Loan" and together with the Term B Loan, the "SFRO Term Loans"). The SFRO Term Loans each have a maturity date of January 15, 2017. We incurred approximately $1.0 million in deferred financing costs relating to the SFRO debt.

        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 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 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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        On September 26, 2014, we issued to CPPIB, in a private placement, an aggregate of 385,000 newly issued shares of our Series A Convertible Redeemable Preferred Stock for a purchase price of $325.0 million.

        This equity investment provides us with incremental liquidity, reduces our debt, and provides capital to continue to grow our business. As further described in Note 11 to our consolidated financial statements, a portion of the net proceeds from the issuance of our Series A Preferred Stock was used to repay all outstanding borrowings under our revolving credit facility, repay all obligations under the South Florida Radiation Oncology Term A, Term A-1, and Term B loans, repay certain other debt and capital leases, as well as provide capital for near-term strategic initiatives and general corporate purposes.

        For the year ended December 31, 2014, we paid approximately $4.9 million in costs associated with the initial public offering costs.

        We had partnership distributions from non-controlling interests of approximately $3.9 million, $2.2 million, and $3.6 in 2012, 2013, and 2014, 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.

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.

        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 Company's acquisition of all of the outstanding membership units of MDLLC and substantially all of the interests of MDLLC's affiliated companies (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").

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        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.

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

Senior Secured Credit Facility

        On May 10, 2012, we also entered into the Original Credit Agreement among 21C, as borrower, the Company, Wells Fargo Bank, National Association, as 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 Original Credit Agreement. Pursuant to the terms of the Amendment Agreement the amendments to the Original Credit Agreement became effective on August 29, 2013.

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        The Credit Agreement provides for credit facilities consisting of (i) a $90 million 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 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 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

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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, 2014   Level at December 31, 2014  

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

  >$15.0 million   $ 186.5 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, 2014.

        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 consolidated financial statements. The default was cured with the provision of the audited consolidated financial statements to the administrative agent on April 30, 2014.

Purchase Money Note Purchase Agreement

        On May 19, 2014, we entered into a Purchase Money Note Purchase Agreement (the "Note Purchase Agreement") with Theriac (a related party entity owned by certain of the Company's directors and officers). Pursuant to the Note Purchase Agreement, Theriac loaned to us, pursuant to an unsecured purchase money note, the principal amount of $7.4 million. The Company and certain of its domestic subsidiaries of the Company guaranteed the obligations under the note. The note will mature on June 15, 2015 and is subject to an interest rate payable in cash of 10.75% per annum or by adding the amount of such interest to the aggregate principal amount of outstanding notes at the interest rate of 12.0% per annum. The proceeds from the issuance of the note were used to pay for purchases or improvements of property and equipment or to refinance debt incurred to finance such purchases or improvements. A portion of the net proceeds from the issuance of our Series A Preferred Stock was used to repay all outstanding borrowings under the Note Purchase Agreement on September 26, 2014.

MDLLC Credit and Guaranty Agreement

        On July 28, 2014, MDLLC and certain of its subsidiaries and affiliates, including the Company entered into a credit and guaranty agreement (the "MDLLC Credit Agreement").

        The MDLLC Credit Agreement provided for Tranche A term loans in the aggregate principal amount of $8.5 million and Tranche B term loans in the aggregate principal amount of $9.0 million (collectively, the "MDLLC Term Loans"), for an aggregate principal amount of MDLLC Term Loans of $17.5 million, in favor of MDLLC.

        The MDLLC Term Loans are subject to interest rates, for any interest period, at a rate equal to 14.0% per annum.

        A portion of the net proceeds from the issuance of our Series A Preferred Stock was used to repay all outstanding borrowings under the MDLLC Credit Agreement on September 26, 2014.

Term Loan A and B Facilities

        On February 10, 2014, 21C East Florida and Coconut Creek, as borrowers, entered into the SFRO Credit Agreement. The SFRO Credit Agreement provides for a $60 million Term B Loan in

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favor of 21C East Florida and $7.9 million Term A Loan in favor of Coconut Creek issued for purposes of refinancing existing SFRO debt. The SFRO Term Loans each have a maturity date of January 15, 2017.

        On July 22, 2014, 21C East Florida and Coconut Creek entered into a first amendment (the "SFRO Amendment") to the SFRO Credit Agreement. The SFRO Amendment provided for an incremental $10.35 million term loan (the "Term A-1 Loan") in favor of Coconut Creek issued for purposes of (i) refinancing approximately $5.64 million in existing capitalized lease obligations owing to First Financial Corporate Leasing, including a prepayment premium, (ii) repaying the approximately $2.55 million intercompany loan made by 21C to pay the capitalized lease obligations owing to First Financial Corporate Leasing and (iii) pay fees, costs and expenses of the transactions related to the SFRO Amendment.

        The SFRO Term Loans were subject to variable interest rates. In addition, the Term B Loan contained a provision allowing 21C East Florida to elect payment in kind interest payments.

        A portion of the net proceeds from the issuance of our Series A Preferred Stock was used to repay all outstanding borrowings under the Company's South Florida Radiation Oncology Term A, Term A-1, and Term B loans on September 26, 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.

Billing and Collections

        Our billing system in the U.S., excluding recently acquired businesses, 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. For all our practices that are less than one year from date of acquisition, our billing system includes fee schedules on approximately 99% of all payers and developed a blended rate allowable amount on the remaining payers. As a result of this change 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

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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 debt on balances relating to these types of payers over the years has been insignificant.

        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.

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Acquisitions and Developments

        The following table summarizes our change in treatment centers in which we operate for the year ended December 31, 2014:

 
  2014  

Treatment centers at beginning of period

    163  

Internally developed / reopened

    2  

Transitioned to freestanding

    1  

Internally (consolidated / closed / sold)

    (10 )

Acquired

    21  

Hospital-based / other groups

    5  

Hospital-based (ended / transitioned)

    (2 )

Treatment centers at period end

    180  

        On January 2, 2014, we sold a 20% share of our Southern New England Regional Cancer Care joint venture each to CNE and Roger Williams Medical Center. Also during the quarter CNE acquired a 20% interest in our Roger Williams Medical Center joint venture. The incorporation of CNE reflects the addition of another important long-term partnership with a leading health system.

        On January 13, 2014, CarePoint purchased the membership interest in Quantum Care, LLC for approximately $1.9 million. 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.

        On January 15, 2014, we purchased a 69% interest in a legal entity that operates a radiation oncology facility in Guatemala City, Guatemala for approximately $0.9 million plus the assumption of approximately $3.1 million in debt. The facility is strategically located in Guatemala City's medical corridor and, when combined with our existing center, we believe will significantly enhance our level of services.

        In January 2014, we entered a strategic partnership with ProHealth Care Associates, LLP and opened a new de novo state-of-the-art radiation therapy center in Riverhead, New York. ProHealth is the largest physician group practice in the metropolitan New York area with over 500 physicians in over 150 offices treating over 750,000 covered lives.

        On February 10, 2014, we purchased a 65% equity interest in SFRO for approximately $65.5 million, subject to working capital and other customary adjustments. The transaction was primarily funded with the proceeds of a new $60 million term loan facility that accrues interest at the Eurodollar Rate plus a margin of 10.50% per annum and matures on January 15, 2017 and $7.9 million of term loans to refinance existing SFRO debt.

        SFRO operates 21 radiation treatment centers throughout south Florida. SFRO increases the number of treatment centers by approximately 10% and is expected to add approximately 591 average treatments per day.

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        On March 26, 2014 we purchased a 75% interest in a legal entity that operates a radiation oncology facility in Villa Maria, Argentina for approximately $0.5 million. The purchase of this radiation oncology facility further expands our presence in the Latin America market.

        On April 21, 2014, we acquired the assets of a radiation oncology practice located in Boca Raton, Florida for approximately $0.4 million plus the assumption of approximately $2.7 million in debt. The acquisition of the radiation oncology practice further expands our presence in the Broward County market.

        On May 5, 2014, we purchased the remaining 50% interest we did not already own in an unconsolidated joint venture which operates a freestanding radiation treatment center in Lauderdale Lakes, Florida for approximately $0.5 million.

        During 2014, we acquired the assets of several physician practices in Florida for approximately $0.4 million. The physician practices provide synergistic clinical services and an ICC service to its patients in the respective markets in which we provide radiation therapy treatment services.

        The operations of the foregoing acquisitions have been included in the accompanying consolidated statements of operations and comprehensive loss from the respective dates of each acquisition. When we acquire a treatment center, the purchase price is allocated to the assets acquired and liabilities assumed based upon their respective fair values.

        On January 2, 2015, we purchased a 80% interest in a legal entity that that operates a radiation oncology facility in Kennewick, Washington for approximately $17.6 million. The acquisition expands our presence into the state of Washington. The purchase agreement contains a provision for earn out payments, contingent upon achieving certain EBITDA targets measured over three years from the acquisition date. The earn out payments cannot exceed approximately $3.4 million.

        On January 6, 2015, we acquired the assets of a radiation oncology practice located in Warwick, Rhode Island for approximately $8.0 million. The acquisition further expands our presence in Rhode Island.

        On January 6, 2015, we acquired the additional assets of a radiation oncology practice we already manage located in Hollywood, Florida for approximately $0.5 million.

        During the first quarter of 2014, we closed two radiation treatment facilities, one located in Lee County—Florida and another facility located in Charlotte County—Florida, as a result of the purchase on the OnCure transaction.

        During the second quarter of 2014, we closed six radiation treatment facilities, three located in Broward and Palm Beach Counties, two located in Sarasota/Manatee Counties, and one in Southern California, all as a result of the purchase of the OnCure and SFRO transactions.

        During the third quarter of 2014, we closed two radiation treatment facilities, one located in Central Maryland and one located in the Palm Springs, California market.

        During October 2014, the Company entered into a license agreement with the Public Health Trust of Miami-Dade County, Florida to license space and equipment and assume responsibility for the operation of a radiation therapy center located in Miami, Florida, as part of the Company's value added services offering. The license agreement runs for an initial term of five years, with two separate five year renewal options.

        During the fourth quarter of 2014, we closed one radiation treatment facility located in New York.

        As of December 31, 2014, we have four additional de novo radiation treatment centers located in Bolivia, California, North Carolina, and South Carolina. The internal development of radiation treatment centers is subject to a number of risks including but not limited to risks related to

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negotiating and finalizing agreements, construction delays, unexpected costs, obtaining required regulatory permits, licenses and approvals and the availability of qualified healthcare and administrative professionals and personnel. As such, we cannot assure you that we will be able to successfully develop radiation treatment centers in accordance with our current plans and any failure or material delay in successfully completing planned internally developed treatment centers could harm our business and impair our future growth.

        We had been selected by a consortium of leading New York academic medical centers (including Memorial Sloan-Kettering Cancer Center, Beth Israel Medical Center/Continuum Health System, NYU Langone Medical Center, Mt. Sinai Medical Center, and Montefiore Medical Center) to serve as the developer and manager of a proton beam therapy center to be constructed in Manhattan. The project is in the final stages of certificate of need approval. As a result of NY Proton's continued operating losses since its inception in 2010 and our liquidity issues experienced during the quarter ended June 30, 2014, we provided notice to the consortium that we may not be able to provide the full commitment of approximately $10.0 million to this project. Pursuant to the Subscription Agreement entered into with CPPIB on September 26, 2014, we are required to use commercially reasonable efforts to transfer and sell our ownership interest to the consortium or to a third party and transfer the general manager role and any future management services fees to the consortium or a third party. We have accounted for our interest in the center as an equity method investment.

Critical Accounting Policies

        Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We continuously evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

        We believe the following critical accounting policies are important to the portrayal of our financial condition and results of operations and require our management's subjective or complex judgment because of the sensitivity of the methods, assumptions and estimates used in the preparation of our consolidated financial statements.

Variable Interest Entities

        We evaluate certain of our radiation oncology practices in order to determine if they are variable interest entities ("VIE"). This evaluation resulted in determining that certain of our radiation oncology practices were potential VIEs. For each of these practices, we have evaluated (1) the sufficiency of the fair value of the entities' equity investments at risk to absorb losses, (2) that, as a group, the holders of the equity investments at risk have (a) the direct or indirect ability through voting rights to make decisions about the entities' significant activities, (b) the obligation to absorb the expected losses of the entity and their obligations are not protected directly or indirectly, and (c) the right to receive the expected residual return of the entity, and (3) substantially all of the entities' activities do not involve or are not conducted on behalf of an investor that has disproportionately fewer voting rights in terms of its obligation to absorb the expected losses or its right to receive expected residual returns of the entity, or both. ASC 810 requires a company to consolidate VIEs if the company is the primary beneficiary of the activities of those entities. Certain of our radiation oncology practices are VIEs and we have a variable interest in each of these practices through our administrative services agreements.

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Pursuant to ASC 810, through our variable interests in these practices, we have the power to direct the activities of these practices that most significantly impact the entity's economic performance and we would absorb a majority of the expected losses of these practices should they occur. Based on these determinations, we have included these radiation oncology practices in our consolidated financial statements for all periods presented. All significant intercompany accounts and transactions have been eliminated.

Net Patient Service Revenue and Allowances for Contractual Discounts

        We have agreements with third-party payers that provide us payments at amounts different from our established rates. Net patient service revenue is reported at the estimated net realizable amounts due from patients, third-party payers and others for services rendered. Net patient service revenue is recognized as services are provided. Medicare and other governmental programs reimburse physicians based on fee schedules, which are determined by the related government agency. We also have agreements with managed care organizations to provide physician services based on negotiated fee schedules. Accordingly, the revenues reported in our consolidated financial statements are recorded at the amount that is expected to be received.

        We derive a significant portion of our revenues from Medicare, Medicaid and other payers that receive discounts from our standard charges. We must estimate the total amount of these discounts to prepare our consolidated financial statements. The Medicare and Medicaid regulations and various managed care contracts under which these discounts must be calculated are complex and subject to interpretation and adjustment. We estimate the allowance for contractual discounts on a payer class basis given our interpretation of the applicable regulations or contract terms. These interpretations sometimes result in payments that differ from our estimates. Additionally, updated regulations and contract renegotiations occur frequently necessitating regular review and assessment of the estimation process. Changes in estimates related to the allowance for contractual discounts affect revenues reported in our consolidated statements of operations and comprehensive loss. If our overall estimated allowance for contractual discounts on our revenues for the year ended December 31, 2014 were changed by 1%, our after-tax loss from continuing operations would change by approximately $0.1 million. This is only one example of reasonably possible sensitivity scenarios. A significant increase in our estimate of contractual discounts for all payers would lower our earnings. This would adversely affect our results of operations, financial condition, liquidity and future access to capital.

        During the years ended 2012, 2013 and 2014, approximately 45%, 45% and 42%, respectively, of net patient service revenue related to services rendered under the Medicare and Medicaid programs. In the ordinary course of business, we are potentially subject to a review by regulatory agencies concerning the accuracy of billings and sufficiency of supporting documentation of procedures performed. Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. As a result, there is at least a reasonable possibility that estimates will change by a material amount in the near term.

Accounts Receivable and Allowances for Doubtful Accounts

        Accounts receivable are reported net of estimated allowances for doubtful accounts and contractual adjustments. Accounts receivable are uncollateralized and primarily consist of amounts due from third-party payers and patients. To provide for accounts receivable that could become uncollectible in the future, we establish an allowance for doubtful accounts to reduce the carrying amount of such receivables to their estimated net realizable value. The credit risk for other concentrations (other than Medicare) of receivables is limited due to the large number of insurance companies and other payers that provide payments for our services. We do not believe that there are any other significant concentrations of receivables from any particular payer that would subject us to any significant credit risk in the collection of our accounts receivable.

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        The amount of the allowance for doubtful accounts is based upon our assessment of historical and expected net collections, business and economic conditions, trends in federal and state governmental healthcare coverage and other collection indicators. The primary tool used in our assessment is an annual, detailed review of historical collections and write-offs of accounts receivable as they relate to aged accounts receivable balances. The results of our detailed review of historical collections and write-offs, adjusted for changes in trends and conditions, are used to evaluate the allowance amount for the current period. If the actual bad debt allowance percentage applied to the applicable aging categories would change by 1% from our estimated bad debt allowance percentage for the year ended December 31, 2014, our after-tax loss from continuing operations would change by approximately $1.1 million and our net accounts receivable would change by approximately $1.8 million at December 31, 2014. The resulting change in this analytical tool is considered to be a reasonably likely change that would affect our overall assessment of this critical accounting estimate. Accounts receivable are written-off after collection efforts have been followed in accordance with our policies.

Goodwill and Other Intangible Assets

        Goodwill represents the excess purchase price over the estimated fair value of net assets acquired by us in business combinations. Goodwill and indefinite life intangible assets are not amortized but are reviewed annually for impairment, or more frequently if impairment indicators arise. As we began to experience some liquidity issues after terminating our previously planned initial public offering, we began to have discussions with an ad hoc group of holders of our outstanding notes. On July 29, 2014, we entered into a Recapitalization Support Agreement. The Recapitalization Support Agreement set forth the terms through which we expected to either (a) obtain additional liquidity through an equity contribution or subordinated debt incurred in a minimum amount of $150 million on or before October 1, 2014 or (b) consummate a Recapitalization consistent with the material terms and conditions described in the term sheet attached to the Recapitalization Support Agreement.

        We performed an interim impairment test for goodwill and indefinite-lived intangible assets. We completed the first step of the impairment test as of June 30, 2014 and determined that the carrying amount of one of the reporting units exceeded its estimated implied fair value, thereby requiring performance of the second step of the impairment test to calculate the amount of the impairment. In accordance with ASC 350, we recorded a preliminary estimated non-cash impairment loss of approximately $182 million in the condensed consolidated statements of operations and comprehensive loss during the quarter ended June 30, 2014. We completed the second step of the impairment test and recorded an impairment loss of approximately $46.3 million during the quarter ended September 30, 2014.

        In addition to the goodwill impairment losses noted above, we recorded an impairment loss of approximately $1.2 million during the third quarter of 2014 related to the write-off of our 33.6% investment interest in NY Proton. As a result of NY Proton's continued operating losses since its inception in 2010 and our liquidity issues experienced during the quarter ended June 30, 2014, we provided notice to the consortium that we may not be able to provide the full commitment of approximately $10.0 million to this project. Pursuant to the Subscription Agreement entered into with CPPIB on September 26, 2014, we are required to use commercially reasonable efforts to transfer and sell our ownership interest to the consortium or to a third party and transfer the general manager role and any future management services fees to the consortium or a third party.

        During the third quarter of 2012 we recognized goodwill impairment of approximately $69.9 million as a result 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

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PSA screenings for healthy men, as well as suggested changes in treatment pattern for low risk prostate cancer away from definitive treatment. During the fourth quarter of 2012 we incurred an impairment loss of approximately $11.1 million. Approximately $10.8 million relating to goodwill impairment in certain of our reporting units and approximately $0.1 million 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. There was no goodwill impairment recorded for the year ended December 31, 2013.

        The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. The estimated fair value of the reporting unit is allocated to all of the assets and liabilities of the reporting unit (including the unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the estimated fair value of the reporting unit was the purchase price paid. Based on (i) assessment of current and expected future economic conditions, (ii) trends, strategies and forecasted cash flows at each reporting unit and (iii) assumptions similar to those that market participants would make in valuing the reporting units.

        The estimated fair value measurements were developed using significant unobservable inputs (Level 3). For goodwill, the primary valuation technique used was an income methodology based on estimates of forecasted cash flows for each reporting unit, with those cash flows discounted to present value using rates commensurate with the risks of those cash flows. In addition, a market- based valuation method involving analysis of market multiples of revenues and EBITDA for (i) a group of comparable public companies and (ii) recent transactions, if any, involving comparable companies. Assumptions used are similar to those that would be used by market participants performing valuations of regional divisions. Assumptions were based on analysis of current and expected future economic conditions and the strategic plan for each reporting unit.

        Intangible assets consist of trade names, certificates of need, non-compete agreements, licenses and hospital contractual relationships. Trade names and certificates of need have an indefinite life and are tested annually for impairment. Non-compete agreements, licenses and hospital contractual relationships are amortized over the life of the agreement (which typically ranges from 2 to 20 years) using the straight-line method. No intangible asset impairment loss was recognized for the years ended December 31, 2012, 2013, and 2014.

Impairment of Long-Lived Assets

        In accordance with ASC 360, "Accounting for the Impairment or Disposal of Long-Lived Assets", we review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable. Assessment of possible impairment of a particular asset is based on our ability to recover the carrying value of such asset based on our estimate of its undiscounted future cash flows. If these estimated future cash flows are less than the carrying value of such asset, an impairment charge would be recognized for the amount by which the asset's carrying value exceeds its estimated fair value.

Stock-Based Compensation

        All share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense in the statement of operations and comprehensive loss over the requisite service period.

        For purposes of determining the compensation expense associated with the 2012 and 2013 equity-based incentive plan grants, we engaged a third party valuation company to value the business enterprise using a variety of widely accepted valuation techniques, which considered a number of factors such as the financial performance of the Company, the values of comparable companies and the lack of marketability of the Company's equity. The third party valuation company then used the

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probability-weighted expected return method ("PWERM") to determine the fair value of these units at the time of grant. Under the PWERM, the value of the units is estimated based upon an analysis of future values for the enterprise assuming various future outcomes (exits) as well as the rights of each unit class. In developing assumptions for the various exit scenarios, management considered the Company's ability to achieve certain growth and profitability milestone in order to maximize shareholder value at the time of potential exit. Management considers an initial public offering of the Company's stock to be one of the exit scenarios for the current shareholders, as well as a sale or merger/acquisition transaction. For the scenarios the enterprise value at exit was estimated based on a multiple of the Company's EBITDA for the fiscal year preceding the exit date. The enterprise value for the scenario where the Company stays private (and under the majority ownership of Vestar, our equity sponsor) was estimated based on a discounted cash flow analysis as well as guideline company market approach. The guideline companies were publicly-traded companies that were deemed comparable to the Company. The discount rate analysis also leveraged market data of the same guideline companies. For each PWERM scenario, management estimated probability factors based on the outlook of the Company and the industry as well as prospects and timing for a potential exit based on information known or knowable as of the grant date. The probability-weighted unit values calculated at each potential exit date was present-valued to the grant date to estimate the per-unit value. The discount rate utilized in the present value calculation was the cost of equity calculated using the Capital Asset Pricing Model and based on the market data of the guideline companies as well as historical data published by Morningstar, Inc. For each PWERM scenario, the per unit values were adjusted for lack of marketability discount to determine unit value on a minority, non-marketable basis.

        For 2012, 2013, and 2014, the estimated fair value of the units, less an assumed forfeiture rate of 3.9%, is recognized in expense in the Company's consolidated financial statements on a straight-line basis over the requisite service periods of the awards for Class MEP Units. For Class MEP Units, the requisite service period is approximately 18 months, and for Class EMEP Units, the requisite service period is 36 months only if probable of being met. The Class M Units and O Units compensation will be recognized upon the sale of the Company or an initial public offering. Under the terms of the incentive unit grant agreements governing the grants of the Class M Units and Class O Units, in the event of an initial public offering of the Company's common stock, holders have certain rights to receive shares of restricted common stock of the Company in exchange for their Class M Units and Class O Units. The assumed forfeiture rate is based on an average historical forfeiture rate. All outstanding Class EMEP Units and Class L units were canceled without payment to the holder thereof in connection with 21CI's entry into the Fourth Amended LLC Agreement.

Grants under 2013 Plan

        On December 9, 2013, 21CI entered into 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 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.

Income Taxes

        We make estimates in recording our provision for income taxes, including determination of deferred tax assets and deferred tax liabilities and any valuation allowances that might be required against the deferred tax assets. ASC 740, "Income Taxes" ("ASC 740"), requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. For the year ended December 31, 2012, we determined that the valuation allowance was approximately $82.3 million, consisting of $70.3 million against federal deferred tax assets and

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$12.0 million against state deferred tax assets. This represented an increase of $36.8 million over the prior year. For the year ended December 31, 2013, we determined that the valuation allowance should be $97.4 million, consisting of $87.5 million against federal deferred tax assets and $9.9 million against state deferred tax assets. This represented an increase of $15.1 million in valuation allowance. For the year ended December 31, 2014, we determined that the valuation allowance should be $184.0 million, consisting of $163.4 million against federal deferred tax assets and $20.6 million against state deferred tax assets. This represents an increase of $86.6 million in valuation allowance.

        ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740, the impact of an uncertain tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

        We are subject to taxation in the United States, approximately 24 state jurisdictions, the Netherlands, and throughout Latin America, namely, Argentina, Bolivia, Brazil, Costa Rica, Dominican Republic, El Salvador, Guatemala and Mexico. However, the principal jurisdictions for which we are subject to tax are the United States, Florida and Argentina.

        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 routinely 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.

        During 2012, we closed a US Federal income tax examination for tax years 2007 through 2008. All issues proposed were agreed to with the exception of interest and penalties for which an accrual of $2.2 million was recorded. During the third quarter of 2013, we closed the US federal income tax audit related to calendar year 2009 with no material adjustments. We closed the New York state audit for tax years 2006 through 2008 with a favorable result during the first quarter of 2013. During 2014, we reached a favorable settlement with the US Internal Revenue Service related to the interest and penalty issues in tax years 2007 and 2008 and various US state and local and foreign jurisdictions related to tax years 2005 through 2012. As a result, we released $3.2 million of previously recorded reserves.

Recent Pronouncements

        In July 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-11, Income Taxes (Topic 740):Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (ASU 2013-11), which amends ASC 740 to clarify balance sheet presentation requirements of unrecognized tax benefits. ASU 2013-11 was effective for us on January 1, 2014. We adopted ASC 740

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and reclassified approximately $1.2 million of unrecognized tax benefits from income taxes payable to other long term liabilities.

        In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU 2014-08 changes the requirements for reporting discontinued operations in FASB Accounting Standards Codification Subtopic 205-20, such that a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results. ASU 2014-08 requires an entity to present, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of financial position, as well as additional disclosures about discontinued operations. Additionally, ASU 2014-08 requires disclosures about a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation in the financial statements and expands the disclosures about an entity's significant continuing involvement with a discontinued operation. The accounting update is effective for annual periods beginning on or after December 15, 2014. Early adoption is permitted but only for disposals that have not been reported in financial statements previously issued. We are currently evaluating the potential impact of this guidance.

        In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principle of the guidance in ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We are currently evaluating the potential impact of this guidance, which will be effective beginning January 1, 2017.

        In August 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-15, "Presentation of Financial Statements—Going Concern (Subtopic 205-40)." The new guidance addresses management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. Management's evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the potential impact of this guidance.

        In November 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or Equity (ASU 2014-06). The new guidance eliminates use of diversity in practice when evaluating whether the nature of the host contract within a hybrid financial instrument issued in the form of a share is more akin to debt or to equity. Pursuant to ASU 2014-06, entities should determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, weighing each term and feature on the basis of relevant facts and circumstances. That is, an entity should determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host contract. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2015. Early adoption is permitted. We are currently evaluating the potential impact of this guidance.

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        In February 2015, the Financial Accounting Standards Board issued Accounting Standards Update 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (ASU 2015-02). The new guidance intends to reduce the number of consolidation models as well as place more emphasis on risk of loss when determining a controlling financial interest. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2015. Early adoption is permitted. We are currently evaluating the potential impact of this guidance.

Reimbursement, Legislative and Regulatory Changes

        Legislative and regulatory action has resulted in continuing changes in reimbursement under the Medicare and Medicaid programs that will continue to limit payments we receive under these programs.

        Within the statutory framework of the Medicare and Medicaid programs, there are substantial areas subject to legislative and regulatory changes, administrative rulings, interpretations, and discretion which may further affect payments made under those programs, and the federal and state governments may, in the future, reduce the funds available under those programs or require more stringent utilization and quality reviews of our treatment centers or require other changes in our operations. Additionally, there may be a continued rise in managed care programs and future restructuring of the financing and delivery of healthcare in the United States. These events could have an adverse effect on our future financial results.

Inflation

        While inflation was not a material factor in revenue or operating expenses during the periods presented, the healthcare industry is labor- intensive. Wages and other expenses increase during periods of inflation and labor shortages, such as the nationwide shortage of dosimetrists and radiation therapists. In addition, suppliers pass along rising costs to us in the form of higher prices. We have implemented cost control measures to curb increases in operating costs and expenses. We have to date offset increases in operating costs by increasing reimbursement or expanding services. However, we cannot predict our ability to cover, or offset, future cost increases.

Commitments

        The following table sets forth our contractual obligations as of December 31, 2014.

Contractual Cash Obligations
  Total   Less Than
1 Year
  2 - 3 Years   4 - 5 Years   After 5 Years  
 
  (in thousands)
 

Senior secured credit agreement(1)

  $ 118,322     13,872     104,450          

Senior subordinated notes(2)

    466,056     37,530     428,526          

Senior secured second lien notes(3)

    413,420     31,063     382,357          

Senior secured notes(4)

    92,993     8,813     84,180          

Other notes and capital leases(5)

    89,156     32,855     43,329     8,760     4,212  

Operating lease obligations(6)

    543,437     59,413     111,856     97,677     274,491  

Finance obligations(7)

    29,304     2,194     4,777     4,566     17,767  

Total contractual cash obligations

  $ 1,752,688   $ 185,740   $ 1,159,475   $ 111,003   $ 296,470  

(1)
As of December 31, 2014, there was $-0.0- million in aggregate principal amount outstanding under our senior secured revolving credit facility and $90.0 million in aggregate principal amount outstanding under our senior term credit facility (excluding issued but undrawn letters of credit). Interest expense and fees on our senior secured revolving credit facility is based on an assumed interest rate of the one-month LIBOR rate as of December 31, 2014 plus 575 basis points plus

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    unused commitment fees on our $100.0 million senior secured revolving credit facility and 7.5% on our $90.0 million senior secured term credit facility.

(2)
Senior subordinated notes of $380.1 million (excluding original issue discount of $2.4 million), due April 15, 2017. Interest expense is based on an interest rate of 97/8%.

(3)
Senior secured second lien notes of $350.0 million (excluding original issue discount of $1.1 million), due January 15, 2017. Interest expense is based on an interest rate of 87/8%.

(4)
Senior secured notes of $75.0 million, due January 15, 2017. Interest expense is based on an interest rate of 113/4%.

(5)
Other notes and capital leases includes leases relating to medical equipment.

(6)
Operating lease obligations includes land and buildings, and equipment.

(7)
Finance obligations includes real estate under the failed sale-leaseback accounting. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Finance Obligation."

Off-Balance Sheet Arrangements

        We do not currently have any off-balance sheet arrangements with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Sensitivity

        We are exposed to various market risks as a part of our operations, and we anticipate that this exposure will increase as a result of our planned growth. In an effort to mitigate losses associated with these risks, we may at times enter into derivative financial instruments. These derivative financial instruments may take the form of forward sales contracts, option contracts, and interest rate swaps. We have not and do not intend to engage in the practice of trading derivative securities for profit. Because our borrowings under our senior secured credit facilities will bear interest at variable rates, we are sensitive to changes in prevailing interest rates.

Interest Rates

        Outstanding balances under our senior secured credit facility bear interest based on either LIBOR plus an initial spread, or an alternate base rate plus an initial spread, at our option. Accordingly, an adverse change in interest rates would cause an increase in the amount of interest paid. As of December 31, 2014, we have interest rate exposure on $90.0 million of our senior secured credit facility. A 100 basis point change in interest rates on our senior secured credit facility would result in an increase of $0.9 million in the amount of annualized interest paid and annualized interest expense recognized in our consolidated financial statements.

Item 8.    Financial Statements and Supplementary Data

        Information with respect to this Item is contained in our consolidated financial statements beginning with the Index on Page F-1 of this report, which is incorporated herein by reference.

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Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        None.

Item 9A.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

        We maintain disclosure controls and procedures to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, and is accumulated and communicated to management, including the President and Chief Executive Officer and the Chief Financial Officer, to allow for timely decisions regarding required disclosure. On August 25, 2014, Bryan J. Carey resigned as the President, Chief Financial Officer and Vice Chairman of the Company and from the offices and directorships he held with the Company's subsidiaries. We had appointed David Beckman as Interim Chief Financial Officer to serve in that role. On November 25, 2014, 21C terminated its financial advisory and consulting agreement with FTI Consulting, Inc. Accordingly, pursuant to the terms of the agreement, effective as of December 26, 2014, David Beckman is no longer serving as the Company's Interim Chief Financial Officer. Joseph Biscardi, the Company's Senior Vice President, Assistant Treasurer, Controller and Chief Accounting Officer, serves as the Company's principal financial officer. The functions of Chief Financial Officer will be filled by individuals with significant tenure at 21C, including Richard Lewis, Chief Financial Officer—US Operations (9 years), Mr. Biscardi (17 years), and Frank G. English IV, Vice President—International Finance and Treasurer (3 years), until such time as a new Chief Financial Officer is appointed. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. As of December 31, 2014, the end of the period covered by this Annual Report on Form 10-K, our management, with the participation of our principal executive officers and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, our principal executive officers and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2014


REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

        The management of 21st Century Oncology Holdings, Inc. (the "Company") is responsible for the preparation, integrity and fair presentation of the consolidated financial statements appearing in our periodic filings with the Securities and Exchange Commission. The consolidated financial statements were prepared in conformity with United States generally accepted accounting principles appropriate in the circumstances and, accordingly, include certain amounts based on our best judgments and estimates.

        Management is also responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) under the Securities Exchange Act of 1934. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting in accordance with accounting principles generally accepted in the United States of America. Our internal control over financial reporting includes a program of internal audits and appropriate reviews by management, written policies and guidelines, careful selection and training of qualified personnel including a dedicated Compliance department and a written Code of Business Conduct and Ethics adopted by our Board of Directors, applicable to all of our directors, officers and employees.

        Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that

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receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our consolidated financial statements would be prevented or detected in a timely manner. Because of its inherent limitations, including the possibility of human error and the circumvention or overriding of control procedures, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our consolidated financial statements would be prevented or detected. Therefore, even those internal controls determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

        Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued in 1992 by the Committee of Sponsoring Organizations of the Treadway Commission. Management's evaluation did not include an assessment of the effectiveness of internal control over financial reporting for SFRO, which the Company acquired effective February 10, 2014. SFRO represented approximately $186.8 million of the Company's consolidated total assets as of December 31, 2014 and approximately $138.8 million of the Company's consolidated total revenues during the year ended December 31, 2014. Based on this evaluation, management concluded that the Company's internal control over financial reporting, excluding the internal controls of SFRO, was effective as of December 31, 2014.

        This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to an exemption for issuers that are not "large accelerated filers" nor "accelerated filers" set forth in Section 989G(a) set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted into federal law in July 2010.

Changes in Internal Control Over Financial Reporting

        As previously disclosed in Item 9A of the 2013 Form 10-K, management had then concluded that there was a material weakness in internal controls over financial reporting related to 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 OIG. We implemented certain changes to our internal control over financial reporting to address the material weaknesses in our internal control over financial reporting. Specifically, during fiscal year 2014, management implemented a 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. Management's report on internal control over financial reporting is included above. Management has concluded that, as of December 31, 2014, the above identified material weakness had been fully remediated.

        Effective February 10, 2014, we completed the acquisition of SFRO. The facilities acquired as part of the SFRO Acquisition utilize different information technology systems from our other facilities. We are currently integrating our internal control processes at SFRO. Although the SFRO acquisition has been excluded from our assessment of and conclusion on the effectiveness of our internal control over financial reporting, we have concluded there are material weaknesses related to the integration of SFRO into our control environment as of December 31, 2014. Specifically, we did not maintain appropriate segregation of duties over cash, adequate access controls with regard to financial applications, or adequate controls over the processing of expenditures.

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        We are in the process of developing and implementing a remediation plan to address the material weaknesses related to the SFRO integration. The remediation actions that are expected to be taken include the following:

    Integration of the revenue cycle and practice management system platform to our current revenue cycle systems.

    Centralization of the cash management process and consolidation on bank accounts and banking transactions.

    Centralization of vendor payments and processes to our current payment process systems.

        Except as noted in the preceding paragraphs, there has been no change in our internal control over financial reporting that occurred during the year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.    Other Information

        None.

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PART III

Item 10.    Directors, Executive Officers and Corporate Governance

21st Century Oncology Holdings, Inc.'s Executive Officers, Directors and Key Employees

Name
  Age   Position

Daniel E. Dosoretz, M.D. 

    62   Chief Executive Officer and Director

Alejandro Dosoretz

    56   President and Chief Executive Officer of Medical Developers Cooperatief U.A. B.V. and Vidt Centro Medico

Constantine A. Mantz, M.D. 

    46   Chief Medical Officer

Gary Delanois

    62   Senior Vice President, United States Operations

Joseph Biscardi

    46   Senior Vice President, Assistant Treasurer, Controller and Chief Accounting Officer

Richard R. Lewis

    46   Senior Vice President, Chief Financial Officer for United States Operations

Madlyn Dornaus

    62   Senior Vice President, Chief Compliance Officer

Frank G. English, IV

    54   Vice President International Finance and Treasurer

James L. Elrod, Jr. 

    60   Director

Robert L. Rosner

    55   Director

Erin L. Russell

    41   Director

Scott Lawrence

    41   Director

Christian Hensley

    41   Director

James H. Rubenstein, M.D. 

    60   Secretary, Medical Director

Howard M. Sheridan, M.D. 

    70   Director

Background of Executive Officers and Directors

        Daniel E. Dosoretz, M.D., F.A.C.R., F.A.C.R.O. is one of our founders and has served as a director since 1988 and as our Chief Executive Officer since April 1997. Dr. Dosoretz is also employed as a physician by our wholly owned subsidiary, 21st Century Oncology, LLC. Prior to founding the Company, Dr. Dosoretz served as attending physician at the Massachusetts General Hospital. He also was an Instructor and Assistant Professor of Radiation Medicine at Harvard Medical School and Research Fellow of the American Cancer Society. Upon moving to Fort Myers, Florida, he was appointed to the Clinical Faculty as a Voluntary Associate Professor at the University of Miami School of Medicine. He also has been a visiting Professor at Duke University Medical School and is a Distinguished Alumni Visiting Professor in Radiation Oncology at Massachusetts General Hospital, Harvard Medical School. Dr. Dosoretz is board certified in Therapeutic Radiology by the American Board of Radiology. He is a Fellow of the American College of Radiation Oncology and of the American College of Radiology and is a member of the International Stereotactic Radiosurgery Society, the American Society for Therapeutic Radiology and Oncology and the American Society of Clinical Oncology. Dr. Dosoretz graduated from the University of Buenos Aires School of Medicine with the Gold medal for being top of his class, and served his residency in Radiation Oncology at the Department of Radiation Medicine at the Massachusetts General Hospital, Harvard Medical School, where he was selected Chief Resident of the department. Dr. Dosoretz's role as founder and Chief Executive Officer of the Company, history with the Company and significant operating experience in the healthcare industry and extensive board experience led to the conclusion that Dr. Dosoretz should serve as a director of the Company.

        Alejandro Dosoretz joined us in March 2011 in conjunction with our purchase of MDLLC where he serves in his current capacity as President and Chief Executive Officer of Medical Developers Cooperatief U.A. B.V. and Vidt Centro Medico. Prior to 2011, Mr. Dosoretz served as President and

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Chief Executive Officer of Vidt Centro Medico, where he held that position since 2003. He previously served as President of Provincia ART from 2001-2003. From 1983-2001, Mr. Dosoretz acted as an advisor to various healthcare companies in Argentina. Mr. Dosoretz has served on Argentina's Congress' Health Advisory Committee, as a general advisor to Argentina's National Institute for Retirees and Pensioners, and has represented Argentina's Ministry of Foreign Affairs. He holds a Public Accounting degree from the University of Buenos Aires, School of Economics.

        Constantine A. Mantz, M.D. joined us in 2000 and has served in his current capacity since February 2011 and formerly as Senior Vice President of Clinical Operations from March 2009 to February 2011. Dr. Mantz is also employed as a physician by our wholly owned subsidiary, 21st Century Oncology, Inc. Dr. Mantz received a Bachelor of Science Degree in Biology from Loyola University of Chicago. He earned his medical degree from the University of Chicago's Pritzker School of Medicine and did a surgical internship at the Hennepin County Medical Center in Minneapolis, Minnesota. Dr. Mantz completed his radiation oncology residency at the University of Chicago Hospitals, is Board Certified in Radiation Oncology by the American Board of Radiology and is a member of ACR, the American Medical Association, the American Society for Radiation Oncology and the Association of Freestanding Radiation Oncology Centers. During the course of his career, Dr. Mantz has been involved in numerous radiation therapy research projects, published professional journal articles and given lectures and presented abstracts and poster sessions at national meetings concerning cancer treatment. Dr. Mantz has special clinical interests in the study and treatment of prostate cancer and breast cancer. Dr. Mantz also has published and lectured on healthcare payment and delivery reform in oncology.

        Gary Delanois moved into his current role as Senior Vice President, United States Operations in August 2014 after leading the growth of our integrated cancer care operations network of employed and affiliated physicians. Prior to joining the Company, Mr. Delanois was the Administrator for a large urology group practice that was one of the first multispecialty groups to join the Radiation Therapy Services, Inc. network. Mr. Delanois has more than 24 years of experience in the healthcare field, including assisting large, integrated healthcare delivery systems establish primary and specialty care physician networks. He began his career in business as a certified public accountant with Ernst & Young in Indianapolis, and later progressed to a Senior Manager position with Coopers & Lybrand in Southwest Florida before leaving to become Chief Operating Officer with a diversified and multi-divisional private company. Mr. Delanois is a certified public accountant and a member of the American Institute of CPAs and the Florida Institute of Public Accountants.

        Joseph Biscardi joined us in June 1997 and serves as our Senior Vice President, Assistant Treasurer, Controller and Chief Accounting Officer. Prior to joining the Company, Mr. Biscardi worked for PricewaterhouseCoopers, LLP from 1993 to June 1997. Mr. Biscardi holds a B.B.A. in accounting from Hofstra University. He is a Certified Public Accountant in New York and a member of the American Institute of Certified Public Accountants, a member of the Healthcare Financial Management Association and a member of the Financial Executives International.

        Richard R. Lewis joined us in January 2006 and serves as our Senior Vice President, and Chief Financial Officer for United States Operations. Prior to joining the Company, Mr. Lewis worked for Anthem Blue Cross and Blue Shield in the self-insured National Accounts Division serving in various roles including as the Director of Coast and Budget, and Director of Administrative Services from April 1996 to December 2005. Mr. Lewis holds a Bachelor of Science in Business Administration degree in accounting from the Fisher College of Business at The Ohio State University and an MBA from the Joseph M. Katz Graduate School of Business at The University of Pittsburgh. He is a member of the Accountancy Board of Ohio and the American Institute of Certified Public Accountants.

        Madlyn Dornaus joined us in 2004 and has served in her current capacity as Senior Vice President and Chief Compliance Officer since September 2009. Ms. Dornaus received her B.S. degree from Illinois State University and her M.B.A. from the University of Illinois. Prior to joining the Company,

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Ms. Dornaus was National Vice President for Per Se Technologies and held operational leadership roles as Regional Vice President at Curative Health Services and Concentra. She is a Certified Healthcare Compliance Officer and a member of the Medical Group Management Association.

        Frank G. English, IV began working with the Company as an international acquisition and finance consultant in March 2009 in conjunction with our investment in MDLLC. He joined the Company full time in August 2011, as Vice President, International Finance. In April 2012 Mr. English assumed the additional responsibility of Corporate Treasurer. During 2010 Mr. English was Acting Treasurer of Community Education Centers. Prior to joining us in 2009, Mr. English worked for Banco Santander's Global Corporate and Investment Bank in New York as Managing Director, U.S. Energy and Power Group, assisting U.S. multi-nationals globally, but primarily in Latin America. Mr. English received his B.A. from Washington and Lee University and his MBA from Duke University, Fuqua School of Business.

        James L. Elrod, Jr. has been a member of our Board of Directors since February 2008 and served as Chairman of our Board of Directors from February 2008 to October 2014. Mr. Elrod is a Managing Director of Vestar. Prior to joining Vestar in 1998, Mr. Elrod was Executive Vice President, Finance and Operations for Physicians Health Service, a public managed care company. Prior to that, he was a Managing Director and Partner of Dillon, Read & Co. Inc. Mr. Elrod is currently a director of National Mentor Holdings, Inc. and was a director of Joerns Healthcare, LLC until August 2010 and Essent Healthcare, Inc. until December 2011. Mr. Elrod received his A.B. from Colgate University and his MBA from Harvard Business School. Mr. Elrod's experience in the healthcare industry and collective board experience, financial experience, and diverse personal background led to the conclusion that Mr. Elrod should serve as a director of the Company.

        Robert L. Rosner has been a member of our Board of Directors since February 2012 and the Chairman of our Board of Directors since October 2014. Mr. Rosner was a founding partner of Vestar in 1988 and currently serves as Co-President of the firm. Prior to founding Vestar, Mr. Rosner was with the Management Buyout Group at The First Boston Corporation. Mr. Rosner is currently a director of Institutional Shareholder Services, Triton Container International Limited, Tervita Corporation, and was previously a director of Seves S.p.a. until October 2014, Group OGF until October 2013, AZ Electronic Materials S.A. until November 2010, and Sunrise Medical, Inc. until December 2012. He serves as a member of the Graduate Executive Board of The Wharton School and is a Trustee of The Lawrenceville School. Mr. Rosner received a B.A. in Economics from Trinity College and an MBA with Distinction from The Wharton School at the University of Pennsylvania. Mr. Rosner's collective board experience, financial experience, history in governance matters and diverse personal background led to the conclusion that Mr. Rosner should serve as a director of the Company.

        Erin L. Russell has been a member of our Board of Directors since February 2008. Ms. Russell is a Principal of Vestar, and is primarily focused on healthcare investments. Ms. Russell joined Vestar in 2000. Previously, she was a member of the mergers and acquisitions group at PaineWebber, Inc. Ms. Russell is a director of DeVilbiss Healthcare, LLC and was previously a director of DynaVox Inc. until January 2015. In addition, she serves on the National Advisory Board of the Jefferson Scholars Foundation at the University of Virginia. Ms. Russell received a B.S. from the McIntire School of Commerce at the University of Virginia and her MBA from Harvard Business School. Ms. Russell's experience in the healthcare industry, board experience and diverse personal background led to the conclusion that Ms. Russell should serve as a director of the Company.

        Scott Lawrence has been a member of our Board of Directors since September 2014. Mr. Lawrence leads the team responsible for making significant minority investments in public companies seeking a constructive, longer-term relationship with CPPIB. He has more than 15 years of experience in the financial services sector. Mr. Lawrence joined the CPPIB's Private Investments group in 2005 as a Senior Principal to start the Infrastructure Investments group. Prior to that, he was an investment

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professional at Onex Corporation and held positions in both finance and operations at GE Capital Real Estate and GE Plastics. Mr. Lawrence holds an MBA from Harvard Business School and a Bachelor of Commerce (Honours) from Queen's University in Canada. He also serves on the board of TORC Oil & Gas Ltd., and has served on numerous other boards in a variety of industries. Mr. Lawrence's experience in the healthcare industry, board experience and diverse personal background led to the conclusion that Mr. Lawrence should serve as a director of the Company.

        Christian Hensley has been a member of our Board of Directors since September 2014. Prior to joining CPPIB's Relationship Investments group in 2012, Mr. Hensley spent 11 years in the private equity and growth capital industry at Charterhouse Group and Planier Capital. As a principal investor, Mr. Hensley previously served on five company boards in the Healthcare Services, Business Services, Communications and Education sectors. Mr. Hensley began his career in the Investment Banking division of Salomon Brothers in New York City. He holds an MBA from Harvard Business School and a BA from the University of Pennsylvania. Mr. Hensley's experience in the healthcare industry, board experience and diverse personal background led to the conclusion that Mr. Hensley should serve as a director of the Company.

        James H. Rubenstein, M.D. joined us in 1989 as a physician and has served as Medical Director since 1993 and as a director from January 1993 through September 2014. Dr. Rubenstein is also employed as a physician by our wholly owned subsidiary, 21st Century Oncology, LLC. Prior to joining the Company, Dr. Rubenstein was an Assistant Professor of Radiation Oncology at the University of Pennsylvania and later became Co-Director of its Radiation Oncology Residency Program. He also served as Chairman of the Department of Medicine for Columbia Regional Medical Center in Southwest Florida and became a Clinical Assistant Professor at the University of Miami School of Medicine's Department of Radiology. He is board certified in Internal Medicine by the American Board of Internal Medicine and in Radiation Oncology by the American Board of Radiology. He graduated from New York University School of Medicine and completed his internship and residency in internal medicine at Beth Israel Hospital in Boston, at the same time working as an Assistant Instructor in internal medicine for Harvard University's School of Medicine. Dr. Rubenstein's years of experience in the healthcare industry career, particularly in radiation oncology and with the Company, as well as his familiarity with all aspects of its business led to the conclusion that Dr. Rubenstein should serve as a director of the Company.

        Howard M. Sheridan, M.D. is one of our founders and has served as a director since 1988. Dr. Sheridan planned and developed our first radiation treatment center. Prior to joining us, Dr. Sheridan served as President of the medical staff at Southwest Florida Regional Medical Center as well as chairman of the Department of Radiology. Dr. Sheridan currently serves as Chairman of Edison Bancshares, Inc. He previously served on the Advisory Board of Southeast Bank, N.A., and also served as a founding Director and member of the Executive Compensation and Loan Committee of Heritage National Bank from 1989 until September 1996, when Heritage was acquired by SouthTrust Corporation. Dr. Sheridan has practiced interventional radiology and diagnostic radiology in Fort Myers, Florida from 1975 until accepting the chairmanship in April 2004. Dr. Sheridan is a member of the American Medical Association, the Florida Medical Association and the American College of Radiology. Dr. Sheridan is the Vice President of 21st Century C.A.R.E., a non-profit dedicated to cancer patient assistance, research and education. Dr. Sheridan serves as Vice-Chairman of the Tulane Medical School's Board of Governors. He graduated from Tulane Medical School and completed his residency at the University of Colorado Medical Center. Dr. Sheridan is board certified by the American Board of Radiology and the American Board of Nuclear Medicine. Dr. Sheridan's board experience, years of experience in the healthcare industry, particularly in radiation oncology and with the Company, as well as his familiarity with all aspects of its business since its founding led to the conclusion that Dr. Sheridan should serve as a director of the Company.

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Board Composition

        Effective as of September 26, 2014, we entered into the Amended Securityholders Agreement. The Amended Securityholders Agreement amends and restates the existing securityholders agreement such that, among other things, the Board of Directors is comprised of (i) two managers nominated by the Majority Preferred Holders, (ii) three managers nominated by funds affiliated with Vestar and (iii) Dr. Daniel E. Dosoretz and one manager he nominated after consultation with Vestar and the Majority Preferred Holders, subject to certain ongoing security ownership provisions. In addition, the size of our Board of Directors may be increased to include one independent director nominated by the Majority Preferred Holders at their election. Following an event of default under the Certificate of Designations, the parties to the Amended Securityholders Agreement agree to vote in favor of a changed board composition at the election of the Majority Preferred Holders.

        Each director serves for annual terms and until his or her successor is elected and qualified. The Company's Board of Directors presently consists of seven members.

        We are controlled by 21CI. 21CI does not have a formal policy regarding the procedures by which equityholders may recommend nominees to its Board of Managers. However, any recommendations received from equityholders pursuant to our submission procedures are generally evaluated in the same manner that potential nominees suggested by board members are evaluated. 21CI is party to the Amended Securityholders Agreement, pursuant to which the parties thereto must cause the Board of Managers of 21CI to consist of (i) two managers nominated by the Majority Preferred Holders, (ii) three managers nominated by Vestar and (iii) Dr. Daniel E. Dosoretz and one manager he nominated after consultation with Vestar and the Majority Preferred Holders. See "Item 13. Certain Relationships and Related Transactions, and Director Independence."

Board Committees

        The Amended Securityholders Agreement provides for the establishment of an Executive Committee of the Board of Directors (the "Executive Committee"), which will carry out all activities of our Board of Directors to the extent permitted by applicable Delaware law. Our Board of Directors has the authority to appoint committees to perform certain management and administration functions. Our Board of Directors has also provided for an Audit and Compliance Committee, a Capital Allocation Committee and a Compensation Committee. Each committee is comprised of three members, one of which is designated by the Majority Preferred Holders, one of which is designated by a fund affiliated with Vestar and one of which is designated by Dr. Dosoretz, subject to certain ongoing security ownership provisions.

Executive Committee

        Mr. Rosner, Dr. Dosoretz and Mr. Hensley serve on the Executive Committee, with Mr. Rosner serving as the Chair. The Executive Committee has and may exercise all the powers and authority of our Board of Directors in the management of the business and affairs of the Company, including to take and authorize actions that would otherwise be in the jurisdiction of our Board of Directors, except to the extent (i) such delegation of authority would not be permitted under applicable Delaware law and (ii) the power and authority is reserved to another existing committee under its existing charter. The Executive Committee met three times during 2014. The Executive Committee operates under a written charter, which was effective as of September 26, 2014 and adopted by our Board of Directors in September 2014.

Audit and Compliance Committee

        Messrs. Elrod and Hensley and Ms. Russell serve on the Audit and Compliance Committee, with Mr. Elrod serving as the Chair. The Audit and Compliance Committee is responsible for reviewing and

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monitoring our accounting controls, related party transactions, internal audit functions and compliance with federal and state laws that affect our business and recommending to the Board of Directors the engagement of our outside auditors. The Audit and Compliance Committee met four times during 2013 and six times during 2014. The Audit and Compliance Committee operates under a written charter, which was amended and restated effective as of September 26, 2014 and adopted by our Board of Directors in September 2014. Our Board of Directors has determined that each of its members is financially literate. However, as we are privately held and controlled by affiliates of Vestar, our Board of Directors has determined that it is not necessary to designate one or more of its Audit and Compliance Committee members as an "audit committee financial expert" at this time.

Capital Allocation Committee

        Messrs. Dosoretz and Hensley and Ms. Russell serve on the Capital Allocation Committee, with Ms. Russell serving as the Chair. The Capital Allocation Committee reviews and either approves, on behalf of the Board of Directors, or recommends to the Company's Board of Directors for approval all material expenditures related to equipment, acquisitions and de novo development, among others. The Capital Allocation Committee met once during 2013 and six times during 2014. The Capital Allocation Committee operates under a written charter, which was amended and restated effective as of September 26, 2014 and adopted by our Board of Directors in September 2014.

Compensation Committee

        Messrs. Rosner, Sheridan and Lawrence serve on the Compensation Committee, with Mr. Rosner serving as the Chair. The Compensation Committee reviews and either approves, on behalf of our Board of Directors, or recommends to our Board of Directors for approval the annual salaries and other compensation of our executive officers and individual unit incentive awards. The Compensation Committee also provides assistance and recommendations with respect to our compensation policies and practices and assists with the administration of our compensation plans. The Compensation Committee met once during 2013 and two times during 2014. The Compensation Committee operates under a written charter, which was amended and restated effective as of September 26, 2014 and adopted by our Board of Directors in September 2014.

Code of Ethics

        Our Board of Directors expects its members, as well as its officers and employees, to act ethically at all times and to acknowledge in writing their adherence to the policies comprising its code of conduct and as applicable, in Our Code of Ethics for Senior Financial Officers and Chief Executive Officer (our "Code of Ethics"). Our Code of Ethics is posted on our website located at www.21co.com under the heading "Code of Conduct for Principal Executive Officers and Senior Financial Officers." We intend to disclose any amendments to our Code of Ethics and any waiver from a provision of such code, as required by the SEC, on our website within five business days following such amendment or waiver. Copies of our Code of Ethics are available upon request, without charge, by writing or telephoning us at 21st Century Oncology Holdings, Inc., 2270 Colonial Boulevard, Fort Myers, Florida 33907, Attn: Corporate Secretary, (239) 931-7275.

Item 11.    Executive Compensation

        References in this Item 11 to "we", "us", "our" and "the Company" are references to 21st Century Oncology Holdings, Inc. and its subsidiaries, consolidated professional corporations and associations and unconsolidated affiliates, unless the context requires otherwise or unless indicated otherwise.

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Compensation Discussion and Analysis

        The following discussion and analysis of compensation arrangements of our named executive officers should be read together with the compensation tables and related disclosures with respect to our current plans, considerations, expectations and determinations regarding compensation.

Executive Summary

        The primary objectives of our executive compensation policies are to attract and retain talented executives to effectively manage and lead our Company and create value for our equityholders. Through our executive compensation policies, we seek to align the level of our executive compensation with the achievement of our corporate objectives, thereby aligning the interests of our management with those of our equityholders.

        The compensation of our named executive officers generally consists of base salary, annual cash incentive payments, long-term equity incentives and other benefits and perquisites. In addition, our named executive officers are eligible to receive severance or other benefits upon termination of their employment with us. In setting an individual executive officer's initial compensation package and the relative allocation among different types of compensation, we consider the nature of the position being filled, the scope of associated responsibilities, the individual's qualifications, as well as Vestar's experience with other companies in its investment portfolio and general market knowledge regarding executive compensation.

        The discussion below explains our compensation decisions with respect to fiscal year 2014, our last fiscal year. Throughout this Annual Report, the following officers are referred to as our named executive officers: (i) Daniel E. Dosoretz, M.D., our Chief Executive Officer since April 1997, (ii) Constantine A. Mantz, M.D., our Chief Medical Officer since February 2011, (iii) Norton L. Travis, who had been our Executive Vice President and General Counsel since joining us in February 2008 until he resigned effective December 31, 2014 and (iv) Bryan J. Carey who had been our Vice Chairman and Chief Financial Officer since January 2012 and President since February 2014 until he resigned effective August 25, 2014.

Executive Compensation Philosophy

        The compensation policies for our named executive officers have been designed based upon our view that the ownership by management of equity interests in our business is the most effective mechanism for providing incentives for management to maximize gains for equityholders, that annual cash incentive compensation should be linked to metrics that create value for our equityholders and that other elements of executive compensation should be set at levels that are necessary, within reasonable parameters, to successfully attract, retain and motivate optimally talented and experienced executives.

Role of Our Compensation Committee

        Our Compensation Committee evaluates and determines the levels and forms of individual compensation for our named executive officers. Under the term of its charter, our Compensation Committee reviews and either approves, on behalf of the Company's Board of Directors, or recommends to the Company's Board of Directors for approval the annual salaries and other compensation for our executive officers and individual unit incentive awards. The Compensation Committee develops and determines all components of executive officer compensation, as well as provides assistance and recommendations to the Company's Board of Directors with respect to our incentive-compensation plans, equity-based plans, compensation policies and practices and assists with the administration of our compensation and benefit plans. Messrs. Rosner, Sheridan and Lawrence serve on the Compensation Committee, which met once during 2013 and two times during 2014.

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Compensation Determination Process

        Our Compensation Committee determines or recommends to the Board of Directors for determination the compensation of each of our named executive officers and solicits input from our Chief Executive Officer in determining the compensation (particularly base salary and annual cash incentive payments) of our named executive officers. The Compensation Committee does not retain compensation consultants to review our policies and procedures with respect to executive officer compensation

Effect of Accounting and Tax Treatment on Compensation Decisions

        In the review and establishment of our compensation program, we consider the anticipated accounting and tax implications to us and our named executive officers. While we consider the applicable accounting and tax treatment of alternative forms of equity compensation, these factors alone are not dispositive, and we also consider the cash and non-cash impact of the programs and whether a program is consistent with our overall compensation philosophy and objectives.

Compensation Committee Interlocks and Insider Participation

        Messrs. Rosner, Sheridan and Lawrence serve on the Compensation Committee. No executive officer of the Company served as a director of any corporation for which any of these individuals served as an executive officer, and there were no other compensation committee interlocks with the companies with which these individuals or the Company's other directors are affiliated.

        Dr. Sheridan has certain related party relationships with us requiring disclosure under the rules and regulations of the SEC. These related party relationships include, among other things, ownership interests held by Dr. Sheridan in real estate partnerships, which own treatment centers and properties leased by the Company, a medical services provider, to which we provide billing and collections services and an insurance company which provides us with malpractice insurance coverage. See "Item 13. Certain Relationships and Related Transactions, and Director Independence." Dr. Sheridan is one of our founders and previously served as Chairman of our Board of Directors until February 2008.

Risk Considerations in Determining Compensation

        We regularly assess our compensation policies and practices in response to current public and regulatory concern about the link between incentive compensation and excessive risk taking by corporations. We have concluded that our compensation program does not motivate imprudent risk taking and any risks involved in compensation are not reasonably likely to have a material adverse effect on the Company. In reaching this conclusion, we believe that the following risk oversight and compensation design features guard against excessive risk-taking:

    Establishing base salaries consistent with executives' responsibilities so that they are not motivated to take excessive risks to achieve a reasonable level of financial security;

    Determining cash and equity incentive awards based on achievement of performance metrics that provide a simple, but encompassing and powerful, performance goal that aligns the strategies and efforts of the enterprise across operational groups and geographies, and also helps ensure that extraordinary compensation is tied to creation of enhanced value for stockholders;

    Designing long-term compensation, including vesting provisions for equity compensation awards, to reward executives for driving sustainable, profitable, growth for stockholders; and

    Ensuring oversight of the Compensation Committee in the operation of our compensation plans.

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Elements of Compensation

        We generally deliver executive compensation through a combination of annual base salary, annual cash incentive payments, long-term equity incentives and other benefits and perquisites. We believe that this mix of elements is useful in achieving our primary compensation objectives. The payment of executive compensation is determined by the Compensation Committee, and we do not target any particular form of compensation to encompass a majority of annual compensation provided to our executive officers.


EXECUTIVE COMPENSATION

Summary Compensation Table

        The following table provides summary information concerning compensation paid or accrued by us to or on behalf of our named executive officers for services rendered to us during the prior two fiscal years.

 
  Fiscal
Year
  Salary   Bonus(1)   Stock
Awards(2)
  Non-Equity
Incentive Plan
Compensation
  Other Annual
Compensation
  Total  

Daniel E. Dosoretz M.D.,

    2014   $ 1,047,690   $ 37,086   $   $ 850,000   $ 179,363 (3) $ 2,114,139  

Chief Executive Officer and

    2013     1,200,000     35,284     5,534,725     400,000     857,039 (3)   8,027,048  

Director

                                           

Constantine A. Mantz, M.D.,

   
2014
   
1,730,770
   
283,206
   
   
   
180
   
2,014,156
 

Chief Medical Officer

    2013     1,245,386     260,377     510,772         149     2,015,684  

Norton L. Travis

   
2014
   
900,000
   
   
   
   
113,308

(4)
 
1,013,308
 

Executive Vice President and

    2013     900,000         2,284,712         441,958 (4)   3,626,670  

General Counsel

                                           

Bryan J. Carey

   
2014
   
527,261
   
   
   
   
303,323

(4)
 
830,584
 

Chief Financial Officer

    2013     600,000     300,000     3,055,052         603,562 (4)   4,558,614  

(1)
The amounts set forth in this column represent discretionary bonuses approved by the Company's Board of Directors except for Dr. Dosoretz's 2014 and 2013 bonuses, which were based on production and ancillary bonus arrangements set forth in his physician employment agreement.

(2)
No stock awards were granted in 2014. 2013 stock awards granted on December 9, 2013 with the initial grants under the 21CI 2013 equity-based incentive plan.

(3)
These amounts consist of: (i) compensation associated with the personal use of the Company's corporate aircraft in 2014 and 2013 in the amounts of $178,571 and $205,105, respectively, (ii) life insurance premiums paid by the Company in 2014 and 2013 of $792 and $684, respectively, and (iii) employer 401(k) match of $1,250 in 2013. Includes a one-time incentive payment for the closing of OnCure and other corporate development activities in 2013 of $650,000.

(4)
These amounts consist of life insurance premiums paid by the Company in 2014 and 2013, and employer 401(k) match paid in 2013. Includes one-time incentive payments for the closing of OnCure as well as other corporate development activities in 2013 which total $440,000 and $550,000 for Mr. Travis and Mr. Carey, respectively. Mr. Carey also received payment of $48,428 and $52,032 as a gross-up payment for the vesting of his preferred units in 2014 and 2013, respectively. Mr. Travis received $112,516 in accrued vacation and other benefits in 2014. In addition Mr. Carey received separation payments of $248,259 and compensation associated with the personal use of the Company's corporate aircraft of $6,413 in 2014.

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Employment Agreements

Executive Employment Agreements with Daniel E. Dosoretz, M.D.

        We have entered into a Second Amended and Restated Executive Employment Agreement, dated as of May 6, 2014 and amended on September 25, 2014, with Daniel E. Dosoretz, M.D., pursuant to which Dr. Dosoretz serves as our Chief Executive Officer. The employment term is a five-year term with automatic two-year extensions thereafter unless either party provides the other 120 days' prior written notice of its intention not to renew the employment agreement.

        Dr. Dosoretz is currently entitled to receive an annual base salary of $300,000 and entitled to such increases in his annual base salary as may be determined by the Company's Board of Directors or Compensation Committee from time to time. In the event of a Change of Control of the Company (as defined in the employment agreement), a material deleveraging of the Company or a material refinancing or recapitalization of the Company, Dr. Dosoretz's annual base salary will be increased to $1,200,000. Dr. Dosoretz is also eligible to earn an annual performance-based incentive bonus of not less than $300,000 based upon the attainment of one or more pre-established performance goals established by the Board of Directors or the Compensation Committee.

        Dr. Dosoretz is also entitled to participate in our employee benefit plans on the same basis as those benefits are generally made available to our other officers. Dr. Dosoretz is entitled to use the Company's corporate jet in the conduct of business on behalf of the Company and up to 300 hours of usage per year for personal use. We have also agreed to indemnify Dr. Dosoretz in connection with his capacity as our director and officer.

        If Dr. Dosoretz resigns or otherwise voluntarily terminates his employment and the termination is not for good reason during the term of the agreement, he will be entitled to receive his base salary accrued and unpaid through the date of termination and his earned and unpaid annual cash incentive payment, if any, for the fiscal year prior to the termination date. Dr. Dosoretz shall also receive any nonforfeitable benefits already earned and payable to him under the terms of any deferred compensation, incentive or other benefit plan maintained by the Company, payable in accordance with the terms of the applicable plan (all amounts in this section are referred to as "Accrued Compensation").

        If Dr. Dosoretz's employment is terminated by us without "cause" (as defined in his employment agreement) or by Dr. Dosoretz for "good reason" (as defined in his employment agreement), subject to his execution of a release of claims against us and his continued compliance with the restrictive covenants described below, and in addition to the payment of Accrued Compensation, the Company is obligated to make monthly payments to Dr. Dosoretz for a period of 24 months after his termination date. Each monthly payment shall be equal to 1/12th of the sum of (i) Dr. Dosoretz's annual base salary, as in effect at the termination date, plus (ii) the amount equal to the sum of his bonuses for the three prior years divided by three. Dr. Dosoretz shall also be permitted to continue participation at the Company's expense in all benefit and insurance plans, coverage and programs for one year in which he was participating prior to the termination date.

        If Dr. Dosoretz's employment terminates due to a "disability" (as defined in his employment agreement), he will be entitled to receive the Accrued Compensation and any other disability benefits payable pursuant to any long-term disability plan or other disability program or insurance policies maintained or provided by the Company. If Dr. Dosoretz dies during the term of his employment term, the Company shall pay to his estate a lump sum payment equal to the sum of (i) his Accrued Compensation and (ii) the Board of Director's good faith estimated annual cash incentive payment for the fiscal year in which the death occurs (on a pro rata basis for the number of whole or partial months in the fiscal year in which the death occurs through the date of death) based on the performance of the Company at the time of his death. In addition, the death benefits payable pursuant

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to any retirement, deferred compensation or other employee benefit plan maintained by the Company shall be paid to the beneficiary designated by Dr. Dosoretz in accordance with the terms of the applicable plan.

        Should Dr. Dosoretz be terminated as Chief Executive Officer for any reason, notwithstanding any other provision in the employment agreement, Dr. Dosoretz may elect to remain employed by the Company as a senior physician providing radiation oncology services at the Company's and its subsidiaries' integrated cancer care centers and that, under such circumstances, Dr. Dosoretz and the Company, or one of its affiliates, shall enter into a new employment agreement pursuant to which Dr. Dosoretz will receive an annual base salary of $1,000,000 and be eligible to participate in such other performance, bonus and benefit plans afforded other senior physicians of the Company and receive comparable fringe benefits to such other senior physicians.

        Dr. Dosoretz is also subject to a covenant not to disclose our confidential information during his employment term, and at all times during his employment term and ending three years after his termination date, Dr. Dosoretz covenants not to compete with us, not to interfere or disrupt the relationships we have with any joint venture party, any patient, referral source, supplier or other person having a business relationship with the Company, not to solicit or hire any of our employees and not to publish or make any disparaging statements about us or any of our directors, officers or employees. If Dr. Dosoretz breaches or threatens to breach these covenants, the Company shall be entitled to temporary and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, to enforce such provisions in any action or proceeding instituted in any court in the State of Florida having subject matter jurisdiction. The provision with respect to injunctive relief shall not, however, diminish the Company's right to claims and recover damages.

Physician Employment Agreement with Constantine A. Mantz, M.D.

        We have entered into a physician employment agreement with Constantine A. Mantz, dated effective as of July 1, 2003 and as amended, pursuant to which Dr. Mantz serves as our Chief Medical Officer and provides medical services as a radiation oncologist. The employment term commenced on July 1, 2003 and is a five-year term with automatic one-year extensions thereafter unless either party provides the other 90 days' prior written notice of its intention not to renew the employment agreement. Dr. Mantz is currently entitled to receive an annual base salary of $1,620,000 and the Company shall be obligated to pay all medical malpractice insurance premiums during employment and any "tail" coverage premiums after termination or expiration of this agreement if Dr. Mantz's employment is terminated without cause, or due to death or disability. Further, during Dr. Mantz's employment, the Company will provide basic hospital and major medical insurance coverage to him to the extent obtainable with coverage amounts as the Company shall in its sole discretion determine and subject to the limitations and restrictions of the Company's group health plan.

        In addition, Dr. Mantz is entitled to receive an annual production incentive bonus of up to $1,000,000 based on a pro rata share of 19.0% of the collections of professional fees (as defined) over and above physician salaries, benefits, coverage and other defined reductions with respect to the Company's radiation oncology centers and certain other ancillary services provided in the Lee County, Florida local market.

        If an event of termination occurs for any reason, Dr. Mantz shall be entitled to (i) receive his Accrued Compensation determined as of the effective date of termination and not theretofore paid and (ii) receive or continue to receive benefits due or payable under any pension or profit sharing plan and any disability, medical and life insurance plans maintained by the Company.

        Dr. Mantz is also subject to a covenant not to disclose our confidential information during his employment term and at all times during his employment term and ending two years after his termination date, Dr. Mantz has agreed (i) not to practice radiation oncology at any center in Lee,

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Collier or Charlotte County, Florida or at those hospitals in Lee, Collier or Charlotte County, Florida where physicians employed by the Company or an affiliate of the Company are, at the time of such termination, practicing radiation oncology, and (ii) not to solicit or hire any of our employees.

Executive Employment Agreement with Norton L. Travis

        We entered into an executive employment agreement, dated effective as of February 21, 2008, with Norton L. Travis, pursuant to which Mr. Travis served as our Executive Vice President and General Counsel. The employment term was a five-year term with automatic two-year extensions thereafter unless either party provided the other 120 days' prior written notice of its intention not to renew the employment agreement. On February 3, 2011, the employment agreement was amended to provide for a termination date of February 3, 2016 with automatic extensions thereafter unless either party provided the other 120 days prior written notice not to renew the agreement. Pursuant to an amendment dated as of June 11, 2012, Mr. Travis had the option to extend the initial term of his employment by an additional two years at any time prior to the second anniversary of the date of execution the amendment.

        Mr. Travis was entitled to receive an annual base salary of $900,000 and entitled to such increases in his annual base salary as may be determined by the Company's Board of Directors or compensation committee from time to time. With respect to each full fiscal year during the employment term, Mr. Travis was also eligible to earn an annual cash incentive payment of not less than $300,000, (as the Company's Board of Directors may, but not be obligated to adjust from time to time, the "Travis Target Bonus"), the actual amount of the bonus to be determined by the Company's Board of Directors pursuant to a bonus plan based on factors including, without limitation, the Company's PF Adjusted EBITDA and net debt targets. Mr. Travis was also entitled to participate in our employee benefit plans on the same basis as those benefits are generally made available to our other officers. We also agreed to indemnify Mr. Travis in connection with his capacity as an officer.

        As part of our overall plan for the cost-cutting and consolidation of corporate services and overhead, we determined not to renew the office lease for our Great Neck, New York based legal department when the lease expired at the end of 2014, and instead to relocate the legal department to its corporate headquarters in Ft. Myers, Florida. The Company's Executive Vice President and General Counsel, Norton L. Travis, whose employment agreement provided that he would be based in New York and not be required to relocate, advised us that, for personal and family reasons, he would not relocate to Ft. Myers. As a result, the Company and Mr. Travis mutually agreed that effective as of December 31, 2014, Mr. Travis would resign as the Company's Executive Vice President and General Counsel, and assume a new role as a consultant to the Company to assist in the transition of the Company's legal services. Because Mr. Travis resigned, he was entitled to receive his Accrued Compensation.

        Mr. Travis is also subject to a covenant not to disclose our confidential information during his employment term, and ending two years after his termination date, Mr. Travis covenants not to compete with us, not to interfere or disrupt the relationships we have with any joint venture party, any patient, referral source, supplier or other person having a business relationship with the Company, not to solicit or hire any of our employees and not to publish or make any disparaging statements about us or any of our directors, officers or employees. If Mr. Travis breaches or threatens to breach these covenants, the Company shall be entitled to temporary and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, to enforce such provisions in any action or proceeding instituted in any court in the State of Florida having subject matter jurisdiction. The provision with respect to injunctive relief shall not, however, diminish the Company's right to claims and recover damages.

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Executive Employment Agreement with Bryan J. Carey

        We entered into an executive employment agreement, dated effective as of January 1, 2012, with Bryan J. Carey, pursuant to which Mr. Carey served as President, Vice Chairman and Chief Financial Officer. The employment term was a five-year term beginning January 1, 2012 with automatic two-year extensions thereafter unless either party provided the other 120 days' prior written notice of its intention not to renew the employment agreement.

        Mr. Carey was entitled to receive an annual base salary of at least $600,000 and had the opportunity to earn an initial annual cash performance incentive bonus equal to 85% of his annual base salary based on criteria as reasonably agreed to between Mr. Carey and the Chief Executive Officer of the Company, with reasonable approval from the Compensation Committee. For each of 2012 and 2013, the minimum amount of the performance bonus payable to Mr. Carey was $200,000 and $300,000, respectively. Mr. Carey also had the opportunity to earn an additional bonus upon achievement of related operating performance targets. Mr. Carey was also entitled to participate in our employee benefit plans on the same basis as those benefits are generally made available to our other officers. We also agreed to indemnify Mr. Carey in connection with his capacity as an officer.

        On August 25, 2014, Bryan J. Carey resigned as the President, Chief Financial Officer and Vice Chairman of the Company, as a member of the Company's Board of Directors, and from the offices and directorships he held with the Company's subsidiaries. His resignation was not due to any disagreement with the Company on any matter relating to the Company's operations, policies or practices. Mr. Carey had the right to terminate his employment at any time for any reason. Because Mr. Carey resigned, he was entitled to receive his base salary accrued and unpaid through the date of termination and his earned and unpaid annual cash incentive payment, if any, for the fiscal year prior to the termination date. Mr. Carey also received any nonforfeitable benefits already earned and payable to him under the terms of any deferred compensation, incentive or other benefit plan maintained by the Company, payable in accordance with the terms of the applicable plan.

        Mr. Carey is also subject to a covenant not to disclose our confidential information during his employment term, and ending 24 months after his termination date, Mr. Carey covenants not to compete with us, not to interfere or disrupt the relationships we have with any joint venture party, any patient, referral source, supplier or other person having a business relationship with the Company, not to solicit or hire any of our employees and not to publish or make any disparaging statements about us or any of our directors, officers or employees. If Mr. Carey breaches or threatens to breach these covenants, the Company shall be entitled to temporary and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, to enforce such provisions in any action or proceeding instituted in any court in the State of Florida having subject matter jurisdiction. The provision with respect to injunctive relief shall not, however, diminish the Company's right to claims and recover damages.

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Outstanding Equity Awards at 2014 Fiscal-Year End

        The following table provides information regarding outstanding equity awards held by our named executive officers as of the end of fiscal year 2014.

 
  Stock Awards  
 
  Equity Incentive Plan Awards  
 
  Number of Unearned Shares,
Units or Other Rights
That Have Not Vested(#)
  Market or
Payout Value of Unearned
Shares, Units or Other
Rights That Have Not Vested($)(b)
 

Daniel E. Dosoretz, M.D. 

    28,500   Class M Units(a)   $ 310,650  

    32,000   Class O Units(a)     15,040  

    33.6 % Executive Bonus Plan(a)     3,277,719  

Constantine A. Mantz, M.D. 

   
4,056
 

Class M Units(a)

   
44,210
 

    5,185   Class O Units(a)     2,437  

    2.4 % Executive Bonus Plan(a)     230,849  

(a)
Granted on December 9, 2013 in connection with the initial grants under the 2013 21CI equity-based incentive plan. The vesting measurement date, as set forth in the relevant subscription agreement, for these units is December 9, 2013. The Class M, and O units vesting is dependent upon the occurrence of a qualified sale or liquidation event. The Executive Bonus Plan vesting is dependent upon the occurrence of a qualified sale or liquidation event.

(b)
Payout value represents fair market value determined as of fiscal year-end December 31, 2014, which is $10.90 per Class M non-voting equity unit of 21CI, $0.47 per Class O non-voting equity unit of 21CI, $376.96 per Preferred unit of 21CI and $0.15 per Class A equity unit of 21CI. The Executive Bonus Pool fair market value as of fiscal year-end December 31, 2013 was $9.8 million

Executive Bonus Plan

        The Company has adopted the Executive Bonus Plan to provide certain senior level employees of the Company with an opportunity to receive additional compensation based on the "Equity Value" (as defined in the plan and described in general terms below) of 21CI, the ultimate parent holding company of the Company, in connection with a Company sale or an initial public offering. Upon the occurrence of the first Company sale or initial public offering to occur following the effective date of the plan, which is December 9, 2013, a bonus pool will be established equal in value to five percent (5%) of the Equity Value of 21CI, subject to a maximum bonus pool of $12,650,000. Each participant in the plan will participate in the bonus pool based on the participant's award percentage. Dr. Dosoretz and Dr. Mantz, received an award percentage under the plan equal to 33.6% and 2.7%, respectively.

        Payment of awards under the plan generally will be made as follows:

    If the applicable liquidity event is a Company sale, payment of awards under the plan generally will be made in cash within thirty (30) days following consummation of the Company sale. However, the Company reserves the right under the plan to make payment in the same form as the proceeds received by 21CI and its equity holders in connection with the Company sale if such sale proceeds do not consist of all cash.

    If the applicable liquidity event is an initial public offering, (i) one-third (1/3) of the award will be paid within forty-five (45) days following the effective date of the initial public offering, and (ii) the remaining two-thirds (2/3) of the award will be payable in two equal annual installments on each of the first and second anniversaries of the effective date of the initial public offering. Payment of the award may be made in cash or stock or a combination thereof as determined by

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      the plan administrator in its sole discretion. With respect to payment of the portion of the award payable on the first and second anniversaries of the effective date of the initial public offering, the Company may satisfy its payment obligation by granting a restricted stock award or a restricted stock unit award under an equity compensation plan of the Company then in effect.

        The right to receive payment under the plan generally is subject to a participant's continued employment with the Company or its affiliates through the date of payment. However, in the case of Dr. Dosoretz, in the event of his termination of employment by the Company without "cause", by him for "good reason" or as a result of his death or "disability" (each, as defined in his employment agreement), in any case, on or following the occurrence of the applicable liquidity event, any unvested portion of his award will become fully vested as of the date of such termination, and payment in respect thereof (if applicable) will be made to him within thirty (30) days following the date of such termination.

        In addition to the right to receive payment of the bonus amounts under the plan, Dr. Dosoretz will be entitled to a tax "gross up" payment payable in cash and intended to compensate each such executive for the loss of tax benefits resulting from the treatment of awards under the plan being subject to taxation as ordinary income as opposed to long-term capital gains income.

Directors Compensation

        The following tables provide information concerning certain of our employees who are not named executive officers but who serve as a director on the Company's Board of Directors. We do not provide any remuneration to the members of the Company's Board of Directors other than to the directors listed below and the compensatory arrangements with certain of our directors designated as a named executive officer other than for director services. See "Item 11. Executive Compensation" and "Item 13. Certain Relationships and Related Transactions, and Director Independence." Shares and stock options are not included in this table because none were issued during fiscal years 2014 or 2013 and none were outstanding at either fiscal year-end.

 
  Fiscal
Year
  Fees Earned or
Paid in Cash($)
  Stock
Award($)
  Non-Equity
Incentive Plan
Compensation($)(1)
  All Other
Annual
Compensation($)
  Total($)  

Howard M. Sheridan, M.D. 

    2014                 173,549 (1)   173,549  

    2013                 312,383 (1)