SecProbe.io

Mail Stop 6010
         April 25, 2006
  David A. Tenwick, Chairman Adcare Health Systems, Inc. 5057 Troy Road Springfield, Ohio  45502-9032
Re:   Adcare Health Systems, Inc.
Amendment No. 1 to Form SB-2  Filed on April 10, 2006
 File No. 333-131542

Dear Mr. Tenwick:
We have reviewed your filing and have the following comments.  Where
indicated, we think you should re vise 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 deta iled as necessary in your explanation.  In
some of our comments, we may ask you to pr ovide us with supplemental information so
we may better understand your disclosure.  Af ter reviewing this information, we may or
may not raise additional comments.
 Please understand that the purpose of our re view 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.
 Summary, page 1

 1. Please revise the discussion of the reve nues earned by the fa cilities you manage
for third parties to explain the significance of this measure and the significance of
the combined revenues of facilities you own and facilities you manage.  Also, clarify how the revenues rec ognized by the facilities you manage for third parties
affect your revenue.  We note your statemen t that the long-term care facilities you

Mr. David A. Renwick
April 25, 2006 Page 2

own had annual revenues of $21,900,360.  What were the revenues you
recognized for managing facilities for third parties and where is this amount shown on your income statement?
 Summary Financial Information, page 3

 2. Refer to your response to our prior comme nt number seven.  Please revise your
disclosure to separately present the income from conti nuing and discontinued
operations as well as the impact of the “Return to Minority Interests” line item
that significantly impacts your EPS calcu lation. Additionally, present separately
the earnings per share for continuing and discontinued operations in this section.
 Capitalization, page 13

 3. Refer to your response to comment 18.  We were unable to identify where you
adjusted this presentation.  It appears that you still provide the same two columns
and do not provide an interim column to re flect only the effects of the offering.
Please revise your presentation to include a column that reflects only the offering
prior to the additional pro form a columns that you present.

Liquidity and Capital Resources, page 19
 4. Refer to your response to comment 20.  Your discussion of operating cash flows
still seems to focus on what happened in the cash flow statement as a result of
reconciling items.  For instance your refe rence to the cash gain in 2004 seems to
indicate that you included this cash gain w ithin operations.  Y our reference to the
increase in total receivables as a result of  the Assured acquisition also infers that
the addition of these receivables at ac quisition impacted your cash flows, which
would not appear to be the case.  Please revise your discussi on to better reflect
actual cash flows from operations incl uding these preceding points in lieu of
referencing reconciling items in the statement of cash flows.
  Security Ownership of Certain Bene ficial Owners and Management, page 44

 5. We note your response to comment 34.  Pl ease revise your registration statement
to include this information.
 Selling Shareholders, page AA-3

 6. We note your response to comment 47.  Please note, if any of the selling
shareholders are broker dealers, they must  be identified as broker dealers and as
underwriters.  If any of the selling share holders are affiliates of broker dealers,
please identify them as such and include representations that the securities were purchase in the ordinary course and ther e were no agreements to distribute the
securities.  If the selling shareholders ar e not able to make these representations,
they should also be identified as underwriters.

Mr. David A. Renwick
April 25, 2006 Page 3

 Financial Statements, page F-1

 Consolidated Statements of Operations, page F-4

 7. Refer to your response to our prior comme nt number 37.  Please clarify for us
why you feel that treating this  return of earnings to the minority interest holders in
a manner similar to a preferred share divi dend is appropriate.  Include specific
reference to any authorita tive literature upon which you relied in arriving at the
accounting treatment.
 Consolidated Statements of Changes in Owner’s Equity, page F-5

8. We have reviewed your response to our prior comment number 36 and have the
following comments:
a. According to your disclosure on F-8, you issued 191,000 shares.  This
does not agree to the disclosure here  which states that 45,800 shares were
issued in conjunction with the acquisition of the remaining interest in SPI.
Please clarify this inconsistency.
b. Tell us how the shares issued to shar eholders to acquire related entity
resulted in the issuan ce of treasury stock.
c. Include how you determined the fair va lue to assign to the shares that you
issued in connection with the “Share s issued to acquire related entity”
transaction.
d. Explain how you determined the value assigned to the “Treasury shares
contributed by related pa rty” and where you applied the related credit.
e. Explain how the amounts included in th e line items “Beneficial conversion
on convertible debentures” and “Warrant s issued in connection with debt”
reconcile to the amounts included in your response to comment 45.

9. Refer to your response to our prior comment  number 38.   Your response seems to
indicate that a portion of this amount rela tes to an additional investment in the
subsidiary partnered with Van Wert, and th at a portion of this payment represents
an extension of a put obligation.  Please explain to us why you have accounted for each of these transaction as you did through equity.
 Note 1.  Description of Business, page F-8

 10. Refer to your response to our prior comment  number 39.  It does not appear that
your analysis is based on the appropriate guidance.  Please give us your analysis
as to whether this obligation is subjec t to the requirements of SFAS 150, SFAS
133, EITF 00-6, or EITF D-98 and if applicable, how your accounting and disclosures comply with the guidance.  If you believe that the options are not
subject to this litera ture, please explain why.

Mr. David A. Renwick
April 25, 2006 Page 4

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

 11. Refer to your response to our prior comme nt number 40.  Please revise your
discussion in this policy note to provide a more detailed discussion of the reasons
why you feel that you meet the consolidati on criteria under that guidance.  Include
specifically the key points in your analys is that led you to this determination.
 Note 4. Discontinued Operations, page F-18

 12. Refer to your response to our prior comme nt number 42.   Please provide the
following information to us related to the sale of this property:
• Provide to us a detailed analysis under  the guidance of SFAS 66 of whether or
not this transaction constitutes a sale  under the provision of that guidance.
• Provide to us your calculation of the deferred gain on this sale.
• Tell us and disclose in greater detail  the specific circumstances under which
the other party can return these assets to you.  Also include what happens to
any payments already received by you in that event.
• Provide to us your analysis under the guidance of EITF 03-13 that supports
the inclusion of these operations as  discontinued opera tions within your
financial statements.
 Note 6. Note Receivable, page F-21

 13. Refer to your response to our prior comme nt number 43.  Please clarify why you
did not reserve the entire notes receivabl e in 1999, and how you determined that
the allowance for collectibility was adequate at that time.  Further, clarify why the
allowance is adequate at this point in time given that he has only made minimal
payments through this point in time.  In clude specifically w hy how the appraisal
and the evaluation of the propert y factored into that decision.
 Note 9. Convertible Debentures, page F-26

 14. Refer to your response to comment 44.  We  were unable to identify the changes
that you made in response to this comme nt.  We note that this note currently
references disclosure in not e 8, formerly note 7, that has been pulled apparently
due to the fact that it was extinguished.  Please revise your disclosure to include a
discussion of this extinguishment along w ith how you determined any gain or loss
associated with the extinguishment of this debt.

* * *

Mr. David A. Renwick
April 25, 2006 Page 5

 As appropriate, please amend your registration statement in response to these comments.
You may wish to provide us with marked copies of the amendm ent 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.

You may contact Tabatha Akins at 2 02-551-3658 or James Atkinson at 202-551-
3674 if you have questions regarding comments on the financial statements and related
matters.  Please contact Mary K. Fras er at 202-551-3609, Suzanne Hayes at 202-551-
3675 or me at 202-551-3710 with any other questions.

         R e g a r d s ,             J e f f r e y  P .  R i e d l e r          A s s i s t a n t  D i r e c t o r

 Cc: Michael A. Smith  Carlile Patchen & Murphy  366 East Broad Street  Columbus, Ohio 43215