SecProbe.io

September 2 7, 201 3

Via E -mail
Mr. Boyd P. Gentry
President and Chief Executive Officer
AdCare Health Systems, Inc.
5057 Troy Rd, Springfield, OH
45502 -9032

Re: AdCare  Health Systems, Inc.
 Form 10-K for the fis cal year ended December 31, 2012
Filed July 8, 2013
Form s 10-Q/A for the quarterly period s ended March 31, 2012, June 30, 2012
and September 30, 2012
Filed July 8, 2013
Response dated August 29, 2013
File No. 001-33135

Dear Mr. Gentry :

We have reviewed your response letter and have the following comments.  As noted in
our letter dated August 16, 2013, we have limited our review to only your financial statements
and related disclosures and do not intend  to expand our review to other portions of your
documents.  In some of our comments, we may ask you to provide us with  information so we
may better understand your disclosure.

Please respond to this letter within ten business days by amending your filings , by
providing the requested information, or by advising us when you will provide the requested
response.   If you do not believe our comments apply to your facts and circumstances or do not
believe an amendment is appropriate, please tell us why in your re sponse.

After reviewing  any amendment to your filings and  the information you provide in
response to these  comments, we may have  additional comments.

Form 10 -K

Financial Statements

Principles of Consolidation, page 72

1. We note your response to comment one  explains that the consolidation of the Oklahoma
Facilities VIEs did not have the effect of increasing management’s compensation.  We

Mr. Boyd P. Gentry
AdCare Health Systems, Inc.
September  27, 2013
Page 2

 note from page 7 of your December 5, 2012 correspondence that there existed a
principal/agent relationship betw een AdCare and the Oklahoma Facilities Owners.   We
also note from page 147 of your December 31, 2012 Form 10 -K that your former Chief
Acquisitions Officer, Mr. Brogdon , served without a fixed salary prior to 2013 but
instead received the substantial major ity of his compensation for services for the year
2011 in the form of discretionary bonus payments and option stock incentives.  We note
from the first paragraph of page 150 of the Form 10 -K that Mr. Brogdon currently earns a
“success fee” for each complet ed acquisition transaction, and that Mr. Brogdon earns no
such success fee for leased or managed facilities.  Confirm for us that Mr. Brogdon and
other officers were not compensated for services rendered to facilitate the acquisition of
the Oklahoma Facili ties.  Otherwise please explain how such services rendered in the
Oklahoma Facilities transactions effected officer’s compensation.

2. Further in this regard, explain for us why Mr. Brogdon’s  $200,000 bonus earned for 2011
was omitted from the executive compensation table on page 100 of your December 31,
2011 Form 10 -K.

Form 10 -Q/A#1  for the quarterly period ended September 30, 2012

Note 2. Restatement of Previously Issued Consolidated Fina ncial Statements , page 11

3. We note your response to comment eight and note the following:
 The $34,000 adjustment increasing deferred loan costs , net as described on page 13
of your September 30, 2012 Form 10 -Q/A#1 is silent regarding the $164,000 increase
in interest expense for the fair value of warrants granted to non -employees as
indicated in your response letter,
 The description of the adjustment to general and administrative  expense bridging
pages 12 and 13 of your September 30, 2012 Form 10 -Q/A#1 is s ilent about an
adjustment to consulting expense , and
 The description of the adjustment to property and equipment, net  on page 13 of your
September 30, 2012 Form 10 -Q/A#1 is silent about inappropriately capitalized
interest costs.
Accordingly it appears to us that the nature of the adjustments to interest  expense  and
general and administrativ e expens e are unclear.   As previously requested, please revise
your disclosure of “other adjustments” in the June 30 and September 30, 2012 Forms 10 -
Q to include an explanation of why material corrections were made to the interest
expense line item.

4. We note that the correction made to costs of services,  for delays in collection efforts and
lack of timely follow -up on open patient accounts during 2012, required an adj ustment
variously stated as $721,000 and $484,000 in your response to comment nine and in the
first paragraph of page 13 of your Form 10 -Q/A#1 for September 30, 2012.   Please
reconcile and correct.

Mr. Boyd P. Gentry
AdCare Health Systems, Inc.
September  27, 2013
Page 3

 5. Similarly we note that the correction made to general and  administrative expenses for
interest incorrectly capitalized on the balance sheet required an adjustment variously
stated as $159,000 and $94,000 in your response to comment nine and in the sixth
paragraph of page 12 of your Form 10 -Q/A#1 for September 30 , 2012.   Please reconcile
and correct.

6. Please revise your disclosure of the adjustments made to correct reported costs of services
to reflect the additional information provided in your response to comment nine.  Address
in costs of services  the $112,000 correction for untimely recorded payroll expense and the
reversal of the $480,000 elimination of management fees.

7. In your amended 34 Act reports for 2012, where applicable, please make similar
revisions , as requested above , to the financial statements pro vided for the six months
ended June 30, 2012 and for three months ended March 31, June 30 and September 10,
2012.

8. We note your response to comment five. You indicate in your response that certain
restated financial covenant metric information ha s been omi tted from the June 30  and
September 30, 2012 debt covenant compliance tables.    The (***) footnotes to these
tables explain that these covenants commence in future quarters.    However Sections 7.15
and 7.16 of the loan agreement dated March 30, 2012 betwee n Little Rock HC&R
Property Holdings, LLC, Northridge HC&R Property Holdings, LLC, Woodland Hills
HC&R Property Holdings, LLC and The PrivateBank and Trust Company (Exhibit 10.6
to the March 31, 2012 Form 10 -Q) appears to include monthly and quarterly debt
compliance provisions that were in effect at June 30, 2012 and September 30,
2012.   Please clarify and, if necessary, revise your response to comment five and its June
30 and September 30, 2012 debt covenant compliance tables accordingly.

9. In this regard please similarly address the quarterly restated financial covenant metric
information for the PrivateBank -Thomasville line of credit and the Contemporary
Healthcare Capital -Companion Care line of credit omitted from the September 30, 2012
debt covenant compliance table.

10. We n ote your responses to comments two  and eight . We note that you attribute the
significant number of adjustments to the fact that you did not maintain sufficient,
adequately trained and qualified personnel with technical e xpertise in U.S. GAAP and
financial reporting in your corporate accounting function.   In this regard, tell us in detail
how you concluded in your original Form 10 -Qs filed during 2012 that your disclosure
controls and procedures and your  internal control o ver financial reporting were
effective.

Mr. Boyd P. Gentry
AdCare Health Systems, Inc.
September  27, 2013
Page 4

 You may contact Joseph M. Kempf, Senior Staff Accountant , at 202-551-3352  or Carlos
Pacho, Senior Assistant Chief Accountant, at 202 -551-3835  if you have questions regarding
comments on the financial stateme nts and related matters.  Please contact me at (202) 551 -3810
with any other questions.

Sincerely,

 /s/ Robert S. Littlepage  for

 Larry Spirgel
Assistant Director

cc:  Via E -mail
 Lori Gelchion, Esq.
 Rogers & Hardin LLP