SecProbe.io

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Mail Stop 6010

									March 3, 2006

David A. Tenwick, Chairman
Adcare Health Systems, Inc.
5057 Troy Road
Springfield, Ohio  45502-9032

Re:  	Adcare Health Systems, Inc.
Form SB-2 Registration Statement
	File No. 333-131542

Dear Mr. Tenwick:

      We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments.  If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary.  Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.

      Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects.  We welcome
any questions you may have about our comments or on any other
aspect
of our review.  Feel free to call us at the telephone numbers
listed
at the end of this letter.

Prospectus Cover Page

1. Please disclose the date when the units will separate and the
common stock and the warrants will trade separately.

2. Please revise the statement that you expect to list the units
on
the American Stock Exchange.  You may state that you intend to
apply
for listing on the exchange or that you have applied for listing,
whichever is accurate.

Summary - page 2

3. Please provide third-party support for your claim that you
"enjoy
an excellent reputation" for your management capabilities, or in
the
alternative, delete the claim.

4. In a number of places in the summary and throughout the
document
you make claims regarding market share, the size of the market for
your services and facilities, and other similar information.  See,
for example, the fifth paragraph on page 2 and the sixth paragraph
on
page 25.  Please provide us with copies of the documents you are
relying on in support of these claims.  Mark the documents to show
the location of the information you cite.

5. We note that you have disclosed your revenue base for the nine
month period ended September 30, 2005.  Please balance this
disclosure by quantifying your expenses for the period.

6. Similarly, balance the discussion of your strategy and future
plans by identifying the risks and obstacles you will encounter in
implementing your future plans.

Summary Financial Information - page 3

7. Please revise this presentation to clearly reflect the impact
of
the discontinued operations on your financial information.

8. Please revise your presentation here to remove the "Adjusted"
column.

Risk Factors - page 4

We may need additional financing to complete our long term
acquisition and expansion plans, and we do not have commitments
for
additional financing. - page 4

9. Please quantify the disclosure in this risk factor to the
extent
practicable.  Your discussion should highlight the fact that you
had
negative working capital as of September 30, 2005.

Our business is concentrated in Ohio, making it subject to
increased
risks as a result of potential declines in the Ohio economy. -
page 5

10. Please expand the disclosure to briefly describe the current
state of the Ohio economy and indicate whether you have
experienced
any adverse consequences to date from the concentration of your
business in Ohio.  If you have, you should also briefly describe
the
adverse consequences you experienced.

Changes in the reimbursement rate from methods of payment from
Medicare and Medicaid may adversely affect our revenues and
operating
margins. - page 5

11. Disclose the percentages of your revenue that come from each
of
Medicare, Medicaid and from other third party payors in each of
the
two most recent fiscal years.

12. You say that there are administrative rulings and
interpretations
of the Medicare and Medicaid program statutes that may further
affect
payments.  Please briefly identify them and describe the potential
adverse consequences you might experience as a result.

We encounter intense competition from competitors, many of whom
have
greater resources than Adcare. - page 6

13. Please identify your most significant competitors in each area
of
your business and discuss the basis on which you compete with
them.
Also, if you have experienced any adverse consequences to date as
a
result of the competition you discuss, you should briefly describe
the consequences here.

Our business is very labor intensive, we operate in smaller
markets
with limited personnel resources, and our success is tied to our
ability to attract and retain qualified employees. - page 7

14. If you have experienced difficulties in hiring and retaining
the
necessary personnel in the past, you should revise the risk factor
to
discuss these experiences.

Our business is largely dependent on short-term management
contracts
that may not be renewed from year to year. - page 7

15. Please disclose the percentage of your revenue attributable to
management contracts in each of the two most recent fiscal years.
Also, disclose the percentage of your home healthcare contracts
that
were renewed in each of the two most recent fiscal years, and
whether
you have renewed or lost any of your management contracts during
the
two most recent fiscal years.

Use of Proceeds - page 11

16. Please expand your discussion of the debts you will repay to
disclose the maturity of each loan.  Also disclose the uses to
which
you put the proceeds of the debts to be repaid.

17. Please expand your discussion of the funds to be used for
"working capital and for general corporate purposes" to be more
specific about the uses you might use the funds for.

Capitalization, page 12

18. Please revise this presentation to include the effects of only
the offering.  You can then provide the additional tables that
include the effects of the other two scenarios after that.

Dilution, page 13

19. Please revise this presentation to more clearly present the
effects that you are trying to articulate by offsetting the
numbers
that must be combined to arrive at the "Pro Forma Net Tangible
Book
Value Per Share."

Management`s Discussion and Analysis of Financial Conditions, page
14

Liquidity and Capital Resources, page 16

20. Your discussion related to the decrease in operating cash
flows
is confusing.  Please expand for us how the acquisition of
accounts
receivable related to a purchase business combination affected
your
cash flows from receivables.  Further revise the discussion to
better
address the actual activities that affect your cash flows from
operations instead of this apparent reference to the cash flow
statement.  Given the impact of your accounts receivables, provide
a
discussion of your days sales outstanding related to these
receivables.

21. Please provide a more thorough discussion of all of your note
payables, as the payment of these obligations will provide
investors
increased transparency of your future cash flows and a greater
understanding of your cash requirements.  Your disclosure here
appears to only address certain short and long term obligations.

Business - page 20

Business Divisions - page 23

22. Please refer to the pie chart showing your current mix of
revenues for the period ended September 30, 2005.  Please provide
a
similar chart showing expenses for each revenue source.  Also
consider providing similar charts for each of the two previous
fiscal
years.

Portfolio of Owned and Managed Facilities - page 23

23. Please explain what the headings "date" and "develop" mean in
the
table on this page.

24. Please include occupancy information for each of the last two
fiscal years.

25. In footnote 1 you refer to "Net Lease."  Please explain the
meaning and significance of this term.

Growth Strategy - page 24

26. Refer to the last paragraph on this page.  Please expand the
disclosure to include the basis for your belief that "limited
capital
resources" impedes the growth and exit prospects for small private
operators and explain how this presents an attractive opportunity
to
expand your base of senior living operations.  We note in this
regard
that elsewhere in this document you essentially describe yourself
as
a small private operator, so the basis for your opportunities are
not
clear.

27. Under "Assisted Living" on page 27, please explain what the
phrases "passively encouraging socialization" and "infusion
therapy"
mean.

Demographic Trends - page 28

28. Under "Facility Supply/Demand Imbalance" on page 28 you
indicate
that a slowdown in construction and lack of construction financing
since 1999 has led to a reduction in the supply of new units being
constructed.  It is unclear whether this slowdown occurred in the
localities in which your facilities are located, or in your
industry
in general.  Please expand the disclosure to include specific
information about the localities in which your facilities are
located.  You should quantify the discussion to the extent
practicable and include a discussion of your own experiences.

Competition

29. Please identify the long-term care providers with which your
facilities compete, identifying those which are larger or have
greater financial and marketing resources than you do.  Also
identify
the ones that are non-profits.  Please also disclose and discuss
whether new long-term care facilities are currently being
constructed
or are planned in the localities where your facilities are
located.
Your current disclosure is very generic and does not provide an
adequate picture of your competitive situation.

Government Regulation

30. Please expand the disclosure to discuss in reasonable detail
how
the new Medicaid reimbursement system will differ from the current
one.

31. Please briefly describe the types of nursing home acquisitions
that require governmental approval as well as the process for
obtaining the approval.

Underwriter`s Board Rights - page 35

32. Please tell us whether the compensation to the underwriter`s
designee will be considered underwriting compensation.

Executive Compensation

33. Please update the disclosure to include information for the
fiscal year ended December 31, 2005.

Security Ownership of Certain Beneficial Owners and Management

34. Please identify the natural person possessing voting and
investment rights over the securities held by Capital City
Partners,
LLC.

Financial Statement Comments

General

35. Your financial statements are now stale.  Please update your
financial statements and related disclosures in accordance with
Rule
310(g) of Regulation S-B.

Financial Statements, page F-1

Consolidated Balance Sheets, page F-3

36. Please tell us what the "Members deficiency" account
represents,
and how it differs from the "Accumulated deficit" account.
Further
explain how you determined to allocate net income between the two
accounts, and why that is appropriate.  Cite any accounting
literature relied on in your determination.

Consolidated Statements of Operations, page F-4

37. Please tell us what "return to members" represents and why it
is
not included on the statements of changes in owner`s equity.

Consolidated Statements of Changes in Owner`s Equity, page F-5

38. Please explain to us what the "Acquisition of additional
investment in subsidiary in excess of book value" represents and
how
it was accounted for.  Include specific references to the
literature
that supports this accounting treatment.

Note 1.  Description of Business, page F-8

39. Please describe to us in greater detail the agreement that you
have made to offer to purchase the Van Wert minority interest.
Include a discussion of the accounting literature upon which you
relied in determining the accounting treatment to apply to this
offer
to purchase.

Note 2. Summary of Significant Accounting Policies, page F-9

Principles of Consolidation, page F-9

40. Please tell us how you determined that it was appropriate to
consolidate the entities identified in this note.  Specifically
address the criteria in FIN 46R upon which you relied in your
determination.

Segments, page F-13

41. We note in your discussion in this document of the acquisition
of
Assured Health.  These revenues seem to be distinct from the
revenues
provided by your communities based on the discussion on page 21.
Please revise the disclosure to provide separately revenue from
distinct services.  Refer to paragraph 37 of SFAS 131.

Note 3. Discontinued Operations, page F-18

42. Please explain why you continue to recognize "Income (Loss)
from
Operations" in all periods presented related to the operation of
MedCenter.  Explain how this apparent continued involvement does
not
affect your decision to classify this disposition as discontinued
operations.  Also explain to us how you arrived at the amount of
gain
recognized related to the installment sale method in the 2004
period.

Note 5. Note Receivable, page F-20

43. Please revise your disclosure to more specifically address the
timing of when you recorded the allowance.  Include what has
happened
with respect to cash receipts since that date, and why the
allowance
is adequate.

Note 7.  Notes Payable - Stockholders, page F-24

44. Please explain to us how you determined the settlement price
and
associated gain or loss that appears to be different than the
stated
terms when this debt was extinguished in the current year.

Note 8. Convertible Debentures, page F-26

45. Please provide to us your analysis of whether a beneficial
conversion feature did or did not exist at the time of issuance
for
each of these debenture issuances.  Reference EITF 98-5 and 00-27
in
your response.

Note 14.  Related Party Transactions, page F-33

46. Please explain to us how you valued and accounted for the
warrants issued to the officers in exchange for their guarantee of
your term loan.

Alternate Prospectus Pages

47. Please complete the blank spaces in these pages, including the
identity of the selling shareholders.  This information must be
included in the document at the time of effectiveness.

48. Please revise the cover page to provide a price or price
range.
You may also state that the shares will sell at prevailing market
prices or privately negotiated prices if and when your shares are
listed on the American Stock Exchange.

Item 27.  Exhibits

49. We note that you have filed the Form of Secured promissory
Debenture dated _____,2005 and Form of Warrant to Purchase Common
Stock dated _____, 2005.  Please revise to file the actual
executed
documents.

Signatures

50. Please identify and provide the signatures of your chief
executive officer and your controller or chief accounting officer.

*	*	*	*	*

As appropriate, please amend your registration statement in
response
to these comments.  You may wish to provide us with marked copies
of
the amendment to expedite our review.  Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested supplemental information.  Detailed cover
letters greatly facilitate our review.  We may have additional
comments after reviewing your amendment and responses to our
comments.

	We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision.  Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.

	Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledg