10-K

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

Form 10-K

ý	ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
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 numbers: 001-34465 and 001-31441

SELECT MEDICAL HOLDINGS CORPORATION
SELECT MEDICAL CORPORATION

(Exact name of Registrants as specified in their Charter)

Delaware Delaware (State or Other Jurisdiction of Incorporation or Organization)	20-1764048 23-2872718 (I.R.S. Employer Identification Number)
4714 Gettysburg Road, P.O. Box 2034 Mechanicsburg, PA (Address of Principal Executive Offices)	17055 (Zip Code)

(717) 972-1100
(Registrants' telephone number, including area code)

             Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Select Medical Holdings Corporation, Common Stock, $0.001 par value	New York Stock Exchange

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

             Indicate by check mark if the registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.

             Select Medical Holdings Corporation Yes ý    No o

             Select Medical Corporation Yes o    No ý

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

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

             Indicate by check mark whether the registrants have 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 twelve months (or for such shorter period that the registrants were 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 (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants' 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. ý

             Indicate by check mark whether the registrant, Select Medical Holdings Corporation, 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 ý Accelerated filer o Non-accelerated filer o
(Do not check if a
smaller reporting company) Smaller reporting company o

             Indicate by check mark whether the registrant, Select Medical Corporation, 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 registrants are shell companies (as defined in Rule 12b-2 of the Act). Yes o    No ý

             The aggregate market value of Holdings' voting stock held by non-affiliates at June 30, 2015 (the last business day of Holdings' most recently completed second fiscal quarter) was approximately $1,723,794,194, based on the closing price per share of common stock on that date of $16.20 as reported on the New York Stock Exchange. Shares of common stock known by the registrants to be beneficially owned by directors and officers of Holdings subject to the reporting and other requirements of Section 16 of the Securities Exchange Act of 1934 are not included in the computation. The registrants, however, have made no determination that such persons are "affiliates" within the meaning of Rule 12b-2 under the Securities Exchange Act of 1934.

             The number of shares of Holdings' Common Stock, $0.001 par value, outstanding as of February 1, 2016 was 131,282,798.

             This Form 10-K is a combined annual report being filed separately by two Registrants: Select Medical Holdings Corporation and Select Medical Corporation. Unless the context indicates otherwise, any reference in this report to "Holdings" refers to Select Medical Holdings Corporation and any reference to "Select" refers to Select Medical Corporation, the wholly owned operating subsidiary of Holdings, and any of Select's subsidiaries. Any reference to "Concentra" refers to Concentra Inc., the indirect operating subsidiary of Concentra Group Holdings, LLC ("Group Holdings"), and its subsidiaries. References to the "Company," "we," "us," and "our" refer collectively to Holdings, Select, and Group Holdings and its subsidiaries.

Documents Incorporated by Reference

             Listed hereunder are the documents, any portions of which are incorporated by reference and the Parts of this Form 10-K into which such portions are incorporated:

1.

The registrant's definitive proxy statement for use in connection with the 2016 Annual Meeting of Stockholders to be held on or about April 25, 2016 to be filed within 120 days after the registrant's fiscal year ended December 31, 2015, portions of which are incorporated by reference into Part III of this Form 10-K. Such definitive proxy statement, except for the parts therein which have been specifically incorporated by reference, should not be deemed "filed" for the purposes of this form 10-K.

SELECT MEDICAL HOLDINGS CORPORATION
SELECT MEDICAL CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2015

Item		Page
	PART I
	Forward-Looking Statements	1
1.	Business	2
1A.	Risk Factors	35
1B.	Unresolved Staff Comments	51
2.	Properties	51
3.	Legal Proceedings	53
4.	Mine Safety Disclosures	54
	PART II
5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	55
6.	Selected Financial Data	56
7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	60
7A.	Quantitative and Qualitative Disclosures About Market Risk	92
8.	Financial Statements and Supplementary Data	93
9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	93
9A.	Controls and Procedures	93
9B.	Other Information	94
	PART III
10.	Directors, Executive Officers and Corporate Governance	95
11.	Executive Compensation	95
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	95
13.	Certain Relationships, Related Transactions and Director Independence	96
14.	Principal Accountant Fees and Services	96
	PART IV
15.	Exhibits and Financial Statement Schedules	97
SIGNATURES		106

PART I

Forward-Looking Statements

        This annual report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words "may," "could," "would," "should," "believe," "expect," "anticipate," "plan," "target," "estimate," "project," "intend" and similar expressions. These statements include, among others, statements regarding our expected business outlook, anticipated financial and operating results, our business strategy and means to implement our strategy, our objectives, the amount and timing of capital expenditures, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs and sources of liquidity.

        Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management's beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding our services, the expansion of our services, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following:

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changes in government reimbursement for our services due to the implementation of healthcare reform legislation, deficit reduction measures, and/or new payment policies (including, for example, the expiration of the moratorium limiting the full application of the 25 Percent Rule that would reduce our Medicare payments for those patients admitted to a long term acute care hospital from a referring hospital in excess of an applicable percentage admissions threshold) may result in a reduction in net operating revenues, an increase in costs and a reduction in profitability;

•

the impact of the Bipartisan Budget Act of 2013 (the "BBA of 2013"), which establishes new payment limits for Medicare patients who do not meet specified criteria, may result in a reduction in net operating revenues and profitability of our long term acute care hospitals;

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the failure of our specialty hospitals to maintain their Medicare certifications may cause our net operating revenues and profitability to decline;

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the failure of our facilities operated as "hospitals within hospitals" to qualify as hospitals separate from their host hospitals may cause our net operating revenues and profitability to decline;

•

a government investigation or assertion that we have violated applicable regulations may result in sanctions or reputational harm and increased costs;

•

acquisitions or joint ventures may prove difficult or unsuccessful, use significant resources or expose us to unforeseen liabilities;

•

our plans and expectations related to the acquisition of Concentra, including expectations regarding the expected capital expenditures related to the acquisition, and our ability to realize anticipated synergies;

•

private third-party payors for our services may undertake future cost containment initiatives that could limit our future net operating revenues and profitability;

•

the failure to maintain established relationships with the physicians in the areas we serve could reduce our net operating revenues and profitability;

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•

shortages in qualified nurses, therapists, physicians, or other licensed providers could increase our operating costs significantly or limit our ability to staff our facilities;

•

competition may limit our ability to grow and result in a decrease in our net operating revenues and profitability;

•

the loss of key members of our management team could significantly disrupt our operations;

•

the effect of claims asserted against us could subject us to substantial uninsured liabilities; and

•

other factors discussed from time to time in our filings with the Securities and Exchange Commission (the "SEC"), including factors discussed under the heading "Risk Factors" of this annual report on Form 10-K.

        Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we are under no obligation to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise. You should not place undue reliance on our forward-looking statements. Although we believe that the expectations reflected in forward-looking statements are reasonable, we cannot guarantee future results or performance.

        Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to securities analysts any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any securities analyst irrespective of the content of the statement or report. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of the Company.

Item 1.    Business.

Overview

        We began operations in 1997, and we believe that we are one of the largest operators of both specialty hospitals and outpatient rehabilitation clinics in the United States based on number of facilities. As of December 31, 2015, we operated 127 specialty hospitals in 27 states, and 1,038 outpatient rehabilitation clinics in 31 states and the District of Columbia. Through our contract therapy business we provide medical rehabilitation services on a contracted basis to nursing homes, hospitals, assisted living and senior care centers, schools and work sites. On June 1, 2015, MJ Acquisition Corporation, a joint venture created by Select and Welsh, Carson, Anderson & Stowe XII, L.P. ("WCAS") consummated the acquisition of Concentra, which provides occupational medicine, consumer health, physical therapy, and veteran's healthcare services throughout the United States. As of December 31, 2015, Concentra operated 300 medical centers in 38 states. Concentra also provides contract services at employer worksites and Department of Veterans Affairs community-based outpatient clinics, or "CBOCs." As of December 31, 2015, we had operations in 46 states and the District of Columbia.

        We manage our Company through three business segments; specialty hospitals, outpatient rehabilitation and, as of June 1, 2015, our Concentra segment. We had net operating revenues of $3,742.7 million for the year ended December 31, 2015. Of this total, we earned approximately 63% of our net operating revenues from our specialty hospitals segment, approximately 22% from our outpatient rehabilitation segment and approximately 15% from our Concentra segment. Our specialty hospitals segment consists of hospitals designed to serve the needs of long term acute patients and hospitals designed to serve patients that require intensive medical rehabilitation care. Our outpatient rehabilitation segment consists of clinics and contract therapy that provide physical, occupational and speech rehabilitation services. Our Concentra segment consists of medical centers and contract services provided at employer worksites and Department of Veterans Affairs CBOCs that deliver occupational medicine, urgent care, physical therapy and wellness services. See "Management's Discussion and Analysis of

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Financial Condition and Results of Operations—Results of Operations" for financial information for each of our segments for the past three fiscal years. The financial and statstical information related to the operation of our Concentra segment, and used for calculations in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section, which is contained elsewhere herein, began as of June 1, 2015, which is the date the Concentra acquisition was consummated.

Specialty Hospitals

        We are a leading operator of specialty hospitals in the United States. As of December 31, 2015, we operated 127 facilities throughout 27 states, including 109 long term acute care hospitals, or "LTCHs," 108 of which are currently certified by the federal Medicare program as LTCHs and one which is currently awaiting certification (each new LTCH must demonstrate for a minimum 6-month period that it has an average length of stay of greater than 25 days), and 18 inpatient rehabilitation facilities, or "IRFs," 17 of which are currently certified by the federal Medicare program as IRFs and one which was in the process of obtaining its certification. For the years ended December 31, 2013, December 31, 2014 and December 31, 2015, approximately 59%, 57% and 55%, respectively, of the net operating revenues of our specialty hospitals segment came from Medicare reimbursement. As of December 31, 2015, we operated a total of 5,172 available licensed beds and employed approximately 22,100 people in our specialty hospitals segment, consisting primarily of registered nurses, respiratory therapists, physical therapists, occupational therapists and speech therapists.

        We operate the majority of our LTCHs as a hospital within a hospital, or an "HIH." An LTCH that operates as an HIH leases space from a general acute care hospital, or "host hospital," and operates as a separately licensed hospital within the host hospital, or on the same campus as the host hospital. In contrast, a free-standing LTCH does not operate on a host hospital campus. We operated 109 LTCHs at December 31, 2015, of which 108 were owned and one was managed. Of the 108 LTCHs we owned, 80 were operated as HIHs and 28 were operated as free-standing hospitals.

        Patients are typically admitted to our specialty hospitals from general acute care hospitals. These patients have specialized needs, and serious and often complex medical conditions such as respiratory failure, neuromuscular disorders, traumatic brain and spinal cord injuries, strokes, non-healing wounds, cardiac disorders, renal disorders and cancer. Given their complex medical needs, these patients generally require a longer length of stay than patients in a general acute care hospital and benefit from being treated in a specialty hospital that is designed to meet their unique medical needs. For the year ended December 31, 2015, the average length of stay for patients in our specialty hospitals was 27 days in our LTCHs and 14 days in our IRFs.

        Below is a table that shows the distribution by medical condition (based on primary diagnosis) of patients in our specialty hospitals for the year ended December 31, 2015:

Medical Condition	Distribution of Patients
Respiratory disorders		35	%
Neuromuscular disorders		33	%
Cardiac disorders		10	%
Wound care		5	%
Infectious diseases		5	%
Other		12	%
Total		100	%

        We believe that our services are attractive to healthcare payors who are seeking to provide the most cost-effective care to their enrollees. Additionally, we continually seek to increase our admissions by demonstrating our quality of care and by doing so expanding and improving our relationships with the

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physicians and general acute care hospitals in the markets where we operate. We maintain a strong focus on the provision of high-quality medical care within our facilities and believe that this operational focus is in part reflected by the accreditation of our specialty hospitals by The Joint Commission, the American Osteopathic Association ("AOA") and the Commission on Accreditation of Rehabilitation Facilities ("CARF"). As of December 31, 2015, all of the 127 specialty hospitals we operated were accredited by one or more of these accrediting organizations. The Joint Commission, the AOA and CARF are independent, not-for-profit organizations that establish standards related to the operation and management of healthcare facilities. Each of our accredited facilities must regularly demonstrate to a survey team conformance to the applicable standards.

        When a patient is referred to one of our specialty hospitals by a physician, case manager, discharge planner, health maintenance organization or insurance company, we perform a clinical assessment of the patient to determine if the patient meets criteria for admission. Based on the determinations reached in this clinical assessment, an admission decision is made.

        Upon admission, an interdisciplinary team reviews a new patient's condition. The interdisciplinary team is comprised of a number of clinicians and may include any or all of the following: an attending physician; a specialty nurse; a physical, occupational or speech therapist; a respiratory therapist; a dietician; a pharmacist; and a case manager. Upon completion of an initial evaluation by each member of the treatment team, an individualized treatment plan is established and implemented. The case manager coordinates all aspects of the patient's hospital stay and serves as a liaison with the insurance carrier's case management staff when appropriate. The case manager communicates progress, resource utilization, and treatment goals between the patient, the treatment team and the payor.

        Each of our specialty hospitals has a multispecialty medical staff that is comprised of physicians that have completed the privileging and credentialing process required by that specialty hospital, and have been approved by the governing board of that specialty hospital. Physicians on the medical staff of our specialty hospitals are generally not directly employed by our specialty hospitals but instead have staff privileges at one or more hospitals. At each of our specialty hospitals, attending physicians conduct rounds on their patients on a regular basis and consulting physicians provide consulting services based on the medical needs of our patients. Our specialty hospitals also have on-call arrangements with physicians to ensure that a physician is available to care for our patients at all times. We staff our specialty hospitals with the number of physicians and other medical practitioners that we believe is appropriate to address the varying needs of our patients. When determining the appropriate composition of the medical staff of a specialty hospital, we consider (1) the size of the specialty hospital, (2) services provided by the specialty hospital, (3) if applicable, the size and capabilities of the medical staff of the general acute care hospital that hosts that HIH, and (4) if applicable, the proximity of an acute care hospital to the free-standing specialty hospital. The medical staff of each of our specialty hospitals meets the applicable requirements set forth by Medicare, the hospital's applicable accrediting organizations, and the state in which that specialty hospital is located.

        Each of our specialty hospitals has an onsite management team consisting of a chief executive officer, a chief nursing officer and a director of business development. These teams manage local strategy and day-to-day operations, including oversight of clinical care and treatment. They also assume primary responsibility for developing relationships with the general acute care providers and clinicians in the local areas we serve that refer patients to our specialty hospitals. We provide our hospitals with centralized accounting, treasury, payroll, legal, operational support, human resources, compliance, management information systems, and billing and collection services. The centralization of these services improves efficiency and permits hospital staff to focus their time on patient care.

        For a description of government regulations and Medicare payments made to our specialty hospitals see "—Government Regulations" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Changes."

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Specialty Hospitals Strategy

        The key elements of our specialty hospitals strategy are to:

        Focus on Specialized Inpatient Services.    We serve highly acute patients and patients with debilitating injuries and rehabilitation needs that cannot be adequately cared for in a less medically intensive environment, such as a skilled nursing facility. Generally, patients in our specialty hospitals require longer stays and can benefit from more specialized clinical care than patients treated in general acute care hospitals. Our patients' average length of stay in our specialty hospitals was 24 days for the year ended December 31, 2015.

        Provide High-Quality Care and Service.    Our specialty hospitals serve a critical role in comprehensive healthcare delivery. Through our specialized treatment programs and staffing models, we treat patients with acute, complex and specialized medical needs who are typically referred to us by general acute care hospitals. Our specialized treatment programs focus on specific patient needs and medical conditions such as ventilator weaning programs, wound care protocols and rehabilitation programs for brain trauma and spinal cord injuries. Our responsive staffing models ensure that patients have the appropriate clinical resources over the course of their stay. We maintain quality assurance programs to support and monitor quality of care standards and to meet regulatory requirements and maintain Medicare certifications. We believe that we are recognized for providing quality care and service, as evidenced by our specialty hospitals' accreditations by The Joint Commission, the AOA and CARF. As of December 31, 2015, all of the 127 specialty hospitals we operated were accredited by either The Joint Commission or the AOA. Some of our IRFs had also received accreditation from CARF. See "—Government Regulations—Licensure—Accreditation." We also believe we develop brand loyalty in the local areas we serve by demonstrating our quality of care.

        Our treatment programs, which are continuously reassessed and updated, benefit patients because they give our clinicians access to the best practices and protocols that we have found to be most effective in treating various conditions such as respiratory failure, non-healing wounds, brain and spinal cord injuries, strokes and neuromuscular disorders. In addition, we combine or modify these programs to provide a treatment plan tailored to meet our patients' unique needs. We measure the outcomes and successes of our patients' recovery in order to provide the best possible patient care and service.

        The quality of the patient care we provide is continually monitored using several measures, including clinical outcomes data and analyses and patient satisfaction surveys. Quality measures from our hospitals are collected at our corporate offices and used to create monthly, quarterly and annual reports. In order to benchmark ourselves against other hospitals, we collect our clinical and patient satisfaction information and compare it to national standards and the results of other healthcare organizations. We report to the states in which our hospitals are located certain quality measures that are required to be reported under state laws. We also report to the Centers for Medicare & Medicaid Services, or "CMS," the quality data required to be reported by specialty hospitals. See "—Government Regulations—Other Medicare Regulations—Medicare Quality Reporting."

        Reduce Operating Costs.    We continually seek to improve operating efficiency and reduce costs at our specialty hospitals by standardizing operations and centralizing key administrative functions. These initiatives include:

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centralizing administrative functions such as accounting, finance, treasury, payroll, legal, operational support, human resources, compliance and billing and collection;

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standardizing management information systems to aid in accounting, billing, collections and data capture and analysis; and

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centralizing sourcing and contracting to receive discounted prices for pharmaceuticals, medical supplies and other commodities used in our operations.

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        Increase Commercial Volume.    We have focused on continued expansion of our relationships with commercial insurers to increase our volume of patients with commercial insurance in our specialty hospitals. We believe that commercial payors seek to contract with our hospitals because we offer our patients high-quality, cost-effective care at more attractive rates than general acute care hospitals. We also offer commercial enrollees customized treatment programs not typically offered in general acute care hospitals.

        Develop Specialty Hospitals.    Since our inception in 1997, we have internally developed 73 specialty hospitals, including 68 LTCHs and five IRFs. There is currently a moratorium through September 30, 2017 on the establishment of new LTCHs, LTCH satellite facilities and LTCH beds in existing LTCHs or satellite facilities, see "—Government Regulations—Long Term Acute Care Hospital Medicare Reimbursement—Moratorium on New LTCHs, LTCH Satellite Facilities and LTCH beds." We may open additional LTCHs that met exceptions under the new moratorium and we continue to develop new IRFs through our joint venture relationships. In addition, we are currently pursuing international development opportunities.

        Pursue Joint Ventures with Large Health Care Systems.    By leveraging the experience of our senior management and development team, we believe that we are well positioned to expand our portfolio of joint ventured operations. When we identify joint venture opportunities, our development team conducts an extensive review of the area's referral patterns and commercial insurance rates to determine the general reimbursement trends and payor mix. Once discussions commence with a health care system, we refine the specific needs of a joint venture, which could include working capital, the construction of new space or the leasing and renovation of existing space. A joint venture typically consists of us and the health care system contributing certain post acute care businesses into a newly formed entity. We typically function as the manager and hold either a majority or minority ownership interest. We believe we improve the joint venture by bringing clinical expertise, adding clinical programs that attract commercial payors, and implementing our standardized resource management programs, which may increase the financial performance of the joint venture.

        Pursue Opportunistic Acquisitions.    In addition to our development and joint venture initiatives, we may grow our network of specialty hospitals through opportunistic acquisitions. When we acquire a hospital or a group of hospitals, a team of our professionals is responsible for formulating and executing an integration plan. We seek to improve financial performance at such facilities by adding clinical programs that attract commercial payors, centralizing administrative functions and implementing our standardized resource management programs.

Outpatient Rehabilitation

        We believe that we are the largest operator of outpatient rehabilitation clinics in the United States based on number of facilities, with 1,038 facilities throughout 31 states and the District of Columbia as of December 31, 2015. Typically, each of our clinics is located in a medical complex or retail location. We also provide medical rehabilitative services to residents and patients of nursing homes, hospitals, schools, assisted living and senior care centers and worksites. As of December 31, 2015, we provided rehabilitative services to approximately 419 contracted locations in 30 states and the District of Columbia. Our outpatient rehabilitation segment employed approximately 9,600 people as of December 31, 2015.

        In our clinics and through our contractual relationships, we provide physical, occupational and speech rehabilitation programs and services. We also provide certain specialized programs such as functional programs for work related injuries, hand therapy, post-concussion rehabilitation and athletic training services. The typical patient in one of our clinics suffers from musculoskeletal impairments that restrict his or her ability to perform normal activities of daily living. These impairments are often associated with accidents, sports injuries, work related injuries or post-operative orthopedic and other medical conditions. Our rehabilitation programs and services are designed to help these patients minimize physical and

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cognitive impairments and maximize functional ability. We also provide services designed to prevent short term disabilities from becoming chronic conditions. Our rehabilitation services are provided by our professionals including licensed physical therapists, occupational therapists and speech-language pathologists.

        Outpatient rehabilitation patients are generally referred or directed to our clinics by a physician, employer or health insurer who believes that a patient, employee or member can benefit from the level of therapy we provide in an outpatient setting. We believe that our services are attractive to healthcare payors who are seeking to provide a high-quality and cost-effective care to their enrollees.

        In our outpatient rehabilitation segment, approximately 89% of our net operating revenues come from commercial payors, including healthcare insurers, managed care organizations and workers' compensation programs, contract management services and private pay sources. The balance of our reimbursement is derived from Medicare and other government sponsored programs.

        For a description of government regulations and Medicare payments made to our outpatient rehabilitation services see "—Government Regulations" and "Management's Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Changes."

Outpatient Rehabilitation Strategy

        The key elements of our outpatient rehabilitation strategy are to:

        Provide High-Quality Care and Service.    We are focused on providing a high level of service to our patients throughout their entire course of treatment. To measure satisfaction with our service we have developed surveys for both patients and physicians. Our clinics utilize the feedback from these surveys to continuously refine and improve service levels. We believe that by focusing on quality care and offering a high level of customer service we develop brand loyalty in the local areas we serve. This high quality of care and service allows us to strengthen our relationships with referring physicians, employers and health insurers and drive additional patient volume.

        Increase Market Share.    We strive to establish a leading presence within the local areas we serve. To increase our presence, we seek to expand our services and programs and to open new clinics in our existing markets. This allows us to realize economies of scale, heightened brand loyalty and workforce continuity. We are focused on increasing our workers' compensation and commercial/managed care payor mix.

        Expand Rehabilitation Programs and Services.    Through our local clinical directors of operations and clinic managers within their service areas, we assess the healthcare needs of the areas we serve. Based on these assessments, we implement additional programs and services specifically targeted to meet demand in the local community. In designing these programs we benefit from the knowledge we gain through our national network of clinics. This knowledge is used to design programs that optimize treatment methods and measure changes in health status, clinical outcomes and patient satisfaction.

        Optimize the Profitability of our Payor Contracts.    We review payor contracts up for renewal and potential new payor contracts to optimize our profitability. Before we enter into a new contract with a commercial payor, we evaluate it with the aid of our contract management system. We assess potential profitability by evaluating past and projected patient volume, clinic capacity, and expense trends. We create a retention strategy for the top performing contracts and a renegotiation strategy for contracts that do not meet our defined criteria. We believe that our national footprint and our strong reputation enable us to negotiate favorable outpatient contracts with commercial insurers.

        Maintain Strong Employee Relations.    We believe that the relationships between our employees and the referral sources in their communities are critical to our success. Our referral sources, such as physicians and healthcare case managers, send their patients to our clinics based on three factors: the quality of our care, the service we provide and their familiarity with our therapists. We seek to retain and motivate our

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therapists by implementing a performance-based bonus program, a defined career path with the ability to be promoted from within, timely communication on company developments and internal training programs. We also focus on empowering our employees by giving them a high degree of autonomy in determining local area strategy. We seek to identify therapists who are potential business leaders. This management approach reflects the unique nature of each local area in which we operate and the importance of encouraging our employees to assume responsibility for their clinic's performance.

        Pursue Opportunistic Acquisitions.    We may grow our network of outpatient rehabilitation facilities through opportunistic acquisitions. We believe our size and centralized infrastructure allow us to take advantage of operational efficiencies and increase margins at acquired facilities.

Concentra

        We believe that we are the largest provider of occupational health services in the United States based on the number of facilities. We also believe we are the largest private operator of Veterans Administration CBOCs. As of December 31, 2015 we operated 300 medical centers, 138 onsite clinics at employer worksites and 33 CBOCs throughout 43 states. We deliver occupational medicine, consumer health, physical therapy, and veteran's healthcare services in our medical centers, onsite clinics located at the workplaces of our employer customers and our CBOCs. Our Concentra segment employed approximately 8,200 people as of December 31, 2015.

        We offer a range of occupational and consumer health services through our medical centers and onsite clinics. Occupational health services include workers' compensation injury care as well as employer services, clinical testing, wellness programs and preventative care. Consumer health consists of non-employer, patient-directed treatment of injuries and illnesses. Our consumer service offerings include urgent care, wellness programs and preventative care. Our services at the CBOCs include primary care, specialty care, subspecialty care, mental health, and pharmacy benefits.

        Occupational medicine refers to the diagnosis and treatment of work-related injuries (workers' compensation) and preventive and compliance services, including pre-employment, fitness for duty, and post-accident physical examinations and substance abuse screening. Utilization is driven by the needs of labor-intensive industries such as transportation, distribution/warehousing, manufacturing, construction, health care, police/fire and other occupations that have historically posed a higher than average risk of workplace injury or that require a workplace physical. Workers' compensation is the form of insurance that provides medical coverage to employees with work-related illnesses or injuries.

        Workers' compensation is administered on a state-by-state basis and each state is responsible for implementing and regulating its own workers' compensation program. Because workers' compensation benefits are mandated by law and subject to extensive regulation, insurers, third-party administrators and employers do not have the same flexibility to alter benefits as they have with other health benefit programs. In addition, because programs vary by state, it is difficult for insurance companies and multi-state employers to adopt uniform policies to administer, manage and control the costs of benefits across states. As a result, managing the cost of workers' compensation requires approaches that are tailored to the specific regulatory environments in which the employer operates. For the year ended December 31, 2015, approximately 52% of our Concentra segment operating revenues came from workers' compensation.

        In Concentra's occupational health services business, patient bookings and revenues are typically lower in the quarter ended December 31 compared to the other quarters. We believe that decreased patient bookings are caused by fewer work-related injuries and illnesses during the quarter due to our customer's employees being on vacation and our customer's facilities being closed for the holidays.

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Concentra Strategy

        The key elements of our Concentra strategy are to:

        Provide High-Quality Care and Service.    We strive to provide a high level of service to our patients and our employer customers. We measure and monitor patient and employer satisfaction and focus on treatment programs to provide the best clinical outcomes in a consistent manner. Our programs and services have proven that aggressive treatment and management of workers injuries can more rapidly restore employees to better health which reduces workers' compensation indemnity claim costs for our employer customers.

        Focus on Occupational Medicine.    Our history as an industry leader in the provision of occupational medicine services provides the platform for Concentra to grow this service offering. Complementary service offerings within occupational medicine will help secure additional growth in this business line.

        Pursue Direct Employer Relationships.    We believe we provide occupational health services in a cost effective manner to our employer customers. By establishing direct relationships with these customers we seek to reduce overall costs of their workers' compensation claims, while improving employee health and getting their employees back to work faster.

        Increase Market Share.    We strive to establish a leading presence within the local areas we serve. To increase our presence, we seek to expand our services and programs and to open new medical centers and employer onsite locations in our existing markets. This allows us to realize economies of scale, heightened brand loyalty and workforce continuity.

        Pursue Opportunistic Acquisitions.    We may grow our network of Concentra medical centers and expand our geographic reach through opportunistic acquisitions. We believe our size and centralized infrastructure allow us to take advantage of operational efficiencies and increase margins at acquired facilities.

Other

        Other activities include our corporate services and certain other minority investments in other healthcare related businesses. These include investments in companies that provide specialized technology, services to healthcare entities and providers of complementary services.

Our Competitive Strengths

        We believe that the success of our business model is based on a number of competitive strengths, including our position as a leading operator in each of our business segments, proven financial performance and strong cash flow, significant scale, experience in completing and integrating acquisitions, ability to capitalize on consolidation opportunities and an experienced management team.

        Leading Operator in Distinct but Complementary Lines of Business.    We believe that we are a leading operator in each of our business segments, based on number of facilities in the United States. Our leadership position and reputation as a high-quality, cost-effective healthcare provider in each of our business segments allows us to attract patients and employees, aids us in our marketing efforts to payors and referral sources and helps us negotiate payor contracts. In our specialty hospitals segment, we operated 109 LTCHs in 27 states and 18 IRFs in eight states at December 31, 2015. We derived approximately 63% of net operating revenues from our specialty hospitals segment, for the year ended December 31, 2015. In our outpatient rehabilitation segment, we operated 1,038 outpatient rehabilitation clinics in 31 states and the District of Columbia at December 31, 2015. We derived approximately 22% of net operating revenues from our outpatient rehabilitation segment for the year ended December 31, 2015. In our Concentra segment, we operated 300 medical centers in 38 states at December 31, 2015. We derived

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approximately 15% of net operating revenues from our Concentra segment. With these leading positions in the areas we serve, we believe that we are well-positioned to benefit from the rising demand for medical services due to an aging population in the United States, which will drive growth across our business lines.

        Proven Financial Performance and Strong Cash Flow.    We have established a track record of improving the financial performance of our facilities due to our disciplined approach to revenue growth, expense management and an intense focus on free cash flow generation. This includes regular review of specific financial metrics of our business to determine trends in our revenue generation, expenses, billing and cash collection. Based on the ongoing analysis of such trends, we make adjustments to our operations to optimize our financial performance and cash flow.

        Significant Scale.    By building significant scale in each of our business segments, we have been able to leverage our operating costs by centralizing administrative functions at our corporate office.

        Experience in Successfully Completing and Integrating Acquisitions.    From our inception in 1997 through 2015, we completed eight significant acquisitions for approximately $2.15 billion, which includes $1.05 billion paid to acquire Concentra. We believe that we have improved the operating performance of these facilities over time by applying our standard operating practices and by realizing efficiencies from our centralized operations and management.

        Experience in Partnering with Large Health Care Systems.    Over the past several years we have partnered with large health care systems to provide post-acute care services. We believe that we provide operating expertise through our experience in operating specialty hospitals and outpatient rehabilitation services to these ventures and have improved and expanded the level of post-acute care services provided in these communities, as well as the financial performance of these operations.

        Well-Positioned to Capitalize on Consolidation Opportunities.    We believe that we are well-positioned to capitalize on consolidation opportunities within each of our business segments and selectively augment our internal growth. We believe that each of our business segments is fragmented, with many of the nation's LTCHs, IRFs and outpatient rehabilitation facilities being operated by independent operators lacking national or broad regional scope. With our geographically diversified portfolio of facilities in the United States, we believe that our footprint provides us with a wide-ranging perspective on multiple potential acquisition opportunities.

        Experienced and Proven Management Team.    Prior to co-founding our company with our current Executive Chairman and Co-Founder, our Vice Chairman and Co-Founder founded and operated three other healthcare companies focused on inpatient and outpatient rehabilitation services. In addition, our senior management team has extensive experience in the healthcare industry. Our President and Chief Executive Officer has more than two decades of management experience in the healthcare industry. Many of our other executives, such as our Chief Financial Officer, our General Counsel, our Chief Human Resources Officer and our Chief Accounting Officer, have each served at our company for more than 15 years. In recent years, we have reorganized our operations to expand executive talent and ensure management continuity.

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Sources of Net Operating Revenues

        The following table presents the approximate percentages by source of net operating revenue received for healthcare services we provided for the periods indicated:

	Year Ended December 31,
Net Operating Revenues by Payor Source	2013			2014			2015
Medicare		45.9	%		44.5	%		36.5	%
Commercial insurance(1)		36.1	%		37.3	%		34.1	%
Workers' Compensation		5.6	%		5.4	%		12.6	%
Private and other(2)		8.6	%		8.8	%		12.8	%
Medicaid		3.8	%		4.0	%		4.0	%
Total		100.0	%		100.0	%		100.0	%

(1)

Includes commercial healthcare insurance carriers, health maintenance organizations, preferred provider organizations and managed care programs.

(2)

Includes self-payors, management services and non-patient related payments. Self-pay revenues represent less than 1% of total net operating revenues for all periods.

Government Sources

        Medicare is a federal program that provides medical insurance benefits to persons age 65 and over, some disabled persons, and persons with end-stage renal disease. Medicaid is a federal-state funded program, administered by the states, which provides medical benefits to individuals who are unable to afford healthcare. As of December 31, 2015, we operated 127 specialty hospitals, 126 of which were certified as Medicare providers and one which was in the process of obtaining its certification. Our outpatient rehabilitation clinics regularly receive Medicare payments for their services. Additionally, many of our specialty hospitals participate in state Medicaid programs. Amounts received under the Medicare and Medicaid programs are generally less than the customary charges for the services provided. In recent years there have been significant changes made to the Medicare and Medicaid programs. Since a significant portion of our revenues come from patients under the Medicare program, our ability to operate our business successfully in the future will depend in large measure on our ability to adapt to changes in the Medicare program. See "—Government Regulations—Overview of U.S. and State Government Reimbursements."

Non-Government Sources

        Our non-government sources of net operating revenue include insurance companies, workers' compensation programs, health maintenance organizations, preferred provider organizations, other managed care companies and employers, as well as by patients directly. Patients are generally not responsible for any difference between customary charges for our services and amounts paid by Medicare and Medicaid programs, insurance companies, workers' compensation programs, health maintenance organizations, preferred provider organizations and other managed care companies, but are responsible for services not covered by these programs or plans, as well as for deductibles and co-insurance obligations of their coverage. The amount of these deductibles and co-insurance obligations has increased in recent years. Collection of amounts due from individuals is typically more difficult than collection of amounts due from government or commercial payors.

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Employees

        As of December 31, 2015, we employed approximately 41,000 people throughout the United States. Approximately 28,400 of our employees are full time and the remaining approximately 12,600 are part-time employees. Our specialty hospitals segment employees totaled approximately 22,100, outpatient rehabilitation segment employees totaled approximately 9,600 and Concentra segment employees totaled approximately 8,200. The remaining approximately 1,100 employees performed corporate management, administration and other support services primarily at our Mechanicsburg, Pennsylvania headquarters.

Competition

        We compete on the basis of the quality of the patient services we provide, the results that we achieve for our patients and the prices we charge for our services. The primary competitive factors in the specialty hospitals business include quality of services, charges for services and responsiveness to the needs of patients, families, payors and physicians. Other companies operate specialty hospitals that compete with our hospitals, including large operators of similar facilities, such as Kindred Healthcare Inc. and HealthSouth Corporation and rehabilitation units and stepdown units operated by acute care hospitals in the markets we serve. The competitive position of any hospital is also affected by the ability of its management to negotiate contracts with purchasers of group healthcare services, including private employers, managed care companies, preferred provider organizations and health maintenance organizations. Such organizations attempt to obtain discounts from established hospital charges. The importance of obtaining contracts with preferred provider organizations, health maintenance organizations and other organizations which finance healthcare, and its effect on a hospital's competitive position, vary from area to area, depending on the number and strength of such organizations.

        Our outpatient rehabilitation clinics face a highly fragmented and competitive environment. The primary competitors that provide outpatient rehabilitation services include physician-owned physical therapy clinics, dedicated locally owned and managed outpatient rehabilitation clinics and hospital or university owned or affiliated ventures, as well as national and regional providers in select areas, including Athletico Physical Therapy, ATI Physical Therapy, Drayer Physical Therapy Institute, Physiotherapy Associates, U.S. Physical Therapy and Upstream Physical Therapy. Some of these competing clinics have longer operating histories and greater name recognition in these communities than our clinics, and they may have stronger relations with physicians in these communities on whom we rely for patient referrals. Because the barriers to entry are not substantial and current customers have the flexibility to move easily to new healthcare service providers, we believe that new outpatient physical therapy competitors can emerge relatively quickly.

        Our Concentra segment's occupational health services, consumer health and veteran's healthcare business face a highly fragmented and competitive environment. The primary competitors that provide occupational health services have typically been independent physicians, hospital emergency departments, and hospital-owned or hospital-affiliated medical facilities. Because the barriers to entry are not substantial and its current customers have the flexibility to move easily to new healthcare service providers, we believe that new competitors to Concentra can emerge relatively quickly. Furthermore, urgent care clinics in the local communities Concentra serves provide services similar to those Concentra offers, and, in some cases, competing facilities (1) are more established or newer than Concentra's, (2) may offer a broader array of services to patients than Concentra's and (3) may have larger or more specialized medical staffs to treat and serve patients. In the future, Concentra expects to encounter increased competition from hospital owned clinics, payor affiliated clinics, retail pharmacy-owned clinics, and healthcare companies.

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Government Regulations

General

        The healthcare industry is required to comply with many complex laws and regulations at the federal, state and local government levels. These laws and regulations require that hospitals and facilities furnishing outpatient services (including outpatient rehabilitation clinics, Concentra medical centers, onsite clinics and CBOCs) comply with various requirements and standards. These laws and regulations include those relating to the adequacy of medical care, facilities and equipment, personnel, operating policies and procedures and recordkeeping as well as standards for reimbursement, fraud and abuse prevention and health information privacy and security. These laws and regulations are extremely complex, often overlap and, in many instances, the industry does not have the benefit of significant regulatory or judicial interpretation. If we fail to comply with applicable laws and regulations, we could suffer civil or criminal penalties, including the loss of our licenses to operate and our ability to participate in the Medicare, Medicaid and other federal and state healthcare programs.

Facility Licensure

        Our healthcare facilities are subject to state and local licensing statutes and regulations ranging from the adequacy of medical care to compliance with building codes and environmental protection laws. In order to assure continued compliance with these various regulations, governmental and other authorities periodically inspect our facilities, both at scheduled intervals and in response to complaints from patients and others. While our facilities intend to comply with existing licensing standards, there can be no assurance that regulatory authorities will determine that all applicable requirements are fully met at any given time. In addition, the state and local licensing laws are subject to changes or new interpretations that could impose additional burdens on our facilities. A determination by an applicable regulatory authority that a facility is not in compliance with these requirements could lead to the imposition of corrective action, assessment of fines and penalties, or loss of licensure, Medicare enrollment or certification or accreditation. These consequences could have an adverse effect on our company.

        Some states still require us to get approval under certificate of need regulations when we create, acquire or expand our facilities or services, or alter the ownership of such facilities, whether directly or indirectly. The certificate of need regulations vary from state to state, and are subject to change and new interpretation. If we fail to show public need and obtain approval in these states for our new facilities or changes to the ownership structure of existing facilities, we may be subject to civil or even criminal penalties, lose our facility license or become ineligible for reimbursement.

Professional Licensure, Corporate Practice and Fee-Splitting Laws

        Healthcare professionals at our specialty hospitals and facilities furnishing outpatient services are required to be individually licensed or certified under applicable state law. We take steps to ensure that our employees and agents possess all necessary licenses and certifications.

        Some states prohibit the "corporate practice of medicine," which restricts business corporations from practicing medicine through the direct employment of physicians or from exercising control over medical decisions by physicians. Some states similarly prohibit the "corporate practice of therapy." The laws relating to corporate practice vary from state to state and are not fully developed in each state in which we have facilities. Typically, however, professional corporations owned and controlled by licensed professionals are exempt from corporate practice restrictions and may employ physicians or therapists to furnish professional services. Also, in some states hospitals are permitted to employ physicians.

        Some states also prohibit entities from engaging in certain financial arrangements, such as fee-splitting, with physicians or therapists. The laws relating to fee-splitting also vary from state to state and are not fully developed. Generally, these laws restrict business arrangements that involve a physician

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or therapist sharing medical fees with a referral source, but in some states these laws have been interpreted to extend to management agreements between physicians or therapists and business entities under some circumstances.

        We believe that each of our facilities complies with any current corporate practice and fee-splitting laws of the state in which it is located. In states where we are prohibited by the corporate practice of medicine from directly employing licensed physicians, we typically enter into management agreements with professional corporations that are owned by licensed physicians, which, in turn, employ or contract with physicians who provide professional medical services in our facilities. Under those management agreements, we perform only non-medical administrative services, do not exercise control over the practice of medicine by the physicians, and structure compensation to avoid fee-splitting. In those states that apply the corporate practice of therapy prohibition, we either contract to obtain therapy services from an entity permitted to employ therapists or we manage the physical therapy practice owned by licensed therapists through which the therapy services are provided.

        Although we believe that our facilities comply with corporate practice and fee-splitting laws, if new regulations or judicial or administrative interpretations establish that our facilities do not comply with these laws, we could be subject to civil and perhaps criminal penalties. In addition, if any of our facilities is determined not to comply with corporate practice and fee-splitting laws, certain of our agreements relating to the facility may be determined to be unenforceable, including our management agreements with the professional corporations furnishing physician services or our payment arrangements with insurers or employers. Future interpretations of corporate practice and fee-splitting laws, the enactment of new legislation or the adoption of new regulations relating to these laws could cause us to have to restructure our business operations or close our facilities in a particular state. Any such penalties, determinations of unenforceability or interpretations could have a material adverse effect on our business.

Medicare Enrollment and Certification

        In order to participate in the Medicare program and receive Medicare reimbursement, each facility must comply with the applicable regulations of the United States Department of Health and Human Services relating to, among other things, the type of facility, its equipment, its personnel and its standards of medical care, as well as compliance with all applicable state and local laws and regulations. As of December 31, 2015, 126 of the 127 specialty hospitals we operated were certified as Medicare providers and one was in the process of obtaining its certification. In addition, we provide the majority of our outpatient rehabilitation services through outpatient rehabilitation clinics certified by Medicare as rehabilitation agencies or "rehab agencies." Our Concentra medical centers furnishing outpatient services are generally enrolled in Medicare as suppliers.

Accreditation

        Our specialty hospitals receive accreditation from The Joint Commission, the AOA, CARF and/or other healthcare accrediting organizations. As of December 31, 2015, all of the 127 specialty hospitals we operated were accredited by either The Joint Commission or the AOA. In addition, some of our IRFs have also applied for and received accreditation from CARF. Where required under our contracts with the Department of Veterans Affairs, our facilities furnishing outpatient services that operate as CBOCs are accredited by The Joint Commission or another healthcare accrediting organization. See "—Government Regulations—Veterans Affairs."

Workers' Compensation

        Workers' compensation is a state mandated, comprehensive insurance program that requires employers to fund or insure medical expenses, lost wages and other costs resulting from work related injuries and illnesses. Workers' compensation benefits and arrangements vary from state to state, and are

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often highly complex. In some states, payment for services covered by workers' compensation programs are subject to cost containment features, such as requirements that all workers' compensation injuries be treated through a managed care program, or the imposition of fee schedules or payment caps for services furnished to injured employees. Some state workers' compensation laws limit the ability of an employer to select the providers furnishing care to injured employees. Several states require that physicians furnishing non-emergency services to workers' compensation patients must register with the applicable state agency and undergo special continuing education and training. Workers' compensation programs may also impose other requirements that affect the operations of our facilities furnishing outpatient services. Net operating revenues generated directly from workers' compensation programs represented approximately 17% of our net operating revenue from outpatient rehabilitation services, 1% of our net operating revenue from our specialty hospitals and 52% of our net operating revenue from our Concentra segment for the year ended December 31, 2015.

        Our facilities furnishing outpatient services are reimbursed for services furnished to injured workers by payors pursuant to the applicable state workers' compensation statutes. Most of the states in which we maintain operations reimburse providers for services payable under workers' compensation laws pursuant to a treatment-specific fee schedule with established maximum reimbursement levels. In states without such fee schedules, healthcare providers are often reimbursed based on "usual and customary" fees benchmarked by market data and negotiated by providers with payors and networks.

        Inadequate increases to the applicable fee schedule amounts for our services, and changes in state workers' compensation laws, including cost containment initiatives, could have a negative impact on the operations and financial performance of those facilities.

Veterans Affairs

        The Veterans Affairs health system is the largest integrated healthcare system in the U.S. and includes over 150 hospitals, 800 CBOCs (of which only 166 are operated by contractors) and 260 veterans medical centers. As of December 31, 2015, we had 33 CBOCs, which were established to provide services to veterans residing in catchment areas under agreements with the Department of Veterans Affairs. The awarding of such agreements is regulated by laws related to federal government procurements generally, including the Federal Acquisition Regulations. Our contracts with the Department of Veterans Affairs include administrative and clinical services, performance standards, qualifications and other contractor requirements and information and security requirements. In general, our facilities furnishing outpatient services that are CBOCs provide outpatient primary care in exchange for a capitated monthly fee based on the number of eligible patients then enrolled in that CBOC.

Overview of U.S. and State Government Reimbursements

Medicare Program in General

        The Medicare program reimburses healthcare providers for services furnished to Medicare beneficiaries, which are generally persons age 65 and older, those who are chronically disabled, and those suffering from end stage renal disease. The program is governed by the Social Security Act of 1965 and is administered primarily by the Department of Health and Human Services and CMS. Net operating revenues generated directly from the Medicare program represented approximately 46% for the year ended December 31, 2013, 45% for the year ended December 31, 2014 and 37% for the year ended December 31, 2015.

        The Medicare program reimburses various types of providers, including LTCHs, IRFs and outpatient rehabilitation providers, using different payment methodologies. The Medicare reimbursement systems specific to LTCHs, IRFs and outpatient rehabilitation providers, as described below, are different than the system applicable to general acute care hospitals. If any of our hospitals fail to comply with requirements

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for payment under Medicare reimbursement systems for LTCHs or IRFs, as applicable, that hospital will be paid under the system applicable to general acute care hospitals. For general acute care hospitals, Medicare payments for inpatient care are made under the inpatient prospective payment system, or "IPPS," under which a hospital receives a fixed payment amount per discharge (adjusted for area wage differences) using Medicare severity diagnosis-related groups, or "MS-DRGs." The general acute care hospital MS-DRG payment rate is based upon the national average cost of treating a Medicare patient's condition, based on severity levels of illness, in that type of facility. Although the average length of stay varies for each MS-DRG, the average stay of all Medicare patients in a general acute care hospital is substantially less than the average length of stay in LTCHs and IRFs. Thus, the prospective payment system for general acute care hospitals creates an economic incentive for those hospitals to discharge medically complex Medicare patients to a post-acute care setting as soon as clinically possible. Effective October 1, 2005, CMS expanded its post-acute care transfer policy under which general acute care hospitals are paid on a per diem basis rather than the full MS-DRG rate if a patient is discharged early to certain post-acute care settings, including LTCHs and IRFs. When a patient is discharged from selected MS-DRGs to, among other providers, an LTCH or IRF, the general acute care hospital may be reimbursed below the full MS-DRG payment if the patient's length of stay is less than the geometric mean length of stay for the MS-DRG.

        The Medicare Access and CHIP Reauthorization Act of 2015, enacted on April 16, 2015, reforms Medicare payment policy for services paid under the Medicare physician fee schedule, including our outpatient rehabilitation services. The law repeals the sustainable growth rate (the "SGR") formula effective January 1, 2015, and establishes a new payment framework consisting of specified updates to the Medicare physician fee schedule, a new Merit-Based Incentive Payment System ("MIPS"), and incentives for participation in alternative payment models ("APMs"). To finance these provisions, the Medicare Access and CHIP Reauthorization Act of 2015 reduces market basket updates for post-acute care providers, including LTCHs and IRFs, among other Medicare payment cuts. As noted below, the law sets the annual prospective payment system update for fiscal year 2018 at 1% for LTCHs and IRFs, as well as skilled nursing facilities, home health agencies, and hospices. The law also extends the exceptions process for outpatient therapy caps through December 31, 2017.

Long Term Acute Care Hospital Medicare Reimbursement

        The Medicare payment system for LTCHs is based on a prospective payment system specifically applicable to LTCHs. The long term care hospital prospective payment system, or "LTCH-PPS," was established by CMS final regulations published on August 30, 2002, and applies to LTCHs for cost reporting periods beginning on or after October 1, 2002. The policies and payment rates under LTCH-PPS are subject to annual updates and revisions. Under LTCH-PPS, each patient discharged from an LTCH is assigned to a distinct "MS-LTC-DRG," which is a Medicare severity diagnosis-related group for LTCHs, and an LTCH is generally paid a pre-determined fixed amount applicable to the assigned MS-LTC-DRG (adjusted for area wage differences), subject to exceptions for short stay and high cost outlier patients (described below). CMS assigns relative weights to each MS-LTC-DRG to reflect their relative use of medical care resources. The payment amount for each MS-LTC-DRG is intended to reflect the average cost of treating a Medicare patient assigned to that MS-LTC-DRG in an LTCH.

Standard Federal Rate

        Payment under the LTCH-PPS is dependent on determining the patient classification, that is, the assignment of the case to a particular MS-LTC-DRG, the weight of the MS-LTC-DRG and the standard federal payment rate. There is a single standard federal rate that encompasses both the inpatient operating costs, which includes a labor and non-labor component, and capital-related costs that CMS updates on an annual basis. LTCH-PPS also includes special payment policies that adjust the payments for some patients

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based on the patient's length of stay, the facility's costs, whether the patient was discharged and readmitted and other factors.

Patient Criteria

        The BBA of 2013, enacted December 26, 2013, establishes new payment limits for Medicare patients discharged from an LTCH who do not meet specified criteria. Specifically, for Medicare patients discharged in cost reporting periods beginning on or after October 1, 2015, LTCHs will be reimbursed under LTCH-PPS only if, immediately preceding the patient's LTCH admission, the patient was discharged from a general acute care hospital paid under IPPS and the patient's stay included at least three days in an intensive care unit (ICU) or coronary care unit (CCU) or the patient is assigned to an MS-LTC-DRG for cases receiving at least 96 hours of ventilator services in the LTCH. In addition, to be paid under LTCH-PPS the patient's discharge from the LTCH may not include a principal diagnosis relating to psychiatric or rehabilitation services. For any Medicare patient who does not meet the new criteria, the LTCH will be paid a lower "site-neutral" payment rate, which will be the lower of (1) the IPPS comparable per-diem payment rate capped at the MS-DRG including any outlier payments, or (2) 100 percent of the estimated costs for services.

        The BBA of 2013 provides for a transition to the site-neutral payment rate for those patients not paid under LTCH-PPS. During the transition period (cost reporting periods beginning on or after October 1, 2015 through September 30, 2017), a blended rate will be paid for Medicare patients not meeting the new criteria. The blended rate will comprise half the site-neutral payment rate and half the LTCH-PPS payment rate. For discharges in cost reporting periods beginning on or after October 1, 2017, only the site-neutral payment rate will apply for Medicare patients not meeting the new criteria.

        In addition, for cost reporting periods beginning on or after October 1, 2019, qualifying discharges from an LTCH will continue to be paid at the LTCH-PPS payment rate, unless the number of discharges for which payment is made under the site-neutral payment rate is greater than 50% of the total number of discharges from the LTCH. If the number of discharges for which payment is made under the site-neutral payment rate is greater than 50%, then beginning in the next cost reporting period all discharges from the LTCH will be reimbursed at the site-neutral payment rate. The BBA of 2013 requires CMS to establish a process for an LTCH subject to the site-neutral payment rate to re-qualify for payment under LTCH-PPS.

        Payment adjustments, including the interrupted stay policy and the 25 Percent Rule (discussed below), apply to LTCH discharges regardless of whether the case is paid at the LTCH-PPS payment rate or the site-neutral payment rate. However, short stay outlier payment adjustments do not apply to cases paid at the site-neutral payment rate. Beginning with fiscal year 2016, CMS will calculate the annual recalibration of the MS-LTC-DRG relative payment weighting factors using only data from LTCH discharges that meet the criteria for exclusion from the site-neutral payment rate. In addition, beginning in fiscal year 2016, CMS will apply the IPPS fixed-loss amount to site-neutral cases, rather than the LTCH PPS fixed-loss amount. For fiscal year 2016, the IPPS fixed-loss amount is set at $22,544 and the LTCH-PPS fixed-loss amount is estimated to be $16,423. CMS will calculate the LTCH-PPS fixed-loss amount using only data from cases paid at the LTCH-PPS payment rate, excluding cases paid at the site-neutral rate.

        Each of our LTCHs has their own unique annual cost reporting period. As a result, the new payment limits will become effective for each of our LTCHs at different points in time over a twelve month period beginning on October 1, 2015. As of December 31, 2015, 16 of our LTCHs have cost reporting periods that began during the fourth quarter of 2015 and 37, 19 and 36 of our LTCHs have cost reporting periods commencing during the first quarter, second quarter and third quarters of 2016, respectively.

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Short Stay Outlier Policy

        CMS established a different payment methodology for Medicare patients with a length of stay less than or equal to five-sixths of the geometric average length of stay for that particular MS-LTC-DRG, referred to as a short stay outlier, or "SSO." SSO cases are paid based on the lesser of (1) 100% of the average cost of the case, (2) 120% of the MS-LTC-DRG specific per diem amount multiplied by the patient's length of stay, (3) the full MS-LTC-DRG payment, or (4) a per diem rate derived from blending 120% of the MS-LTC-DRG specific per diem amount with a per diem rate based on the general acute care hospital IPPS.

        The SSO rule also has a category referred to as a "very short stay outlier," which applies to cases with a length of stay that is less than the average length of stay plus one standard deviation for the same MS-DRG under IPPS, referred to as the so-called "IPPS comparable threshold." The LTCH payment for very short stay outlier cases is equivalent to the general acute care hospital IPPS per diem rate. The Medicare, Medicaid, and SCHIP Extension Act of 2007, or the "SCHIP Extension Act," as amended by the American Recovery and Reinvestment Act, or the "ARRA," and the Patient Protection and Affordable Care Act, or the "ACA," prevented CMS from applying the very short stay outlier policy during the period from December 29, 2007 through December 28, 2012. The very short stay outlier policy again became applicable to discharges occurring on or after December 29, 2012.

High Cost Outliers

        Some cases are extraordinarily costly, producing losses that may be too large for hospitals to offset. Cases with unusually high costs, referred to as "high cost outliers," receive a payment adjustment to reflect the additional resources utilized. CMS provides an additional payment if the estimated costs for the patient exceed the adjusted MS-LTC-DRG payment plus a fixed-loss amount that is established in the annual payment rate update.

Interrupted stays

        An interrupted stay is defined as a case in which an LTCH patient, upon discharge, is admitted to a general acute care hospital, IRF or skilled nursing facility/swing-bed and then returns to the same LTCH within a specified period of time. If the length of stay at the receiving provider is equal to or less than the applicable fixed period of time, it is considered to be an interrupted stay case and the case is treated as a single discharge for the purposes of payment to the LTCH.

Freestanding, HIH and Satellite LTCHs

        LTCHs may be organized and operated as freestanding facilities or as HIHs. As its name suggests, a freestanding LTCH is not located on the campus of another hospital. For such purpose, "campus" means the physical area immediately adjacent to a hospital's main buildings, other areas and structures that are not strictly contiguous to a hospital's main buildings but are located within 250 yards of its main buildings, and any other areas determined, on an individual case basis by the applicable CMS regional office, to be part of a hospital's campus. Conversely, an HIH is an LTCH that is located on the campus of another hospital. An LTCH, whether freestanding or an HIH, that uses the same Medicare provider number of an affiliated "primary site" LTCH is known as a "satellite." Under Medicare policy, a satellite LTCH must be located within 35 miles of its primary site LTCH and be administered by such primary site LTCH. A primary site LTCH may have more than one satellite LTCH. CMS sometimes refers to a satellite LTCH that is freestanding as a "remote location."

Facility Certification Criteria

        The LTCH-PPS regulations define the criteria that must be met in order for a hospital to be certified as an LTCH. To be eligible for payment under the LTCH-PPS, a hospital must be primarily engaged in

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providing inpatient services to Medicare beneficiaries with medically complex conditions that require a long hospital stay. In addition, by definition, LTCHs must meet certain facility criteria, including (1) instituting a review process that screens patients for appropriateness of an admission and validates the patient criteria within 48 hours of each patient's admission, evaluates regularly their patients for continuation of care and assesses the available discharge options, (2) having active physician involvement with patient care that includes a physician available on-site daily and additional consulting physicians on call, and (3) having an interdisciplinary team of healthcare professionals to prepare and carry out an individualized treatment plan for each patient.

        An LTCH must have an average inpatient length of stay for Medicare patients (including both Medicare covered and non-covered days and Medicare Advantage Days) of greater than 25 days. LTCHs that fail to exceed an average length of stay of 25 days during any cost reporting period may be paid under the general acute care hospital IPPS if not corrected within established timeframes. CMS, through its contractors, determines whether an LTCH has maintained an average length of stay of greater than 25 days during each annual cost reporting period. Under the BBA of 2013, for discharges occurring in cost reporting periods beginning on or after October 1, 2015, LTCH cases paid at the site-neutral rate and Medicare Advantage cases are excluded from the LTCH average length of stay calculation.

        Prior to qualifying under the payment system applicable to LTCHs, a new LTCH initially receives payments under the general acute care hospital IPPS. The LTCH must continue to be paid under this system for a minimum of six months while meeting certain Medicare LTCH requirements, the most significant requirement being an average length of stay for Medicare patients (including both Medicare covered and non-covered days) greater than 25 days.

25 Percent Rule

        The "25 Percent Rule" is a downward payment adjustment that applies if the percentage of Medicare patients discharged from LTCHs who were admitted from a referring hospital (regardless of whether the LTCH or LTCH satellite is co-located with the referring hospital) exceeds the applicable percentage admissions threshold during a particular cost reporting period. Specifically, the payment rate for Medicare patients above the percentage admissions threshold are subject to a downward payment adjustment. For Medicare patients above the applicable percentage admissions threshold, the LTCH is reimbursed at a rate comparable to that under general acute care hospital IPPS, which is generally lower than LTCH-PPS rates. Cases that reach outlier status in the referring hospital do not count toward the admissions threshold and are paid under LTCH-PPS.

        The SCHIP Extension Act, as amended by the ARRA and the ACA, has limited the full application of the 25 Percent Rule. However, the SCHIP Extension Act did not postpone the application of the percentage admissions threshold to those Medicare patients discharged from an LTCH HIH or satellite that were admitted from a non-co-located hospital. In addition, CMS adopted regulations providing for a one-year extension of relief from the full application of the 25 Percent Rule. As a result, full implementation of the Medicare percentage admissions thresholds did not go into effect until cost reporting periods beginning on or after October 1, 2013, except for certain LTCHs with cost reporting periods that begin between July 1, 2012 and through September 30, 2012. Specifically, those freestanding facilities, grandfathered HIHs and grandfathered satellites with cost reporting periods beginning on or after July 1, 2012 and through September 30, 2012 were subject to a modified 25 Percent Rule for discharges occurring in a three month period between July 1, 2012 and September 30, 2012.

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        The BBA of 2013 further delays, and in some cases permanently suspends, the application of the 25 Percent Rule. The following table describes the types of LTCHs and the statutory and regulatory relief they have received from the payment adjustment for these discharges:

Type of LTCH	Non Co-located Admissions(1)	Co-located Admissions(2)
Non-grandfathered HIHs and satellite facilities opened before October 1, 2004 (63 owned hospitals)	LTCHs in this category are subject to a payment adjustment for discharged Medicare patients exceeding 25% of the LTCH's total Medicare population.	Percentage admissions threshold was raised from 25% to 50%. In the special case of rural LTCHs, LTCHs co-located with an urban single hospital, or LTCHs co-located with an MSA-dominant hospital the referral percentage was raised from 50% to 75%. This relief is now effective until cost reporting periods beginning on or after October 1, 2016.
Grandfathered HIHs (3 owned hospitals)	25 Percent Rule not applicable.	25 Percent Rule not applicable.
Grandfathered satellites (0 owned hospitals)	LTCHs in this category are subject to a payment adjustment for discharged Medicare patients exceeding 25% of the LTCH's total Medicare population.	Percentage admissions threshold was raised from 25% to 50%. In the special case of rural LTCHs, LTCHs co-located with an urban single hospital, or LTCHs co-located with an MSA-dominant hospital the referral percentage was raised from 50% to 75%. This relief is now effective until cost reporting periods beginning on or after July 1, 2016.
Freestanding facilities (28 owned hospitals)	Percentage admissions threshold is suspended until cost reporting periods beginning on or after July 1, 2016.	25 Percent Rule not applicable.
Facilities co-located with a provider-based, off-campus, non-inpatient location of an inpatient prospective payment system hospital (0 owned hospitals)	Percentage admissions threshold is suspended until cost reporting periods beginning on or after July 1, 2016.	Percentage admissions threshold is suspended until cost reporting periods beginning on or after July 1, 2016.
HIHs and satellite facilities opened on or after October 1, 2004 (14 owned hospitals)	LTCHs in this category are subject to a payment adjustment for discharged Medicare patients exceeding 25% of the LTCH's total Medicare population.	LTCHs in this category are subject to a payment adjustment for discharged Medicare patients exceeding 25% of the LTCH's total Medicare population. In the special case where an LTCH is co-located with an MSA-dominant hospital, the referral percentage is no more than 50%, nor less than 25%.

(1)

Medicare patients admitted from a hospital not located in the same building or on the same campus as the LTCH or satellites of the LTCH.

(2)

Medicare patients admitted from a hospital located in the same building or on the same campus as the LTCH or satellites of the LTCH.

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        After the expiration of the regulatory relief, as described above, our LTCHs (whether freestanding, HIH or satellite) will be subject to a downward payment adjustment for any Medicare patients who were admitted from a co-located or a non-co-located hospital and that exceed the applicable percentage admissions threshold of all Medicare patients discharged from the LTCH during the cost reporting period. These regulatory changes will have an adverse financial impact on the net operating revenues and profitability of many of these hospitals for cost reporting periods beginning on or after July 1, 2016.

        The BBA of 2013 requires CMS to report to Congress before October 2016 on the need for any further extensions or modifications of the extensions of the 25 Percent Rule. In addition, the BBA of 2013 requires the Medicare Payment Advisory Commission, or "MedPAC," to report to Congress by June 2019 on the need to continue applying the 25 Percent Rule, the effect of site-neutral payment on LTCHs, and recommendations on how to change the site-neutral payment policy.

Moratorium on New LTCHs, LTCH Satellite Facilities and LTCH beds

        The SCHIP Extension Act imposed a moratorium on the establishment and classification of new LTCHs, LTCH satellite facilities and LTCH beds in existing LTCHs or satellite facilities. The ACA extended this moratorium by two years. The moratorium expired on December 28, 2012. The BBA of 2013 reinstated the moratorium on the establishment and classification of new LTCHs or LTCH satellite facilities, and on the increase of LTCH beds in existing LTCHs or satellite facilities beginning January 1, 2015 through September 30, 2017. The PAMA advanced the commencement date of the reinstated moratorium from January 1, 2015 to April 1, 2014. The PAMA includes exceptions to the moratorium that are applicable to the establishment and classification of new LTCHs or LTCH satellites facilities currently under development. The new moratorium will not apply to LTCHs or LTCH satellites facilities that: (1) began their qualifying period to become an LTCH on or before April 1, 2014; (2) had a binding written agreement as of April 1, 2014 with an unrelated party for construction, renovation, or lease for an LTCH and have expended, before April 1, 2014, at least 10% of the estimated cost of the project (or, if less, $2,500,000); or (3) had obtained a certificate of need on or before April 1, 2014. The moratorium as reinstated on April 1, 2014 provides no exceptions for increases in the number of certified beds in existing LTCHs and LTCH satellites. Further, any LTCH that establishes a new satellite, based upon meeting the criteria for an exception to the moratorium, must reduce beds elsewhere in the LTCH in order to have beds in the new satellite location.

One-Time Budget Neutrality Adjustment

        Congress required that the LTCH-PPS payment rates maintain budget neutrality during the first years of the prospective payment system with total expenditures that would have been made under the previous reasonable cost-based payment system. The LTCH-PPS regulations give CMS the ability to make a one-time adjustment to the standard federal rate to correct any "significant difference between actual payments and estimated payments for the first year" of LTCH-PPS. The SCHIP Extension Act precluded CMS from implementing the one-time prospective adjustment to the LTCH standard federal rate for a period of three years. The ACA extended the stay on CMS's ability to adopt a one-time budget neutrality adjustment to LTCH-PPS through December 28, 2012. In the update to the Medicare policies and payment rates for fiscal year 2013, CMS adopted a one-time budget neutrality adjustment that results in a permanent negative adjustment of 3.75% to the LTCH base rate. CMS is implementing the adjustment over a three-year period by applying a factor of 0.98734 to the standard federal rate in fiscal years 2013, 2014 and 2015, except that the adjustment did not apply to payments for discharges occurring on or after October 1, 2012 through December 28, 2012.

Annual Payment Rate Update

Fiscal Year 2014.    On August 19, 2013, CMS published the final rule updating the policies and payment rates for LTCH-PPS for fiscal year 2014 (affecting discharges and cost reporting periods

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beginning on or after October 1, 2013 through September 30, 2014). The standard federal rate was set at $40,607, an increase from the standard federal rate applicable during the period from December 29, 2012 through September 30, 2013 of $40,398. The update to the standard federal rate for fiscal year 2014 includes a market basket increase of 2.5%, less a productivity adjustment of 0.5%, less a reduction of 0.3% mandated by the ACA, and less a budget neutrality adjustment of 1.266%, as discussed above. The fixed-loss amount for high cost outlier cases was set at $13,314, which was a decrease from the fixed-loss amount in the 2013 fiscal year of $15,408.

Fiscal Year 2015.    On August 22, 2014, CMS published the final rule updating policies and payment rates for LTCH-PPS for fiscal year 2015 (affecting discharges and cost reporting periods beginning on or after October 1, 2014 through September 30, 2015). The standard federal rate was set at $41,044, an increase from the standard federal rate applicable during fiscal year 2014 of $40,607. The update to the standard federal rate for fiscal year 2015 includes a market basket increase of 2.9%, less a productivity adjustment of 0.5%, less a reduction of 0.2% mandated by the ACA, and less a budget neutrality adjustment of 1.266%, as discussed above. The fixed-loss amount for high cost outlier cases was set at $14,972, which was an increase from the fixed-loss amount in the 2014 fiscal year of $13,314.

Fiscal Year 2016.    On August 17, 2015, CMS published the final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2016 (affecting discharges and cost reporting periods beginning on or after October 1, 2015 through September 30, 2016). The standard federal rate is set at $41,763, an increase from the standard federal rate applicable during fiscal year 2015 of $41,044. The update to the standard federal rate for fiscal year 2016 includes a market basket increase of 2.4%, less a productivity adjustment of 0.5%, and less a reduction of 0.2% mandated by the ACA. The fixed-loss amount for high cost outlier cases paid under LTCH-PPS is set at $16,423, which is an increase from the fixed-loss amount in the 2015 fiscal year of $14,972. The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate described below is set at $22,544.

Medicare Market Basket Adjustments

        The ACA instituted a market basket payment adjustment to LTCHs. In fiscal years 2017 through 2019, the market basket update will be reduced by 0.75%. The Medicare Access and CHIP Reauthorization Act of 2015 sets the annual update for fiscal year 2018 at 1% after taking into account the market basket payment reduction of 0.75% mandated by the ACA. The ACA specifically allows these market basket reductions to result in less than a 0% payment update and payment rates that are less than the prior year.

Medicare Reimbursement of Inpatient Rehabilitation Facility Services

        IRFs are paid under a prospective payment system specifically applicable to this provider type, which is referred to as "IRF-PPS." Under the IRF-PPS, each patient discharged from an IRF is assigned to a case mix group, or "IRF-CMG," containing patients with similar clinical conditions that are expected to require similar amounts of resources. An IRF is generally paid a pre-determined fixed amount applicable to the assigned IRF-CMG (subject to applicable case adjustments related to length of stay and facility level adjustments for location and low income patients). The payment amount for each IRF-CMG is intended to reflect the average cost of treating a Medicare patient's condition in an IRF relative to patients with conditions described by other IRF-CMGs. The IRF-PPS also includes special payment policies that adjust the payments for some patients based on the patient's length of stay, the facility's costs, whether the patient was discharged and readmitted and other factors.

Facility Certification Criteria

        Our rehabilitation hospitals must meet certain facility criteria to be classified as an IRF by the Medicare program, including: (1) a provider agreement to participate as a hospital in Medicare, (2) a

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preadmission screening procedure, (3) ensuring that patients receive close medical supervision and furnish, through the use of qualified personnel, rehabilitation nursing, physical therapy, and occupational therapy, plus, as needed, speech therapy, social or psychological services, and orthotic and prosthetic services, (4) a full-time, qualified director of rehabilitation, (5) a plan of treatment for each inpatient that is established, reviewed, and revised as needed by a physician in consultation with other professional personnel who provide services to the patient, and (6) a coordinated multidisciplinary team approach in the rehabilitation of each inpatient, as documented by periodic clinical entries made in the patient's medical record to note the patient's status in relationship to goal attainment, and that team conferences are held at least every two weeks to determine the appropriateness of treatment. Failure to comply with any of the classification criteria may result in the denial of claims for payment or cause a hospital to lose its status as an IRF and be paid under the prospective payment system that applies to general acute care hospitals.

Patient Classification Criteria

        Under the IRF certification criteria that has been in effect since 1983, in order to qualify as an IRF, a hospital was required to satisfy certain operational criteria as well as demonstrate that, during its most recent 12-month cost reporting period, it served an inpatient population of whom at least 75% required intensive rehabilitation services for one or more of 10 conditions specified in the regulation. We refer to such 75% requirement as the "75% Rule."

        New IRF certification criteria became effective for cost reporting periods beginning on or after July 1, 2004 as a result of the major changes that CMS adopted on May 7, 2004 to the 75% Rule that: (1) temporarily lowered the 75% compliance threshold (starting at 50% and phasing to 75% over four years), (2) modified and expanded from 10 to 13 the medical conditions used to determine whether a hospital qualifies as an IRF, (3) identified the conditions under which comorbidities can be used to verify compliance with the 75% Rule, and (4) changed the timeframe used to determine compliance with the 75% Rule from "the most recent 12-month cost reporting period" to "the most recent, consecutive, and appropriate 12-month period," with the result that a determination of non-compliance with the applicable compliance threshold will affect the facility's certification as an IRF for its cost reporting period that begins immediately after the 12-month review period.

        Under the Deficit Reduction Act of 2005 (the "DRA"), enacted on February 8, 2006, Congress extended the phase-in period for the 75% Rule by maintaining the compliance threshold at 60% (rather than increasing it to the scheduled 65%) during the 12-month period beginning on July 1, 2006. The compliance threshold was then to increase to 65% for cost reporting periods beginning on or after July 1, 2007 and again to 75% for cost reporting periods beginning on or after July 1, 2008. However, the SCHIP Extension Act included a permanent freeze in the 75% Rule patient classification criteria compliance threshold at 60% (with comorbidities counting toward this threshold), at which time the requirement became known as the "60% Rule."

        Compliance with the patient classification criteria is demonstrated through either medical review or the "presumptive" method, in which a patient's diagnosis codes are compared to a "presumptive compliance" list. CMS has announced that it will remove a number of diagnosis codes from the presumptive compliance list. According to CMS, these conditions do not demonstrate the need for intensive inpatient rehabilitation services in the absence of additional facts that would have to be pulled from a patient's medical record. Effective October 1, 2015, CMS removed a number of diagnosis codes from the presumptive compliance list including diagnosis codes in the following categories: nonspecific diagnosis codes, arthritis diagnosis codes, unilateral upper extremity amputations diagnosis codes, amputation status codes, prosthetic fitting and adjustment codes, some congenital anomalies diagnosis codes and other miscellaneous diagnosis codes.

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Annual Payment Rate Update

Fiscal Year 2014.    On August 6, 2013, CMS published the final rule updating policies and payment rates for IRF-PPS for fiscal year 2014 (affecting discharges and cost reporting periods beginning on or after October 1, 2013 through September 30, 2014). The standard payment conversion factor for discharges for fiscal year 2014 was $14,846, which was an increase from the fiscal year 2013 standard payment conversion factor of $14,343. The update to the standard payment conversion factor for fiscal year 2014 includes a market basket increase of 2.6%, less a productivity adjustment of 0.5%, and less a reduction of 0.3% mandated by the ACA. CMS decreased the outlier threshold amount for fiscal year 2014 to $9,272 from $10,466 established in the final rule for fiscal year 2013.

Fiscal Year 2015.    On August 6, 2014, CMS published the final rule updating policies and payment rates for IRF-PPS for fiscal year 2015 (affecting discharges and cost reporting periods beginning on or after October 1, 2014 through September 30, 2015). The standard payment conversion factor for discharges for fiscal year 2015 was $15,198, which was an increase from the fiscal year 2014 standard payment conversion factor of $14,846. The update to the standard payment conversion factor for fiscal year 2015 includes a market basket increase of 2.9%, less a productivity adjustment of 0.5%, and less a reduction of 0.2% mandated by the ACA. CMS decreased the outlier threshold amount for fiscal year 2015 to $8,848 from $9,272 established in the final rule for fiscal year 2014.

Fiscal Year 2016.    On August 6, 2015, CMS published the final rule updating policies and payment rates for IRF-PPS for fiscal year 2016 (affecting discharges and cost reporting periods beginning on or after October 1, 2015 through September 30, 2016). The standard payment conversion factor for discharges for fiscal year 2016 is set at $15,478, which is an increase from the fiscal year 2015 standard payment conversion factor of $15,198. The update to the standard payment conversion factor for fiscal year 2016 includes a market basket increase of 2.4%, less a productivity adjustment of 0.5%, and less a reduction of 0.2% mandated by the ACA. CMS decreased the outlier threshold amount for fiscal year 2016 to $8,658 from $8,848 established in the final rule for fiscal year 2015.

Medicare Market Basket Adjustments

        The ACA instituted a market basket payment adjustment for IRFs. In fiscal years 2017 through 2019, the market basket update will be reduced by 0.75%. The Medicare Access and CHIP Reauthorization Act of 2015 sets the annual update for fiscal year 2018 at 1% after taking into account the market basket payment reduction of 0.75% mandated by the ACA. The ACA specifically allows these market basket reductions to result in less than a 0% payment update and payment rates that are less than the prior year.

Medicare Reimbursement of Outpatient Rehabilitation Services

        The Medicare program reimburses outpatient rehabilitation providers based on the Medicare physician fee schedule. Historically, the Medicare physician fee schedule rates have updated annually based on the SGR formula. The SGR formula has resulted in automatic reductions in rates every year since 2002; however, for each year through March 31, 2015 CMS or Congress has taken action to prevent the SGR formula reductions. The Medicare Access and CHIP Reauthorization Act of 2015 repeals the SGR formula effective for services provided on or after January 1, 2015, and establishes a new payment framework consisting of specified updates to the Medicare physician fee schedule, a new MIPS, and APMs. For services provided between January 1, 2015 and June 30, 2015, a 0% payment update was applied to the Medicare physician fee schedule payment rates. For services provided between July 1, 2015 and December 31, 2015, a 0.5% update was applied to the fee schedule payment rates. For services provided in 2016 through 2019, a 0.5% update will be applied each year to the fee schedule payment rates, subject to MIPS adjustment beginning in 2019. For services provided in 2020 through 2025, a 0.0% percent update will be applied each year to the fee schedule payment rates, subject to MIPS and APM adjustments. Finally, in 2026 and subsequent years eligible professionals participating in APMs that meet

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certain criteria would receive annual updates of 0.75%, while all other professionals would receive annual updates of 0.25%.

        The Medicare Access and CHIP Reauthorization Act of 2015 requires that payments under the fee schedule be adjusted starting in 2019 based on performance in MIPS, which will consolidate the three existing incentive programs focused on quality, resource use, and meaningful use of electronic health records. The law requires the Secretary of Health and Human Services to establish the MIPS requirements under which a provider's performance is assessed according to established performance standards and used to determine an adjustment factor that is then applied to the professional's payment for a year. Each year from 2019-2024 professionals who receive a significant share of their revenues through an APM (such as accountable care organizations or bundled payment arrangements) that involves risk of financial losses and a quality measurement component will receive a 5% bonus. The bonus payment for APM participation is intended to encourage participation and testing of new APMs and promotes the alignment of incentives across payors. The specifics of the MIPS and APM adjustments beginning in 2019 and 2020, respectively, will be subject to future notice and comment rule-making. For the year ended December 31, 2015, we received approximately 11% of our outpatient rehabilitation net operating revenues from Medicare.

Therapy Caps

        Beginning on January 1, 1999, the Balanced Budget Act of 1997 subjected certain outpatient therapy providers reimbursed under the Medicare physician fee schedule to annual limits for therapy expenses. Effective January 1, 2016, the annual limit on outpatient therapy services is $1,960 for combined physical and speech language pathology services and $1,960 for occupational therapy services. The per beneficiary caps were $1,940 for calendar year 2015.

        The annual limits for therapy expenses historically did not apply to services furnished and billed by outpatient hospital departments. However, the Medicare Access and CHIP Reauthorization Act of 2015, and prior legislation, extended the annual limits on therapy expenses in hospital outpatient department settings through December 31, 2017. The application of annual limits to hospital outpatient department settings will sunset on December 31, 2017 unless Congress extends it. We operated 1,038 outpatient rehabilitation clinics at December 31, 2015, of which 169 are provider based outpatient rehabilitation clinics operated as departments of the inpatient rehabilitation hospitals we operated.

        In the DRA, Congress implemented an exceptions process to the annual limit for therapy expenses. Under this process, a Medicare enrollee (or person acting on behalf of the Medicare enrollee) is able to request an exception from the therapy caps if the provision of therapy services was deemed to be medically necessary. Therapy cap exceptions have been available automatically for certain conditions and on a case by case basis upon submission of documentation of medical necessity. The Medicare Access and CHIP Reauthorization Act of 2015 extends the exceptions process for outpatient therapy caps through December 31, 2017. Unless Congress extends the exceptions process, the therapy caps will apply to all outpatient therapy services beginning January 1, 2018, except those services furnished and billed by outpatient hospital departments.

        The Middle Class Tax Relief and Job Creation Act of 2012 made several changes to the exceptions process to the annual limit for therapy expenses. For any claim above the annual limit, the claim must contain a modifier indicating that the services are medically necessary and justified by appropriate documentation in the medical record. In addition, all therapy claims, whether above or below the annual limit, must include the national provider identifier (NPI) of the physician responsible for certifying and periodically reviewing the plan of care. Effective October 1, 2012, all claims exceeding $3,700 are subject to a manual medical review process. The $3,700 threshold is applied separately to the combined physical therapy/speech therapy cap and the occupational therapy cap. Medicare Access and CHIP Reauthorization Act of 2015 requires the Secretary of Health and Human Services to replace the manual medical review process with a new medical review process using such factors as the Secretary may determine to be

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appropriate. The law specifies that such factors may include: (a) whether the therapy provider has a high claims denial percentage for therapy services or is less compliant with applicable requirements; (b) whether the therapy provider has a pattern of billing for therapy services that is aberrant or questionable compared with peers, or otherwise has questionable billing practices, such as billing medically unlikely units of services in a day; (c) whether the therapy provider is newly enrolled or has not previously furnished therapy under Medicare; (d) the types of medical conditions treated by the services; and (e) whether the therapy provider is part of a group. The new factors apply to exception requests for which CMS has not conducted a medical review by July 15, 2015.

Multiple Procedure Payment Reduction

        CMS adopted MPPR Reduction for therapy services in the final update to the Medicare physician fee schedule for calendar year 2011. This MPPR Reduction policy became effective January 1, 2011 and applies to all outpatient therapy services paid under Medicare Part B. The MPPR Reduction policy applies across all therapy disciplines—occupational therapy, physical therapy and speech-language pathology. Under the policy, the Medicare program pays 100% of the practice expense component of the therapy procedure or unit of service with the highest Relative Value Unit, and then reduces the payment for the practice expense component for the second and subsequent therapy procedures or units of service furnished during the same day for the same patient, regardless of whether those therapy services are furnished in separate sessions. In 2011 and 2012, the second and subsequent therapy service furnished during the same day for the same patient was reduced by 20% in office and other non-institutional settings and by 25% in institutional settings. The American Taxpayer Relief Act of 2012 increased the payment reduction in either setting to 50% effective April 1, 2013 for all outpatient therapy services. Our outpatient rehabilitation therapy services are primarily offered in institutional settings and, as such, were subject to the applicable 25% payment reduction in the practice expense component for the second and subsequent therapy services furnished by us to the same patient on the same day until April 1, 2013 when the payment reduction was increased to 50%.

Other Requirements for Payment

        Historically, outpatient rehabilitation services have been subject to scrutiny by the Medicare program for, among other things, medical necessity for services, appropriate documentation for services, supervision of therapy aides and students and billing for single rather than group therapy when services are furnished to more than one patient. CMS has issued guidance to clarify that services performed by a student are not reimbursed even if provided under "line of sight" supervision of the therapist. Likewise, CMS has reiterated that Medicare does not pay for services provided by aides regardless of the level of supervision. CMS also has issued instructions that outpatient physical and occupational therapy services provided simultaneously to two or more individuals by a practitioner should be billed as group therapy services.

Budget Control Act of 2011

        The Budget Control Act of 2011 (the "BCA of 2011"), enacted on August 2, 2011, increased the federal debt ceiling in connection with deficit reductions over the next ten years. The BCA of 2011 requires automatic reductions in federal spending by approximately $1.2 trillion split evenly between domestic and defense spending. Payments to Medicare providers are subject to these automatic spending reductions, subject to a 2% cap. On April 1, 2013, a 2% reduction to Medicare payments was implemented. The Bipartisan Budget Act of 2015, enacted on November 2, 2015, extends the 2% reductions to Medicare payments through fiscal year 2025.

Improving Medicare Post-Acute Care Transformation Act of 2014

        The Improving Medicare Post-Acute Care Transformation Act of 2014, enacted on October 6, 2014, requires our specialty hospitals to collect and report additional patient assessment data and clinical

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measures on each Medicare beneficiary who receives inpatient services in our facilities. Specialty hospitals must begin reporting this data no later than October 1, 2018. Within two years after that, CMS will begin making this data available to the public. Facilities that fail to report the required data will be subject to a 2% reduction in their payment rates. The reduction may result in an annual update of less than zero for the applicable rate year. However, any reduction is limited to the applicable fiscal year and is not cumulative. We expect CMS to publish additional regulations and guidance implementing this new law.

Specialty Hospital Medicaid Reimbursement

        The Medicaid program is designed to provide medical assistance to individuals unable to afford care. The program is governed by the Social Security Act of 1965, funded jointly by each individual state and the federal government, and administered by state agencies. Medicaid payments are made under a number of different systems, which include cost based reimbursement, prospective payment systems or programs that negotiate payment levels with individual hospitals. In addition, Medicaid programs are subject to statutory and regulatory changes, administrative rulings, interpretations of policy by the state agencies and certain government funding limitations, all of which may increase or decrease the level of program payments to our hospitals. Net operating revenues generated directly from the Medicaid program represented approximately 6% of our specialty hospitals net operating revenues for the year ended December 31, 2015.

Other Medicare Regulations

Medicare Quality Reporting

        The ACA established quality reporting requirements for LTCHs and IRFs. These programs are mandatory. For fiscal year 2014 and each subsequent year, LTCHs and IRFs that do not submit the required quality data will be subject to a 2% reduction in their annual payment update. The reduction can result in payment rates less than the prior year. However, the reduction will not carry over into the subsequent fiscal years.

        The Physician Quality Reporting System, or "PQRS," is a CMS reporting program that uses a combination of incentive payments and payment reductions to promote reporting of quality information by "eligible professionals." Although physical therapists, occupational therapists and qualified speech-language therapists are generally able to participate in the PQRS program, therapy professionals for whose services we bill through our rehab agencies cannot participate because the Medicare claims processing systems currently cannot accommodate institutional providers such as rehab agencies. Eligible professionals, such as those of our therapy professionals for whose services we bill using their individual Medicare provider numbers, who do not satisfactorily report data on quality measures will be subject to a 2% reduction in their Medicare payment. Eligible professionals who satisfactorily report data on PQRS quality measures will earn a 0.5% incentive payment.

Medicare Productivity Adjustment

        The ACA implemented a separate annual productivity adjustment for the first time for hospital inpatient services beginning in fiscal year 2012 for LTCHs and IRFs. This provision applied a negative productivity adjustment to the market basket that is used to update the standard federal rate on an annual basis. The market basket does not currently account for increases in provider productivity that could reduce the actual cost of providing services (e.g., through new technology or fewer inputs). The productivity adjustment will equal the 10-year moving average of changes in the annual economy-wide private non-farm business multi-factor productivity. This is a statistic reported by the Bureau of Labor Statistics and updated in the spring of each year. While this adjustment will change each year, it is currently estimated that this adjustment to the market basket will be approximately minus 1.0% on average.

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Hospital Wage Index

        As part of the methodology for determining prospective payments to LTCHs and IRFs, CMS adjusts the standard payment amounts for area differences in hospital wage levels by a factor reflecting the relative hospital wage level in the geographic area of the hospital compared to the national average hospital wage level. This adjustment factor is the hospital wage index. CMS currently defines hospital geographic areas (labor market areas) based on the definitions of Core-Based Statistical Areas established by the Office of Management and Budget. The ACA calls for CMS to develop and present to Congress a comprehensive reform plan using Bureau of Labor Statistics data, or other data or methodologies, to calculate relative wages for each geographic area involved. In the preamble to the proposed rule for LTCH-PPS for fiscal year 2012, CMS solicited public comments on ways to redefine the geographic reclassification requirements to more accurately define labor markets. To date CMS has not presented a comprehensive reform plan to Congress.

Independent Payment Advisory Board

        The ACA established an independent board called the Independent Payment Advisory Board that is authorized to develop and submit proposals to the President and Congress to reduce Medicare spending to meet specified targets. The Independent Payment Advisory Board is precluded from submitting proposals that reduce Medicare payments prior to December 31, 2019 for providers, including LTCHs and IRFs, scheduled to receive a reduction in their payment updates in addition to the Medicare productivity adjustment (discussed above). The Independent Payment Advisory Board's proposals would go into effect automatically unless Congress enacts alternative legislation to achieve the required savings (with certain exceptions). The ACA authorized the Independent Payment Advisory Board to issue its first recommendations by January 2014 for implementation in 2015 if the Medicare per capita target growth rate is exceeded, but the CMS Office of the Actuary has determined that the Medicare spending target will not be triggered for 2015. To date, no Independent Payment Advisory Board members have been appointed, and there have been repeated legislative attempts to repeal the provision of the ACA authorizing the establishment of the Independent Payment Advisory Board.

Physician-Owned Hospital Limitations

        CMS regulations include a number of hospital ownership and physician referral provisions, including certain obligations requiring physician-owned hospitals to disclose ownership or investment interests held by the referring physician or his or her immediate family members. In particular, physician-owned hospitals must furnish to patients, on request, a list of physicians or immediate family members who own or invest in the hospital. Moreover, a physician-owned hospital must require all physician owners or investors who are also active members of the hospital's medical staff to disclose in writing their ownership or investment interests in the hospital to all patients they refer to the hospital. CMS can terminate the Medicare provider agreement of a physician-owned hospital if it fails to comply with these disclosure provisions or with the requirement that a hospital disclose in writing to all patients whether there is a physician on-site at the hospital 24 hours per day, seven days per week.

        Under the transparency and program integrity provisions of the ACA, the exception to the federal self-referral law, or "Stark Law," that permits physicians to refer patients to hospitals in which they have an ownership or investment interest has been dramatically curtailed. Only hospitals, including specialty hospitals, with physician ownership and a provider agreement in place on December 31, 2010 are exempt from the general ban on self-referral. Existing physician-owned hospitals are prohibited from increasing the percentage of physician ownership or investment interests held in the hospital after March 23, 2010. In addition, physician-owned hospitals are prohibited from increasing the number of licensed beds after March 23, 2010, unless meeting specific exceptions related to the hospital's location and patient population. In order to retain their exemption from the general ban on self-referrals, our physician-owned hospitals are required to adopt specific measures relating to conflicts of interest, bona fide investments and patient safety. As of December 31, 2015, we operated 10 hospitals that are owned in-part by physicians.

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Provider and Employee Screening

        The ACA imposed new screening requirements on all Medicare providers, including LTCHs, IRFs and outpatient rehabilitation providers. The screening must include a licensure check and may include other procedures such as a criminal background check, fingerprinting, unscheduled and unannounced site visits, database checks, and other screening techniques CMS deems appropriate to prevent fraud, waste and abuse. Effective March 23, 2011, Medicare providers and suppliers submitting new enrollment applications or revalidating their existing enrollment status are required to pay a $500 application fee that is adjusted annually by the percentage change in the consumer price index. The ACA also imposed new disclosure requirements and authorizes surety bonds for the enrollment of new providers and suppliers.

        In addition, the ACA requires LTCHs to conduct national and state criminal background checks, including fingerprint checks of their employees and contractors who have (or may have) one-on-one contact with patients. Our LTCHs are prohibited from hiring or retaining workers with a history of patient or resident abuse.

Medicare Compliance Requirements and Penalties

        The ACA included new compliance requirements and increases existing penalties for non-compliance with federal law and the Medicare conditions of participation. In addition, Medicare claims will be paid only if submitted within 12 months. Penalties for submitting false claims and for submitting false statements material to a false claim will be increased. The Secretary will be granted the authority to suspend payments to a provider pending an investigation of credible allegations of fraud. Furthermore, the Recovery Audit Contractor program has been extended to Medicare Parts C and D and Medicaid.

Other Healthcare Regulations

        Medicare Recovery Audit Contractors.    The Tax Relief and Health Care Act of 2006 instructed CMS to contract with third-party organizations, known as Recovery Audit Contractors, or "RACs," to identify Medicare underpayments and overpayments, and to authorize RACs to recoup any overpayments. The compensation paid to each RAC is based on a percentage of overpayment recoveries identified by the RAC. CMS has selected and entered into contracts with four RACs, each of which has begun their audit activities in specific jurisdictions. RAC audits of our Medicare reimbursement may lead to assertions that we have been overpaid, require us to incur additional costs to respond to requests for records and pursue the reversal of payment denials, and ultimately require us to refund any amounts determined to have been overpaid. We cannot predict the impact of future RAC reviews on our results of operations or cash flows.

        Fraud and Abuse Enforcement.    Various federal and state laws prohibit the submission of false or fraudulent claims, including claims to obtain payment under Medicare, Medicaid and other government healthcare programs. Penalties for violation of these laws include civil and criminal fines, imprisonment and exclusion from participation in federal and state healthcare programs. In recent years, federal and state government agencies have increased the level of enforcement resources and activities targeted at the healthcare industry. In addition, the federal False Claims Act and similar state statutes allow individuals to bring lawsuits on behalf of the government, in what are known as qui tam or "whistleblower" actions, alleging false or fraudulent Medicare or Medicaid claims or other violations of the statute. The use of these private enforcement actions against healthcare providers has increased dramatically in recent years, in part because the individual filing the initial complaint is entitled to share in a portion of any settlement or judgment. Revisions to the False Claims Act enacted in 2009 expanded significantly the scope of liability, provided for new investigative tools, and made it easier for whistleblowers to bring and maintain False Claims Act suits on behalf of the government. See "—Legal Proceedings."

        From time to time, various federal and state agencies, such as the Office of Inspector General of the Department of Health and Human Services, or "OIG," issue a variety of pronouncements, including fraud alerts, the OIG's Annual Work Plan and other reports, identifying practices that may be subject to

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heightened scrutiny. These pronouncements can identify issues relating to LTCHs, IRFs or outpatient rehabilitation services or providers. For example, the OIG stated in its 2014 Work Plan that it would study (1) readmission patterns in LTCHs to determine whether LTCHs are billing Medicare for higher paying new stays instead of interrupted stays and (2) the extent to which co-located LTCHs readmit patients from the providers with which they are co-located. The OIG issued a corresponding report in June of 2014 in which it recommended that CMS (1) review existing safeguards to determine whether additional action is needed to prevent inappropriate payments for interrupted stays, (2) conduct additional analysis to determine the extent to which financial incentives influence LTCHs' readmission decisions, (3) develop a system to enforce the 5-percent readmission threshold, (4) take appropriate action regarding LTCHs exhibiting certain readmission patterns, and (5) take appropriate action on inappropriate payments and overpayments to co-located LTCHs that exceed the 5-percent readmission threshold. Of these recommendations, CMS concurred with the OIG's recommendation that CMS (1) review existing safeguards to determine whether additional action is needed to prevent inappropriate payments for interrupted stays and (2) take appropriate action on inappropriate payments and overpayments to co-located LTCHs that exceed the 5-percent readmission threshold. In the OIG's 2015 and 2016 Work Plans, the OIG announced its intent to estimate the national incidence of adverse and temporary harm events for Medicare beneficiaries receiving post-acute care in IRFs and LTCHs. As part of this review, the OIG intends to identify factors contributing to these events, determine the extent to which the events were preventable, and estimate the associated costs to Medicare. In the 2016 Work Plan the OIG also indicated it would review compliance with (1) various aspects of IRF PPS, including documentation required in support of claims paid by Medicare, (2) Medicare outlier payments to hospitals and whether CMS performed necessary reconciliations in a timely manner to enable Medicare contractors to perform final settlement of the hospitals' associated cost reports, and (3) hospital compliance with the Medicare provider-based rules. Our IRFs and LTCHs may be required to provide information related to these reviews. We monitor government publications applicable to us to supplement and enhance our compliance efforts.

        We endeavor to conduct our operations in compliance with applicable laws, including healthcare fraud and abuse laws. If we identify any practices as being potentially contrary to applicable law, we will take appropriate action to address the matter, including, where appropriate, disclosure to the proper authorities, which may result in a voluntary refund of monies to Medicare, Medicaid or other governmental healthcare programs.

        Remuneration and Fraud Measures.    The federal anti-kickback statute prohibits some business practices and relationships under Medicare, Medicaid and other federal healthcare programs. These practices include the payment, receipt, offer or solicitation of remuneration in connection with, to induce, or to arrange for, the referral of patients covered by a federal or state healthcare program. Violations of the anti-kickback law may be punished by a criminal fine of up to $50,000 or imprisonment for each violation, or both, civil monetary penalties of $50,000 and damages of up to three times the total amount of remuneration, and exclusion from participation in federal or state healthcare programs.

        The Stark Law prohibits referrals for designated health services by physicians under the Medicare and Medicaid programs to other healthcare providers in which the physicians have an ownership or compensation arrangement unless an exception applies. Sanctions for violating the Stark Law include civil monetary penalties of up to $15,000 per prohibited service provided, assessments equal to three times the dollar value of each such service provided and exclusion from the Medicare and Medicaid programs and other federal and state healthcare programs. The statute also provides a penalty of up to $100,000 for a circumvention scheme. In addition, many states have adopted or may adopt similar anti-kickback or anti-self-referral statutes. Some of these statutes prohibit the payment or receipt of remuneration for the referral of patients, regardless of the source of the payment for the care. While we do not believe our arrangements are in violation of these prohibitions, we cannot assure you that governmental officials

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charged with the responsibility for enforcing the provisions of these prohibitions will not assert that one or more of our arrangements are in violation of the provisions of such laws and regulations.

        Provider-Based Status.    The designation "provider-based" refers to circumstances in which a subordinate facility (e.g., a separately certified Medicare provider, a department of a provider or a satellite facility) is treated as part of a provider for Medicare payment purposes. In these cases, the services of the subordinate facility are included on the "main" provider's cost report and overhead costs of the main provider can be allocated to the subordinate facility, to the extent that they are shared. As of December 31, 2015, we operated 14 specialty hospitals that were treated as provider-based satellites of certain of our other facilities, 169 of the outpatient rehabilitation clinics we operated were provider-based and are operated as departments of the IRFs we operated, and we provide rehabilitation management and staffing services to hospital rehabilitation departments that may be treated as provider-based. These facilities are required to satisfy certain operational standards in order to retain their provider-based status.

        Effective January 1, 2017, outpatient rehabilitation services operated as provider-based and located at an off-campus outpatient department of a hospital, will be paid under the Medicare physician fee schedule, rather than the hospital outpatient prospective payment system, unless services at that location were billed as a department of a hospital prior to November 2, 2015. The 169 outpatient rehabilitation clinics we operated as departments of our IRFs as of November 2, 2015 are grandfathered and will continue to be paid under the hospital outpatient prospective payment system.

        Health Information Practices.    The Health Insurance Portability and Accountability Act of 1996, or "HIPAA," mandates the adoption of standards for the exchange of electronic health information in an effort to encourage overall administrative simplification and enhance the effectiveness and efficiency of the healthcare industry, while maintaining the privacy and security of health information. Among the standards that the Department of Health and Human Services has adopted or will adopt pursuant to HIPAA are standards for electronic transactions and code sets, unique identifiers for providers (referred to as National Provider Identifier), employers, health plans and individuals, security and electronic signatures, privacy and enforcement. If we fail to comply with the HIPAA requirements, we could be subject to criminal penalties and civil sanctions. The privacy, security and enforcement provisions of HIPAA were enhanced by the Health Information Technology for Economic and Clinical Health Act, or "HITECH," which was included in the ARRA. Among other things, HITECH establishes security breach notification requirements, allows enforcement of HIPAA by state attorneys general, and increases penalties for HIPAA violations.

        The Department of Health and Human Services has adopted standards in three areas in which we are required to comply that affect our operations.

        Standards relating to the privacy of individually identifiable health information govern our use and disclosure of protected health information and require us to impose those rules, by contract, on any business associate to whom such information is disclosed.

        Standards relating to electronic transactions and code sets require the use of uniform standards for common healthcare transactions, including healthcare claims information, plan eligibility, referral certification and authorization, claims status, plan enrollment and disenrollment, payment and remittance advice, plan premium payments and coordination of benefits.

        Standards for the security of electronic health information require us to implement various administrative, physical and technical safeguards to ensure the integrity and confidentiality of electronic protected health information.

        We maintain a HIPAA committee that is charged with evaluating and monitoring our compliance with HIPAA. The HIPAA committee monitors regulations promulgated under HIPAA as they have been adopted to date and as additional standards and modifications are adopted. Although health information standards have had a significant effect on the manner in which we handle health data and communicate

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with payors, the cost of our compliance has not had a material adverse effect on our business, financial condition or results of operations. We cannot estimate the cost of compliance with standards that have not been issued or finalized by the Department of Health and Human Services.

        In addition to HIPAA, there are numerous federal and state laws and regulations addressing patient and consumer privacy concerns, including unauthorized access or theft of personal information. State statutes and regulations vary from state to state. Lawsuits, including class actions and action by state attorneys general, directed at companies that have experienced a privacy or security breach also can occur. Although our policies and procedures are aimed at complying with privacy and security requirements and minimizing the risks of any breach of privacy or security, there can be no assurance that a breach of privacy or security will not occur. If there is a breach, we may be subject to various penalties and damages and may be required to incur costs to mitigate the impact of the breach on affected individuals.

Compliance Program

Our Compliance Program

        In 1998, we voluntarily adopted our code of conduct. The code is reviewed and amended as necessary and is the basis for our company-wide compliance program. Our written code of conduct provides guidelines for principles and regulatory rules that are applicable to our patient care and business activities. These guidelines are implemented by a compliance officer, a compliance and internal audit committee, and employee education and training. We also have established a reporting system, auditing and monitoring programs, and a disciplinary system as a means for enforcing the code's policies.

Compliance and Internal Audit Committee

        Our compliance and internal audit committee is made up of members of our senior management and in-house counsel. The compliance and internal audit committee meets on a quarterly basis and reviews the activities, reports and operation of our compliance program. In addition, the HIPAA committee provides reports to the compliance and internal audit committee. The vice president of compliance and audit services meets with the compliance and internal audit committee on a quarterly basis to provide an overview of the activities and operation of our compliance program.

Operating Our Compliance Program

        We focus on integrating compliance responsibilities with operational functions. We recognize that our compliance with applicable laws and regulations depends upon individual employee actions as well as company operations. As a result, we have adopted an operations team approach to compliance. Our corporate executives, with the assistance of corporate experts, designed the programs of the compliance and internal audit committee. We utilize facility leaders for employee-level implementation of our code of conduct. This approach is intended to reinforce our company-wide commitment to operate in accordance with the laws and regulations that govern our business.

Compliance Issue Reporting

        In order to facilitate our employees' ability to report known, suspected or potential violations of our code of conduct, we have developed a system of reporting. This reporting, anonymous or attributable, may be accomplished through our toll-free compliance hotline, compliance e-mail address or our compliance post office box. The compliance officer and the compliance and internal audit committee are responsible for reviewing and investigating each compliance incident in accordance with the compliance and audit services department's investigation policy.

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Compliance Monitoring and Auditing / Comprehensive Training and Education

        Monitoring reports and the results of compliance for each of our business segments are reported to the compliance and internal audit committee on a quarterly basis. We train and educate our employees regarding the code of conduct, as well as the legal and regulatory requirements relevant to each employee's work environment. New and current employees are required to acknowledge and certify that the employee has read, understood and has agreed to abide by the code of conduct. Additionally, all employees are required to re-certify compliance with the code on an annual basis.

Policies and Procedures Reflecting Compliance Focus Areas

        We review our policies and procedures for our compliance program from time to time in order to improve operations and to ensure compliance with requirements of standards, laws and regulations and to reflect the ongoing compliance focus areas which have been identified by the compliance and internal audit committee.

Internal Audit

        In addition to and in support of the efforts of our compliance and audit department, during 2001 we established an internal audit function. The vice president of compliance and audit services manages the combined compliance and audit department and meets with the audit and compliance committee of the board of directors on a quarterly basis to discuss audit results and provide an overview of the activities and operation of our compliance program.

Available Information

        We are subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information is available for inspection and copying at the SEC's Public Reference Room at 100 F Street, NE., Washington, DC 20549, or may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC.

        Our website address is www.selectmedicalholdings.com and can be used to access free of charge, through the investor relations section, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with or furnish it to the SEC. The information on our website is not incorporated as a part of this annual report.

Executive Officers of the Registrant

        The following table sets forth the names, ages and titles, as well as a brief account of the business experience, of each person who was an executive officer of the Company as of January 1, 2015:

Name	Age		Position
Robert A. Ortenzio		58	Executive Chairman and Co-Founder
Rocco A. Ortenzio		83	Vice Chairman and Co-Founder
David S. Chernow		58	President and Chief Executive Officer
Martin F. Jackson		61	Executive Vice President and Chief Financial Officer
John A. Saich		47	Executive Vice President and Chief Human Resources Officer
Michael E. Tarvin		55	Executive Vice President, General Counsel and Secretary
Scott A. Romberger		55	Senior Vice President, Controller and Chief Accounting Officer
Robert G. Breighner, Jr.		47	Vice President, Compliance and Audit Services and Corporate Compliance Officer

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Robert A. Ortenzio was appointed Executive Chairman and Co-Founder effective January 1, 2014. Mr. Ortenzio served as our Chief Executive Officer from January 1, 2005 until December 31, 2013 and. Mr. Ortenzio served as our President and Chief Executive Officer from September 2001 to January 1, 2005. Mr. Ortenzio also served as our President and Chief Operating Officer from February 1997 to September 2001. Mr. Ortenzio co-founded the Company and has served as a director since February 1997. Mr. Ortenzio also serves on the board of directors of Group Holdings. He was an Executive Vice President and a director of Horizon/CMS Healthcare Corporation from July 1995 until July 1996. In 1986, Mr. Ortenzio co-founded Continental Medical Systems, Inc., and served in a number of different capacities, including as a Senior Vice President from February 1986 until April 1988, as Chief Operating Officer from April 1988 until July 1995, as President from May 1989 until August 1996 and as Chief Executive Officer from July 1995 until August 1996. Before co-founding Continental Medical Systems, Inc., he was a Vice President of Rehab Hospital Services Corporation. Mr. Ortenzio is the son of Rocco A. Ortenzio, our Vice Chairman and Co-Founder.

Rocco A. Ortenzio was appointed Vice Chairman and Co-Founder effective January 1, 2014. Mr. Ortenzio served as our Executive Chairman from September 2001 until December 2013. From February 1997 to September 2001, Mr. Ortenzio served as our Chief Executive Officer. Mr. Ortenzio co-founded the Company and has served as a director since February 1997. In 1986, he co-founded Continental Medical Systems, Inc., and served as its Chairman and Chief Executive Officer until July 1995. In 1979, Mr. Ortenzio founded Rehab Hospital Services Corporation, and served as its Chairman and Chief Executive Officer until June 1986. In 1969, Mr. Ortenzio founded Rehab Corporation and served as its Chairman and Chief Executive Officer until 1974. Mr. Ortenzio is the father of Robert A. Ortenzio, our Executive Chairman and Co-Founder.

David S. Chernow has served as our President and Chief Executive Officer since January 1, 2014. Mr. Chernow has served as our President and previously held various additional executive officer titles since September 2010. Mr. Chernow served as a director of the Company from January 2002 until February 2005 and from August 2005 until September 2010. From May 2007 to February 2010, Mr. Chernow served as the President and Chief Executive Officer of Oncure Medical Corp., one of the largest providers of free-standing radiation oncology care in the United States. From July 2001 to June 2007, Mr. Chernow served as the President and Chief Executive Officer of JA Worldwide, a nonprofit organization dedicated to the education of young people about business (formerly, Junior Achievement, Inc.). From 1999 to 2001, he was the President of the Physician Services Group at US Oncology, Inc. Mr. Chernow co-founded American Oncology Resources in 1992 and served as its Chief Development Officer until the time of the merger with Physician Reliance Network, Inc., which created US Oncology, Inc. in 1999.

Martin F. Jackson has served as our Executive Vice President and Chief Financial Officer since February 2007. He served as our Senior Vice President and Chief Financial Officer from May 1999 to February 2007. Mr. Jackson also serves on the board of directors of Group Holdings. Mr. Jackson previously served as a Managing Director in the Health Care Investment Banking Group for CIBC Oppenheimer from January 1997 to May 1999. Prior to that time, he served as Senior Vice President, Health Care Finance with McDonald & Company Securities, Inc. from January 1994 to January 1997. Prior to 1994, Mr. Jackson held senior financial positions with Van Kampen Merritt, Touche Ross, Honeywell and L'Nard Associates.

John A. Saich has served as our Executive Vice President and Chief Human Resources Officer since December 15, 2010. He served as our Senior Vice President, Human Resources from February 2007 to December 2010. He served as our Vice President, Human Resources from November 1999 to January 2007. He joined the Company as Director, Human Resources and HRIS in February 1998. Previously, Mr. Saich served as Director of Benefits and Human Resources for Integrated Health Services in 1997 and as Director of Human Resources for Continental Medical Systems, Inc. from August 1993 to January 1997.

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Michael E. Tarvin has served as our Executive Vice President, General Counsel and Secretary since February 2007. He served as our Senior Vice President, General Counsel and Secretary from November 1999 to February 2007. He served as our Vice President, General Counsel and Secretary from February 1997 to November 1999. He was Vice President—Senior Counsel of Continental Medical Systems from February 1993 until February 1997. Prior to that time, he was Associate Counsel of Continental Medical Systems from March 1992. Mr. Tarvin was an associate at the Philadelphia law firm of Drinker Biddle & Reath, LLP from September 1985 until March 1992.

Scott A. Romberger has served as our Senior Vice President and Controller since February 2007. He served as our Vice President and Controller from February 1997 to February 2007. In addition, he has served as our Chief Accounting Officer since December 2000. Prior to February 1997, he was Vice President—Controller of Continental Medical Systems from January 1991 until January 1997. Prior to that time, he served as Acting Corporate Controller and Assistant Controller of Continental Medical Systems from June 1990 and December 1988, respectively. Mr. Romberger is a certified public accountant and was employed by a national accounting firm from April 1985 until December 1988.

        Robert G. Breighner, Jr.    has served as our Vice President, Compliance and Audit Services since August 2003. He served as our Director of Internal Audit from November 2001 to August 2003. Previously, Mr. Breighner was Director of Internal Audit for Susquehanna Pfaltzgraff Co. from June 1997 until November 2001. Mr. Breighner held other positions with Susquehanna Pfaltzgraff Co. from May 1991 until June 1997.

Item 1A.    Risk Factors.

In addition to the factors discussed elsewhere in this Form 10-K, the following are important factors which could cause actual results or events to differ materially from those contained in any forward-looking statements made by or on behalf of us.

Risks Related to our Business

         If there are changes in the rates or methods of government reimbursements for our services, our net operating revenues and profitability could decline.

        Approximately 46% of our net operating revenues for the year ended December 31, 2013, 45% of our net operating revenues for the year ended December 31, 2014 and 37% of our net operating revenues for the year ended December 31, 2015 came from the highly regulated federal Medicare program.

        In recent years, through legislative and regulatory actions, the federal government has made substantial changes to various payment systems under the Medicare program. President Obama signed into law comprehensive reforms to the healthcare system, including changes to the methods for, and amounts of, Medicare reimbursement. Additional reforms or other changes to these payment systems, including modifications to the conditions on qualification for payment, bundling payments to cover both acute and post-acute care or the imposition of enrollment limitations on new providers, may be proposed or could be adopted, either by Congress or CMS. If revised regulations are adopted, the availability, methods and rates of Medicare reimbursements for services of the type furnished at our facilities could change. Some of these changes and proposed changes could adversely affect our business strategy, operations and financial results. In addition, there can be no assurance that any increases in Medicare reimbursement rates established by CMS will fully reflect increases in our operating costs.

        The BCA of 2011, enacted on August 2, 2011, increased the federal debt ceiling in connection with deficit reductions over the next ten years. The BCA of 2011 requires automatic reductions in federal spending by approximately $1.2 trillion split evenly between domestic and defense spending. Payments to Medicare providers are subject to these automatic spending reductions, subject to a 2% cap. On April 1, 2013 a 2% reduction to Medicare payments was implemented. The BBA of 2013 extended the automatic

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spending reductions through 2023 and the Bipartisan Budget Act of 2015 further extended the automatic spending reductions through fiscal year 2025.

         We conduct business in a heavily regulated industry, and changes in regulations, new interpretations of existing regulations or violations of regulations may result in increased costs or sanctions that reduce our net operating revenues and profitability.

        The healthcare industry is subject to extensive federal, state and local laws and regulations relating to (1) facility and professional licensure, including certificates of need, (2) conduct of operations, including financial relationships among healthcare providers, Medicare fraud and abuse and physician self-referral, (3) addition of facilities and services and enrollment of newly developed facilities in the Medicare program, (4) payment for services and (5) safeguarding protected health information.

        Both federal and state regulatory agencies inspect, survey and audit our facilities to review our compliance with these laws and regulations. While our facilities intend to comply with existing licensing, Medicare certification requirements and accreditation standards, there can be no assurance that these regulatory authorities will determine that all applicable requirements are fully met at any given time. A determination by any of these regulatory authorities that a facility is not in compliance with these requirements could lead to the imposition of requirements that the facility takes corrective action, assessment of fines and penalties, or loss of licensure, Medicare certification or accreditation. These consequences could have an adverse effect on our company.

        In addition, there have been heightened coordinated civil and criminal enforcement efforts by both federal and state government agencies relating to the healthcare industry. The ongoing investigations relate to, among other things, various referral practices, cost reporting, billing practices, physician ownership and joint ventures involving hospitals. In the future, different interpretations or enforcement of these laws and regulations could subject us to allegations of impropriety or illegality or could require us to make changes in our facilities, equipment, personnel, services and capital expenditure programs. These changes may increase our operating expenses and reduce our operating revenues. If we fail to comply with these extensive laws and government regulations, we could become ineligible to receive government program reimbursement, suffer civil or criminal penalties or be required to make significant changes to our operations. In addition, we could be forced to expend considerable resources responding to any related investigation or other enforcement action.

         Full implementation of the Medicare 25 Percent Rule applicable to LTCHs will have an adverse effect on our future net operating revenues and profitability.

        Under the 25 Percent Rule, the Medicare payment rate for LTCHs is subject to a downward payment adjustment if the percentage of Medicare patients discharged from an LTCH who were admitted from an individual referring hospital exceeds an applicable percentage admissions threshold during a particular cost reporting period. Cases admitted to an LTCH in excess of the applicable percentage admissions threshold are reimbursed at a rate comparable to that under IPPS. IPPS rates are generally lower than LTCH-PPS rates. Cases that reach outlier status in the discharging hospital do not count toward the limit and are paid under LTCH-PPS.

        LTCHs that are operated as HIHs or as HIH "satellites," are subject to payment reductions for those Medicare patients admitted from their host hospitals in excess of the applicable percentage admissions threshold and from other referring hospitals in excess of the applicable percentage admissions threshold. LTCHs that are operated as freestanding facilities are subject to a payment reduction for those Medicare patients admitted from other referring hospitals in excess of the applicable admissions threshold. Grandfathered HIHs are excluded from the Medicare percentage admissions threshold regulations.

        The SCHIP Extension Act, as amended by the ARRA, the ACA and the BBA of 2013, postponed the full application of the percentage admissions threshold for specific classifications of LTCHs. Full

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implementation of the Medicare percentage admissions thresholds under the 25 Percent Rule will not go into effect until cost reporting periods beginning on or after July 1, 2016 or October 1, 2016, depending on the specific classification of LTCH. See "Business—Government Regulations—Overview of U.S. and State Government Reimbursements—Long Term Acute Care Hospital Medicare Reimbursement—25 Percent Rule."

        As of December 31, 2015, we owned 80 HIHs and satellite facilities of which three are grandfathered HIHs and are excluded from the percentage threshold regulations. Of the remaining 77 HIHs and satellite facilities subject to a percentage admissions threshold for admissions from their host hospital; nine of these HIHs and satellite facilities were subject to a maximum 25% Medicare percentage admissions threshold for admissions from their host hospital, five HIHs and satellite facilities are co-located with an MSA dominant hospital and were subject to a Medicare percentage admissions threshold of no more than 50%, nor less than 25%, 18 of these HIHs and satellite facilities were co-located with a MSA dominant hospital or single urban hospital and were subject to a Medicare percentage admissions threshold of no more than 75%, 44 of these HIHs and satellite facilities were subject to a maximum 50% Medicare admissions threshold, and one of these HIHs and satellite facilities was located in a rural area and was subject to a maximum 75% Medicare percentage admissions threshold. As of December 31, 2015, we owned three grandfathered HIHs, all of which are excluded from the percentage admissions threshold regulations. As of December 31, 2015, we owned 28 free-standing LTCHs, which are not subject to the Medicare percentage admissions threshold until cost reporting periods beginning on or after July 1, 2016.

        The BBA of 2013 requires CMS to report to Congress before October 2016 on the need for any further extensions or modifications of the extensions of the 25 Percent Rule. In addition, the BBA of 2013 requires MedPAC, an independent federal body that advises Congress on issues affecting the Medicare program, to report to Congress by June 2019 on the need to continue applying the 25 Percent Rule, the effect of site-neutral payment on LTCHs and recommendations on how to change the site-neutral payment policy.

        Because these rules are complex and are based on the volume of Medicare admissions from other referring hospitals as a percent of our overall Medicare admissions, we cannot predict with any certainty the impact on our future net operating revenues and profitability of compliance with these regulations. We expect many of our LTCHs will experience an adverse financial impact when full implementation of the Medicare percentage admissions thresholds goes into effect. Our LTCHs have cost reporting periods that commence on various dates throughout the calendar year. Therefore, the application of the lower percentage admissions thresholds will be staggered and we would not realize the full impact of lower percentage admissions thresholds until 2017.

         If our LTCHs fail to maintain their certifications as LTCHs or if our facilities operated as HIHs fail to qualify as hospitals separate from their host hospitals, our net operating revenues and profitability may decline.

        As of December 31, 2015, we operated 109 LTCHs, 108 of which are currently certified by Medicare as LTCHs and one which is currently awaiting certification. LTCHs must meet certain conditions of participation to enroll in, and seek payment from, the Medicare program as an LTCH, including, among other things, maintaining an average length of stay for Medicare patients in excess of 25 days. An LTCH that fails to maintain this average length of stay for Medicare patients in excess of 25 days during a single cost reporting period is generally allowed an opportunity to show that it meets the length of stay criteria during a subsequent cure period. If the LTCH can show that it meets the length of stay criteria during this cure period, it will continue to be paid under the LTCH-PPS. If the LTCH again fails to meet the average length of stay criteria during the cure period, it will be paid under the general acute care IPPS at rates generally lower than the rates under the LTCH-PPS.

        Similarly, our HIHs must meet conditions of participation in the Medicare program, which include additional criteria establishing separateness from the hospital with which the HIH shares space. If our

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LTCHs or HIHs fail to meet or maintain the standards for certification as LTCHs, they will receive payment under the general acute care hospitals IPPS which is generally lower than payment under the system applicable to LTCHs. Payments at rates applicable to general acute care hospitals would result in our LTCHs receiving significantly less Medicare reimbursement than they currently receive for their patient services.

         Implementation of additional patient or facility criteria for LTCHs that limit the population of patients eligible for our hospitals' services or change the basis on which we are paid could adversely affect our net operating revenue and profitability.

        The BBA of 2013 establishes new payment limits for Medicare patients who do not meet specified criteria. Specifically, for Medicare patients discharged in cost reporting periods beginning on or after October 1, 2015, LTCHs will be reimbursed under LTCH-PPS only if, immediately preceding the patient's LTCH admission, the patient was discharged from a general acute care hospital paid under IPPS and the patient's stay included at least three days in an intensive care unit (ICU) or coronary care unit (CCU) or the patient is assigned to an MS-LTC-DRG for cases receiving at least 96 hours of ventilator services in the LTCH. In addition, to be paid under LTCH-PPS the patient's discharge from the LTCH may not include a principal diagnosis relating to psychiatric or rehabilitation services. For any Medicare patient who does not meet the new criteria, the LTCH will be paid a "site-neutral" payment rate, which will be the lower of (1) the IPPS comparable per-diem payment rate including any outlier payments, or (2) 100 percent of the estimated costs for services. For cost reporting periods beginning on or after October 1, 2019, payment for all discharges from an LTCH may be subject to the site-neutral payment limitation unless the number of discharges for which payment is made under the LTCH-PPS payment rate is greater than 50% of the total number of discharges for the LTCH. The application of the new site-neutral payment rates under LTCH-PPS may reduce our operating revenues.

        CMS requested public comments in May of 2013 on adoption of a payment adjustment based on whether a particular case qualifies as chronically critically ill/medically complex ("CCI/MC"). CMS indicated that it was considering a change to the LTCH-PPS payment policies that would limit full LTCH-PPS payment to those patients meeting the definition of CCI/MC while they were in an IPPS hospital inpatient setting and subsequently directly admitted to an LTCH. Payment for non-CCI/MC patients would be made at an "IPPS comparable amount," that is, an amount comparable to what would have been paid under the IPPS calculated as a per diem rate with total payments capped at the full IPPS MS-DRG payment rate.

        It is unclear how the adoption of the BBA of 2013 will impact regulatory or legislative proposals to change the LTCH-PPS payment policies. We cannot predict whether Congress or CMS will adopt additional patient-level criteria in the future or, if adopted, how such criteria would affect our LTCHs. Implementation of additional patient or facility criteria that may limit the population of patients eligible for our LTCHs' services or change the basis on which we are paid could adversely affect our net operating revenues and profitability. See "Business—Government Regulations—Overview of U.S. and State Government Reimbursements—Long Term Acute Care Hospital Medicare Reimbursement."

         Decreases in Medicare reimbursement rates received by our outpatient rehabilitation clinics, implementation of annual caps, and payment reductions applied to the second and subsequent therapy services may reduce our future net operating revenues and profitability.

        Our outpatient rehabilitation clinics receive payments from the Medicare program under a fee schedule. The Medicare Access and CHIP Reauthorization Act of 2015 requires that payments under the fee schedule be adjusted starting in 2019 based on performance in a new Merit-Based Incentive Payment System and, beginning in 2020, incentives for participation in alternative payment models. The specifics of the Merit-Based Incentive Payment System and incentives for participation in alternative payment models will be subject to future notice and comment rule-making. It is unclear what impact, if any, the Merit-Based Incentive Payment System and incentives for participation in alternative payment models will have on our business and operating results, but any resulting decrease in payment may reduce our future net operating revenues and profitability.

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        Congress has established annual caps that limit the amount that can be paid (including deductible and coinsurance amounts) for outpatient therapy services rendered to any Medicare beneficiary. As directed by Congress in the DRA, CMS implemented an exception process for therapy expenses incurred in 2006. Under this process, a Medicare enrollee (or person acting on behalf of the Medicare enrollee) was able to request an exception from the therapy caps if the provision of therapy services was deemed to be medically necessary. Therapy cap exceptions were available automatically for certain conditions and on a case by case basis upon submission of documentation of medical necessity. The exception process has been extended by Congress several times. Most recently, the Medicare Access and CHIP Reauthorization Act of 2015 extends the exceptions process for outpatient therapy caps through December 31, 2017. The exception process will expire on December 31, 2017 unless further extended by Congress. There can be no assurance that Congress will extend it further. To date, the implementation of the therapy caps has not had a material adverse effect on our business. However, if the exception process is not renewed, our future net operating revenues and profitability may decline.

        CMS adopted a multiple procedure payment reduction for therapy services in the final update to the Medicare physician fee schedule for calendar year 2011. Under the policy, the Medicare program pays 100% of the practice expense component of the therapy procedure or unit of service with the highest Relative Value Unit, and then reduces the payment for the practice expense component for the second and subsequent therapy procedures or units of service furnished during the same day for the same patient, regardless of whether those therapy services are furnished in separate sessions. In 2011 and 2012 the second and subsequent therapy service furnished during the same day for the same patient was reduced by 20% in office and other non institutional settings and by 25% in institutional settings. The American Taxpayer Relief Act of 2012 increased the payment reduction to 50% effective April 1, 2013. Should CMS adopt further increases in the payment reduction percentage our future net operating revenues and profitability would decline.

         The nature of the markets that Concentra serves may constrain its ability to raise prices at rates sufficient to keep pace with the inflation of its costs.

        Rates of reimbursement for work-related injury or illness visits in Concentra's occupational health services business are established through a legislative or regulatory process within each state that Concentra serves. Currently, 32 states have fee schedules pursuant to which all healthcare providers are uniformly reimbursed. The fee schedules are determined by each state and generally prescribe the maximum amounts that may be reimbursed for a designated procedure. In the states without fee schedules, healthcare providers are generally reimbursed based on usual, customary and reasonable rates charged in the particular state in which the services are provided. Given that Concentra does not control these processes, it may be subject to financial risks if individual jurisdictions reduce rates or do not routinely raise rates of reimbursement in a manner that keeps pace with the inflation of Concentra's costs of service.

        In Concentra's veteran's healthcare business, reimbursement rates are generally set according to the capitated monthly rate based on the number of then enrolled patients at that CBOC. Evolving legislative and regulatory changes aimed at improving veteran's access to care in the wake of Department of Veterans Affairs scandals (none of which involved Concentra's CBOCs) could result in fewer patients enrolling in CBOCs. Federal legislation that permits certain veterans to receive their health care outside of the Department of Veterans Affairs facilities, for example, may reduce demand for services at some of Concentra's CBOCs. Moreover, changes in the methods, manner or amounts of compensation payable for Concentra's services, including, amounts reimbursable to the CBOCs under its agreements with the Department of Veterans Affairs, due to legislative or other changes or shifting budget priorities could result in lower reimbursement for services provided at Concentra's CBOCs. Concentra may receive lower payments from the Veterans Health Administration if fewer eligible veterans are considered to live within the catchments of its CBOCs. These trends could have an adverse effect on our financial condition and results of operations.

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         Regulations limiting the diagnosis codes on the presumptive compliance list could adversely affect our net operating revenue and profitability.

        As of December 31, 2015, we operated 18 IRFs, 17 of which are currently certified by Medicare as IRFs and one which is in the process of obtaining its certification. IRFs must meet certain conditions of participation to enroll in, and seek payment from, the Medicare program as an IRF. Among other things, at least 60% of the IRF's total inpatient population must require treatment for one or more of 13 conditions specified by regulation. This requirement is now commonly referred to as the "60% Rule." Compliance with the 60% Rule is demonstrated through a two step process. The first step is the "presumptive" method, in which patient diagnosis codes are compared to a "presumptive compliance" list. IRFs that fail to demonstrate compliance with the 60% Rule using this presumptive test may demonstrate compliance through a second step involving an audit of the facility's medical records to assess compliance.

        Effective October 1, 2015, CMS removed a number of diagnosis codes from the presumptive compliance list including diagnosis codes in the following categories: nonspecific diagnosis codes, arthritis diagnosis codes, unilateral upper extremity amputations diagnosis codes, amputation status codes, prosthetic fitting and adjustment codes, some congenital anomalies diagnosis codes and other miscellaneous diagnosis codes. According to CMS, these conditions do not demonstrate the need for intensive inpatient rehabilitation services in the absence of additional facts that would have to be pulled from a patient's medical record. If an IRF does not demonstrate compliance with the 60% Rule by either the presumptive method or through a review of medical records, then the facility's classification as an IRF may be terminated at the start of its next cost reporting period causing the facility to be paid as a general acute care hospital under IPPS. By removing diagnosis codes from the presumptive compliance list our facilities may be required to demonstrate compliance with the 60% Rule through medical record reviews. If our IRFs fail to demonstrate compliance with the 60% Rule through either method and are classified as general acute care hospitals, our net operating revenue and profitability may be adversely affected.

         As a result of increased post-payment reviews of claims we submit to Medicare for our services, we may incur additional costs and may be required to repay amounts already paid to us.

        We are subject to regular post-payment inquiries, investigations and audits of the claims we submit to Medicare for payment for our services. These post-payment reviews are increasing as a result of new government cost-containment initiatives, including enhanced medical necessity reviews for Medicare patients admitted to our specialty hospitals, and audits of Medicare claims under the Recovery Audit Contractor program. These additional post-payment reviews may require us to incur additional costs to respond to requests for records and to pursue the reversal of payment denials, and ultimately may require us to refund amounts paid to us by Medicare that are determined to have been overpaid.

         Our facilities are subject to extensive federal and state laws and regulations relating to the privacy of individually identifiable information.

        HIPAA required the United States Department of Health and Human Services to adopt standards to protect the privacy and security of individually identifiable health information. The department released final regulations containing privacy standards in December of 2000 and published revisions to the final regulations in August 2002. The privacy regulations extensively regulate the use and disclosure of individually identifiable health information. The regulations also provide patients with significant new rights related to understanding and controlling how their health information is used or disclosed. The security regulations require healthcare providers to implement administrative, physical and technical practices to protect the security of individually identifiable health information that is maintained or transmitted electronically. HITECH, which was signed into law in February of 2009, enhanced the privacy, security and enforcement provisions of HIPAA by, among other things, establishing security breach notification requirements, allowing enforcement of HIPAA by state attorneys general, and increasing

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penalties for HIPAA violations. Violations of HIPAA or HITECH could result in civil or criminal penalties.

        In addition to HIPAA, there are numerous federal and state laws and regulations addressing patient and consumer privacy concerns, including unauthorized access or theft of patient's identifiable health information. State statutes and regulations vary from state to state. Lawsuits, including class actions and action by state attorneys general, directed at companies that have experienced a privacy or security breach also can occur.

        In the conduct of our business, we process, maintain and transmit sensitive data, including our patient's individually identifiable health information. We have developed a comprehensive set of policies and procedures in our efforts to comply with HIPAA and other privacy laws. Our compliance officer, privacy officer and information security officer are responsible for implementing and monitoring compliance with our privacy and security policies and procedures at our facilities. We believe that the cost of our compliance with HIPAA and other federal and state privacy laws will not have a material adverse effect on our business, financial condition, results of operations or cash flows. However, there can be no assurance that a breach of privacy or security will not occur. If there is a breach, we may be subject to various lawsuits, penalties and damages and may be required to incur costs to mitigate the impact of the breach on affected individuals.

         We may be adversely affected by a security breach of our, or our third-party vendor's, information technology systems, such as a cyber attack, which may cause a violation of HIPAA or HITECH and subject us to potential legal and reputational harm.

        In the normal course of business, our information technology systems hold sensitive patient information including patient demographic data, eligibility for various medical plans including Medicare and Medicaid and protected health information, which is subject to HIPAA and HITECH. Additionally, we utilize those same systems to perform our day-to-day activities, such as receiving referrals, assigning medical teams to patients, documenting medical information, maintaining an accurate record of all transactions, processing payments and maintaining our employee's personal information. We also contract with third-party vendors to maintain and store our patient's individually identifiable health information. Numerous state and federal laws and regulations address privacy and information security concerns resulting from our access to our patient's and employee's personal information.

        Our information technology systems and those of our vendors that process, maintain and transmit such data are subject to computer viruses, cyber attacks or breaches. We adhere to policies and procedures designed to ensure compliance with HIPAA and other privacy and information security laws and require our third-party vendors to do so as well. If, however, we or our third-party vendors experience a breach, loss, or other compromise of unsecured protected health information or other personal information, such an event could result in significant civil and criminal penalties, lawsuits, reputational harm and increased costs to us, any of which could have a material adverse effect on our financial condition and results of operations.

        Furthermore, while our information technology systems, and those of our third-party vendors, are maintained with safeguards protecting against cyber attacks, including passive intrusion protection, firewalls and virus detection software, these safeguards do not ensure that a significant cyber attack could not occur. A cyber attack that bypasses our information technology security systems, or those of our third-party vendors, could cause the loss of protected health information, or other data subject to privacy laws, the loss of proprietary business information, or a material disruption to our or a third-party vendor's information technology business systems resulting in a material adverse effect on our business, financial condition, results of operations or cash flows. In addition, our future results could be adversely affected due to the theft, destruction, loss, misappropriation or release of protected health information, other confidential data or proprietary business information, operational or business delays resulting from the

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disruption of information technology systems and subsequent clean-up and mitigation activities, negative publicity resulting in reputation or brand damage with clients, members, or industry peers, or regulatory action taken as a result of such incident.

         We may be adversely affected by negative publicity which can result in increased governmental and regulatory scrutiny and possibly adverse regulatory changes.

        Negative press coverage can result in increased governmental and regulatory scrutiny and possibly adverse regulatory changes. Adverse publicity and increased governmental scrutiny can have a negative impact on our reputation with referral sources and patients and on the morale and performance of our employees, both of which could adversely affect our businesses and results of operations.

         Future acquisitions or expansions may use significant resources, may be unsuccessful and could expose us to unforeseen liabilities.

        As part of our growth strategy, we may pursue acquisitions of specialty hospitals, outpatient rehabilitation clinics and other related healthcare facilities and services, and increase the number of Concentra medical centers, onsite clinics and CBOCs that Concentra operates. These acquisitions or expansions, including the pending acquisition of Physiotherapy Associates Holdings, Inc. ("Physiotherapy), may involve significant cash expenditures, debt incurrence, additional operating losses and expenses and compliance risks that could have a material adverse effect on our financial condition and results of operations.

        We may not be able to successfully integrate acquired businesses, such as Physiotherapy, into ours, and therefore we may not be able to realize the intended benefits from an acquisition or expansion. If we fail to successfully integrate acquisitions and expansions into our operations, our financial condition and results of operations may be materially adversely affected. Acquisitions could result in difficulties integrating acquired operations, technologies and personnel into our business. Such difficulties may divert significant financial, operational and managerial resources from our existing operations and make it more difficult to achieve our operating and strategic objectives. We may fail to retain employees or patients acquired through acquisitions, which may negatively impact the integration efforts. Acquisitions could also have a negative impact on our results of operations if it is subsequently determined that goodwill or other acquired intangible assets are impaired, thus resulting in an impairment charge in a future period. Further expansions may require substantial financial resources and management attention, and diverting these resources may negatively affect our financial results.

        In addition, acquisitions, such as Physiotherapy, and expansions involve risks that the acquired businesses or expanded operations will not perform in accordance with expectations; that we may become liable for unforeseen financial or business liabilities, including liabilities for failure to comply with healthcare regulations; that the expected synergies associated with acquisitions or expansions will not be achieved; and that business judgments concerning the value, strengths and weaknesses of businesses acquired or expanded operations will prove incorrect, which could have an material adverse effect on our financial condition and results of operations.

         If we are not able to raise the financing for the acquisition of Physiotherapy and Physiotherapy terminates the merger agreement, we will be required to pay a termination fee.

        We intend to finance the acquisition of Physiotherapy with proceeds from a proposed senior secured incremental term facility under Select's existing credit facilities, for which JP Morgan Chase, N.A. has provided us with a debt commitment letter. Should the merger agreement be terminated by Physiotherapy under specified conditions, including circumstances where we are required to close the transaction under the merger agreement and there is a failure of the debt financing to be funded in accordance with the terms of the debt commitment letter, a reverse termination fee of $24.0 million would be payable by us to Physiotherapy.

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         Risks associated with our potential international operations.

        We intend to expand our operations into other countries. International operations are subject to risks that may materially adversely affect our business, results of operations and financial condition. The risks that our potential international operations would be subject to include, among other things: difficulties and costs relating to staffing and managing foreign operations; fluctuations in the value of foreign currencies; repatriation of cash from our foreign operations to the United States; foreign countries may impose additional withholding taxes or otherwise tax our foreign income; separate operating and financial systems; disaster recovery; and unexpected regulatory, economic and political changes in foreign markets. In addition to the foregoing, our potential international operations will face risks associated with complying with laws governing our foreign business operations, including the U.S. Foreign Corrupt Practices Act and applicable regulatory requirements.

         Future joint ventures may use significant resources, may be unsuccessful and could expose us to unforeseen liabilities.

        As part of our growth strategy, we may partner with large health care systems to provide post acute care services. These joint ventures may involve significant cash expenditures, debt incurrence, additional operating losses and expenses, and compliance risks that could have a material adverse effect on our financial condition and results of operations.

        A joint venture involves the combining of corporate cultures and mission. As a result, we may not be able to successfully operate a joint venture, and therefore we may not be able to realize the intended benefits. If we fail to successfully execute a joint venture relationship, our financial condition and results of operations may be materially adversely affected. A new joint venture could result in difficulties in combining operations, technologies and personnel. Such difficulties may divert significant financial, operational and managerial resources from our existing operations and make it more difficult to achieve our operating and strategic objectives. We may fail to retain employees or patients as a result of the integration efforts.

        A joint venture is operated through a board of directors that contains representatives of Select and other parties to the joint venture. We may not control the board or some actions of the board may require supermajority votes. As a result, the joint venture may elect certain actions that could have adverse effects on our financial condition and results of operations.

         Competition may limit our ability to acquire hospitals, clinics and medical centers and adversely affect our growth.

        We have historically faced limited competition in acquiring specialty hospitals and outpatient rehabilitation clinics, but we may face heightened competition in the future. In addition, significant merger and acquisition activity has occurred in Concentra's industry. Our competitors may acquire or seek to acquire many of the hospitals, clinics and medical centers that would be suitable acquisition candidates for us. This increased competition could hamper our ability to acquire companies, or such increased competition may cause us to pay a higher price than we would otherwise pay in a less competitive environment. Increased competition from both strategic and financial buyers could limit our ability to grow by acquisitions or make our cost of acquisitions higher and therefore decrease our profitability.

         If we fail to compete effectively with other hospitals, clinics, medical centers and healthcare providers in the local areas we serve, our net operating revenues and profitability may decline.

        The healthcare business is highly competitive, and we compete with other hospitals, rehabilitation clinics, medical centers and other healthcare providers for patients. If we are unable to compete effectively in the specialty hospital, outpatient rehabilitation and occupational health services businesses, our ability to retain customers and physicians, or maintain or increase our revenue growth, price flexibility, control

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over medical cost trends and marketing expenses may be compromised and our net operating revenues and profitability may decline.

        Many of our specialty hospitals operate in geographic areas where we compete with at least one other hospital that provides similar services.

        Our outpatient rehabilitation clinics face competition from a variety of local and national outpatient rehabilitation providers, including physician-owned physical therapy clinics, dedicated locally owned and managed outpatient rehabilitation clinics and hospital or university owned or affiliated ventures, as well as national and regional providers in select areas. Other competing outpatient rehabilitation clinics in local areas we serve may have greater name recognition and longer operating histories than our clinics. The managers of these competing clinics may also have stronger relationships with physicians in their communities, which could give them a competitive advantage for patient referrals. Because the barriers to entry are not substantial and current customers have the flexibility to move easily to new healthcare service providers, we believe that new outpatient physical therapy competitors can emerge relatively quickly.

        Concentra's primary competitors have typically been independent physicians, hospital emergency departments and hospital-owned or hospital-affiliated medical facilities. Because the barriers to entry in Concentra's geographic markets are not substantial and its current customers have the flexibility to move easily to new healthcare service providers, new competitors to Concentra can emerge relatively quickly. The markets for Concentra's consumer health and veteran's healthcare businesses are also fragmented and competitive. If Concentra's competitors are better able to attract patients or expand services at their facilities than Concentra is, Concentra may experience an overall decline in revenue. Similarly, competitive pricing pressures from our competitors could cause Concentra to lose existing or future CBOC contracts with the Department of Veterans Affairs, which may also cause Concentra to experience an overall decline in revenue.

         Future cost containment initiatives undertaken by private third-party payors may limit our future net operating revenues and profitability.

        Initiatives undertaken by major insurers and managed care companies to contain healthcare costs affect the profitability of our specialty hospitals and outpatient rehabilitation clinics. These payors attempt to control healthcare costs by contracting with hospitals and other healthcare providers to obtain services on a discounted basis. We believe that this trend may continue and may limit reimbursements for healthcare services. If insurers or managed care companies from whom we receive substantial payments reduce the amounts they pay for services, our profit margins may decline, or we may lose patients if we choose not to renew our contracts with these insurers at lower rates.

         If we fail to maintain established relationships with the physicians in the areas we serve, our net operating revenues may decrease.

        Our success is partially dependent upon the admissions and referral practices of the physicians in the communities our hospitals and our outpatient rehabilitation clinics serve, and our ability to maintain good relations with these physicians. Physicians referring patients to our hospitals and clinics are generally not our employees and, in many of the local areas that we serve, most physicians have admitting privileges at other hospitals and are free to refer their patients to other providers. If we are unable to successfully cultivate and maintain strong relationships with these physicians, our hospitals' admissions and clinics' businesses may decrease, and our net operating revenues may decline.

         Changes in federal or state law limiting or prohibiting certain physician referrals may preclude physicians from investing in our hospitals or referring to hospitals in which they already own an interest.

        The Stark Law prohibits a physician who has a financial relationship with an entity from referring his or her Medicare or Medicaid patients to that entity for certain designated health services, including

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inpatient and outpatient hospital services. Under the transparency and program integrity provisions of the ACA, the exception to the Stark Law that previously permitted physicians to refer patients to hospitals in which they have an ownership or investment interest has been dramatically curtailed. Only hospitals, including specialty hospitals, with physician ownership and a provider agreement in place on December 31, 2010 are exempt from the general ban on self-referral. Existing physician-owned hospitals are prohibited from increasing the percentage of physician ownership or investment interests held in the hospital after March 23, 2010. In addition, physician-owned hospitals are prohibited from increasing the number of licensed beds after March 23, 2010, unless meeting specific exceptions related to the hospital's location and patient population. In order to retain their exemption from the general ban on self-referrals, our physician owned hospitals are required to adopt specific measures relating to conflicts of interest, bona fide investments and patient safety. Furthermore, initiatives are underway in some states to restrict physician referrals to physician-owned hospitals. Currently, 10 of our consolidating hospitals have physicians as minority owners. The aggregate net operating revenue of these 10 hospitals was $176.9 million for the year ended December 31, 2015, or approximately 4.7% of our consolidated net operating revenues for the year ended December 31, 2015. The range of physician minority ownership of these 10 hospitals was 2.1% to 38.7% as of the year ended December 31, 2015. There can be no assurance that new legislation or regulation prohibiting or limiting physician referrals to physician-owned hospitals will not be successfully enacted in the future. If such federal or state laws are adopted, among other outcomes, physicians who have invested in our hospitals could be precluded from referring to, investing in or continuing to be physician owners of a hospital. In addition, expansion of our physician-owned hospitals may be limited, and the revenues, profitability and overall financial performance of our hospitals may be negatively affected.

         We could experience significant increases to our operating costs due to shortages of healthcare professionals or union activity.

        Our specialty hospitals are highly dependent on nurses, our outpatient rehabilitation division is highly dependent on therapists for patient care, and Concentra is highly dependent upon the ability of its affiliated professional groups to recruit and retain qualified physicians and other licensed providers. The market for qualified healthcare professionals is highly competitive. We have sometimes experienced difficulties in attracting and retaining qualified healthcare personnel. We cannot assure you we will be able to attract and retain qualified healthcare professionals in the future. Additionally, the cost of attracting and retaining qualified healthcare personnel may be higher than we anticipate, and as a result, our profitability could decline.

        In addition, U.S. healthcare providers are continuing to see an increase in the amount of union activity. Though we cannot predict the degree to which we will be affected by future union activity, there are continuing legislative proposals that could result in increased union activity. We could experience an increase in labor and other costs from such union activity.

         Our business operations could be significantly disrupted if we lose key members of our management team.

        Our success depends to a significant degree upon the continued contributions of our senior officers and other key employees, and our ability to retain and motivate these individuals. We currently have employment agreements in place with three executive officers and change in control agreements and/or non-competition agreements with several other officers. Many of these individuals also have significant equity ownership in our company. We do not maintain any key life insurance policies for any of our employees. The loss of the services of any of these individuals could disrupt significant aspects of our business, could prevent us from successfully executing our business strategy and could have a material adverse affect on our results of operations.

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         In conducting our business, we are required to comply with applicable laws regarding fee-splitting and the corporate practice of medicine.

        Some states prohibit the "corporate practice of medicine" that restricts business corporations from practicing medicine through the direct employment of physicians or from exercising control over medical decisions by physicians. Some states similarly prohibit the "corporate practice of therapy." The laws relating to corporate practice vary from state to state and are not fully developed in each state in which we have facilities. Typically, however, professional corporations owned and controlled by licensed professionals are exempt from corporate practice restrictions and may employ physicians or therapists to furnish professional services. Also, in some states hospitals are permitted to employ physicians.

        Some states also prohibit entities from engaging in certain financial arrangements, such as fee-splitting, with physicians or therapists. The laws relating to fee-splitting also vary from state to state and are not fully developed. Generally, these laws restrict business arrangements that involve a physician or therapist sharing medical fees with a referral source, but in some states these laws have been interpreted to extend to management agreements between physicians or therapists and business entities under some circumstances.

        We believe that the Company's current and planned activities do not constitute fee-splitting or the unlawful corporate practice of medicine as contemplated by these state laws. However, there can be no assurance that future interpretations of such laws will not require structural and organizational modification of our existing relationships with the practices. If a court or regulatory body determines that we have violated these laws or if new laws are introduced that would render our arrangements illegal, we could be subject to civil or criminal penalties, our contracts could be found legally invalid and unenforceable (in whole or in part), or we could be required to restructure our contractual arrangements with our affiliated physicians and other licensed providers.

         If Concentra is unable to implement and enhance its information systems in a manner that leverages its knowledge of the workers' compensation market and or more efficiently process and manage claims, results may be adversely affected.

        To leverage its knowledge of workplace injuries, treatment protocols, outcomes data and complex regulatory provisions related to the workers' compensation market, Concentra must continue to implement and enhance information systems that can analyze its data related to the workers' compensation industry. Concentra frequently upgrades existing operating systems and is updating other information systems upon which it relies. Concentra has detailed implementation schedules for these projects that require extensive involvement from its operational, technological and financial personnel. Delays or other problems Concentra might encounter in implementing these projects could adversely affect its ability to deliver streamlined patient care and outcome reporting to its customers.

        In addition, Concentra expects that a considerable amount of its future growth will depend on its ability to process and manage claims data more efficiently and to provide more meaningful healthcare information to customers and payors of healthcare. There can be no assurance that Concentra's current data processing capabilities will be adequate for its future growth, that it will be able to efficiently upgrade its systems to meet future demands, or that it will be able to develop, license or otherwise acquire software to address these market demands as well or as timely as its competitors.

         If the frequency of workplace injuries and illnesses continues to decline, Concentra's results may be negatively affected.

        Approximately 52% of Concentra's revenue in 2015 was generated from the treatment or review of workers' compensation claims. In the past decade, the number of workers' compensation claims has decreased, which Concentra primarily attributes to improvements in workplace safety, improved risk management by employers and changes in the type and composition of jobs. During the economic

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downturn, the number of employees with workers' compensation insurance substantially decreased. Although the number of covered employees has increased more in recent years as the employment rate has increased, adverse economic conditions can cause the number of covered employees to decline which can cause further declines in workers' compensation claims. There may also be a decrease in claims because more workers have access to health insurance since the enactment of the ACA and are less likely to file worker's compensation claims. In addition, because of the greater access to health insurance and the fact that the U.S. economy has continued to shift from a manufacturing-based to a service-based economy along with general improvements in workplace safety, workers are generally healthier and less prone to work injuries. Increases in employer-sponsored wellness and health promotion programs, spurred in part by the ACA, have led to fitter and healthier employees who may be less likely to injure themselves on the job. Concentra's business model is based, in part, on its ability to expand its relative share of the market for the treatment and review of claims for workplace injuries and illnesses. If workplace injuries and illnesses decline at a greater rate than the increase in total employment or if total employment declines at a greater rate than the increase in incident rates, the number of claims in the workers' compensation market will decrease and may adversely affect Concentra's business.

         If Concentra loses several significant employer customers, its results may be adversely affected.

        Concentra's results may decline if it loses several significant employer customers in a short period. Most of Concentra's customer agreements permit either party to terminate without cause upon 30, 60 or 90 days' prior written notice. If several significant employer customers terminate, or do not renew or extend their agreements with Concentra, its results could be adversely affected. One or more of Concentra's significant employer customers could be acquired. Additionally, Concentra could lose significant employer customers due to competitive pricing pressures or other reasons. The loss of several significant employer customers could cause a material decline in Concentra's profitability and operating performance.

         We may not receive payment from some of our patients because of their financial circumstances.

        Some of our patients may not have significant financial resources, liquidity or access to capital. If these patients experience financial difficulties they may be unable to pay for the healthcare services that we will provide, including their copays or deductibles. A significant deterioration in general or local economic conditions could have a material adverse effect on the financial health of our patients, which may adversely affect our financial condition and results of operations.

         Significant legal actions could subject us to substantial uninsured liabilities.

        Physicians, hospitals and other healthcare providers have become subject to an increasing number of legal actions alleging malpractice, product liability or related legal theories. Many of these actions involve large claims and significant defense costs. We are also subject to lawsuits under federal and state whistleblower statutes designed to combat fraud and abuse in the healthcare industry. These whistleblower lawsuits are not covered by insurance and can involve significant monetary damages and award bounties to private plaintiffs who successfully bring the suits. See "Legal Proceedings" and Note 14 in our audited consolidated financial statements.

        We currently maintain professional malpractice liability insurance and general liability insurance coverages under a combination of policies with a total annual aggregate limit of $35.0 million. Our insurance for the professional liability coverage is written on a "claims-made" basis and our commercial general liability coverage is maintained on an "occurrence" basis. These coverages apply after a self-insured retention of $2.0 million per medical incident for professional liability claims and $2.0 million per occurrence for general liability claims. We review our insurance program annually and may make adjustments to the amount of insurance coverage and self-insured retentions in future years. In addition, our insurance coverage does not generally cover punitive damages and may not cover all claims against us. See "Business—Government Regulations—Other Healthcare Regulations."

47

         Concentration of ownership among our existing executives and directors may prevent new investors from influencing significant corporate decisions.

        Our executives and directors, beneficially own, in the aggregate, approximately 19.6% of Holdings' outstanding common stock as of February 1, 2016. As a result, these stockholders have significant control over our management and policies and are able to exercise influence over all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions. The directors elected by these stockholders are able to make decisions affecting our capital structure, including decisions to issue additional capital stock, implement stock repurchase programs and incur indebtedness. This influence may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in their best interest.

Risks Related to our Capital Structure

         If WCAS and the other members of Group Holdings exercise their Put Right, it may have an adverse effect on our liquidity. Additionally, we may not have adequate funds to pay amounts due in connection with the Put Right, if exercised, in which case we would be required to issue Holdings' common stock to purchase interests of Group Holdings and our stockholder's ownership interest will be diluted.

        Pursuant to the Amended and Restated Limited Liability Company Agreement of Group Holdings, WCAS and the other members of Group Holdings have a put right (the "Put Right") with respect to their equity interests in Group Holdings. If a Put Right is exercised by WCAS, Select will be obligated to purchase up to 33¹/3% of the equity interests of Group Holdings that WCAS purchased on June 1, 2015, at a purchase price based on a valuation of Group Holdings performed by an investment bank to be mutually agreed between Select and WCAS, which valuation will be based on certain precedent transactions using multiples of EBITDA and capped at an agreed upon multiple of EBITDA. Select has the right to elect to pay the purchase price in cash or in shares of Holdings' common stock. WCAS may first exercise its Put Right after June 1, 2018, and then may exercise its Put Right again annually during each fiscal year thereafter. If WCAS exercises its Put Right, the other members of Group Holdings may elect to sell to Select, on the same terms as WCAS, a percentage of their equity interests of Group Holdings that such member purchased on June 1, 2015, up to but not exceeding the percentage of its initial equity interests that WCAS has determined to sell to Select in the exercise of its Put Right.

        Furthermore, WCAS and the other members of Group Holdings will have a put right with respect to their equity interest in Group Holdings in the event Holdings or Select experiences a change of control that has not been previously approved by WCAS and which results in change in the senior management of Select (an "SEM COC Put Right"). If an SEM COC Put Right is exercised by WCAS, WCAS and each other member of Group Holdings will be obligated to sell all (but not less than all) of their equity interests in Group Holdings to Select, at a purchase price based on a valuation of Group Holdings performed by an investment bank to be mutually agreed between Select and WCAS, which valuation will be based on certain precedent transactions using multiples of EBITDA and capped at an agreed upon multiple of EBITDA.

        We may not have sufficient funds, borrowing capacity or other capital resources available to pay for the interests of Group Holdings in cash if WCAS and the other members of Group Holdings exercise their Put Rights or maybe prohibited from doing so under the terms of our debt agreements. Such lack of available funds upon the exercising of the Put Rights would force us to issue stock at a time we might not otherwise desire to do so in order to purchase the interests of Group Holdings. To the extent that the interests of Group Holdings are purchased by issuing shares of our common stock, the increase in the number of shares of our common stock issued and outstanding may depress the price of our common stock and our stockholders will experience dilution in their respective percentage ownership in us. In addition, shares issued to purchase the interests in Group Holdings will be valued at the twenty-one trading day

48

volume-weighted average sales price of such shares for the period beginning ten trading days immediately preceding the first public announcement of the Put Right being exercised and ending ten trading days immediately following such announcement. Because the value of the common stock issued to purchase the interests in Group Holdings is, in part, determined by the sales price of our common stock following the announcement that the Put Right is being exercised, which may cause the sales price of our common stock to decline, the amount of common stock we may have to issue to purchase the interests in Group Holdings may increase, resulting in further dilution to our existing stockholders.

         Our substantial indebtedness may limit the amount of cash flow available to invest in the ongoing needs of our business.

        We have a substantial amount of indebtedness. As of December 31, 2015, Select had approximately $1,768.7 million of total indebtedness excluding the debt at Concentra. Taking into account the indebtedness under the Concentra credit facilities (as defined below), which is nonrecourse to Select, our total indebtedness at December 31, 2015 was $2,423.9 million. For the years ended December 31, 2013 and 2014, Select paid cash interest of $89.1 million and $78.8 million, respectively. For the year ended December 31, 2015, Select paid cash interest, including cash interest paid by Concentra on Concentra's indebtedness, of $103.2 million. Our indebtedness could have important consequences to you. For example, it:

•

requires us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, reducing the availability of our cash flow to fund working capital, capital expenditures, development activity, acquisitions and other general corporate purposes;

•

increases our vulnerability to adverse general economic or industry conditions;

•

limits our flexibility in planning for, or reacting to, changes in our business or the industries in which we operate;

•

makes us more vulnerable to increases in interest rates, as borrowings under our senior secured credit facilities are at variable rates;

•

limits our ability to obtain additional financing in the future for working capital or other purposes; and

•

places us at a competitive disadvantage compared to our competitors that have less indebtedness.

        Any of these consequences could have a material adverse effect on our business, financial condition, results of operations, prospects and ability to satisfy our obligations under our indebtedness. In addition, there would be a material adverse effect on our business, financial condition, results of operations and cash flows if we were unable to service our indebtedness or obtain additional financing, as needed.

        See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

         Our credit facilities and the indenture governing Select's 6.375% senior notes require us to comply with certain financial covenants and obligations, the default of which may result in the acceleration of certain of our indebtedness.

        In the case of an event of default under the agreements governing our indebtedness, the lenders under these agreements could elect to declare all amounts borrowed, together with accrued and unpaid interest and other fees, to be due and payable. If we are unable to obtain a waiver from the requisite lenders under such circumstances, the lenders could exercise their rights as described above, then our financial condition and results of operations could be adversely affected and we could become bankrupt or insolvent.

49

        The Select credit facilities (as defined below) require Select to maintain a leverage ratio (based upon the ratio of indebtedness to consolidated EBITDA as defined in the agreement), which is tested quarterly. The Select credit facilities also prohibit Select from making capital expenditures in excess of $125.0 million in any fiscal year (subject to a 50% carry-over provision). Failure to comply with these covenants would result in an event of default under the Select credit facilities and, absent a waiver or an amendment from the lenders, preclude Select from making further borrowings under its revolving facility and permit the lenders to accelerate all outstanding borrowings under the Select credit facilities.

        The Concentra first lien credit agreement (as defined below) requires Concentra to maintain a leverage ratio (based upon the ratio of indebtedness for money borrowed to consolidated EBITDA) of 5.25 to 1.00, which is tested quarterly, but only if Revolving Exposure (as defined in the Concentra credit facilities (as defined below)) exceeds 30% of Revolving Commitments (as defined in the Concentra credit facilities) on such day. Failure to comply with this covenant would result in an event of default under the Concentra revolving facility (as defined below) only and, absent a waiver or an amendment from the lenders, preclude Concentra from making further borrowings under the Concentra revolving facility and permit the lenders to accelerate all outstanding borrowings under the Concentra revolving facility. Upon such acceleration, Concentra's failure to comply with the financial covenant would result in an Event of Default (as defined in the Concentra credit facilities) with respect to the Concentra first lien term loan (as defined below).

        The Concentra credit facilities also contain a number of affirmative and restrictive covenants, including limitations on mergers, consolidations and dissolutions; sales of assets; investments and acquisitions; indebtedness; liens; affiliate transactions; and dividends and restricted payments. The Concentra credit facilities contain events of default for non-payment of principal and interest when due (subject to a grace period for interest), cross-default and cross-acceleration provisions and an event of default that would be triggered by a change of control.

        As of December 31, 2015, Select was required to maintain its leverage ratio (its ratio of total indebtedness to consolidated EBITDA for the prior four consecutive fiscal quarters) at less than 5.75 to 1.00. For the four consecutive fiscal quarters ended December 31, 2015, Select's leverage ratio was 4.78 to 1.00.

        While we have never defaulted on compliance with any of our financial covenants, our ability to comply with these ratios in the future may be affected by events beyond our control. Inability to comply with the required financial covenants could result in a default under our indebtedness. In the event of any default under Select's credit facilities, the lenders could elect to terminate borrowing commitments and declare all borrowings outstanding, together with accrued and unpaid interest and other fees, to be immediately due and payable. In the event of any default under Select's indenture, the trustee or holders of 25% of the notes could declare all outstanding 6.375% senior notes immediately due and payable.

         Payment of interest on, and repayment of principal of, our indebtedness is dependent in part on cash flow generated by our subsidiaries.

        Payment of interest on, and repayment of principal of our indebtedness will be dependent in part upon cash flow generated by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Our subsidiaries may not be able to, or be permitted to, make distributions to enable us to make payments in respect of our indebtedness. For example, as a general matter, Concentra is restricted from paying dividends under the Concentra credit facilities and therefore we cannot rely on Concentra's cash flow to repay Select's indebtedness. Each of our subsidiaries is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness. In addition, any payment of interest, dividends, distributions, loans or advances by our subsidiaries to us could be subject to

50

restrictions on dividends or repatriation of distributions under applicable local law, monetary transfer restrictions and foreign currency exchange regulations in the jurisdictions in which the subsidiaries operate or under arrangements with local partners. Furthermore, the ability of our subsidiaries to make such payments of interest, dividends, distributions, loans or advances may be contested by taxing authorities in the relevant jurisdictions.

         Despite our substantial level of indebtedness, we and our subsidiaries may be able to incur additional indebtedness. This could further exacerbate the risks described above.

        We and our subsidiaries may be able to incur additional indebtedness in the future. Although the Select credit facilities and the Concentra credit facilities contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. Also, these restrictions do not prevent us or our subsidiaries from incurring obligations that do not constitute indebtedness. As of December 31, 2015, Select had $116.1 million of availability under the Select revolving facility (as defined below) (after giving effect to $38.9 million of outstanding letters of credit) and Concentra had $39.0 million of availability under the Concentra revolving facility (after giving effect to $6.0 million of outstanding letters of credit). In addition, to the extent new debt is added to us and our subsidiaries' current debt levels, the substantial leverage risks described above would increase.

         Concentra's inability to meet the conditions and payments under the Concentra credit facilities, although non-recourse to Select, could jeopardize Select's equity contribution to Group Holdings.

        Select is not a party to the Concentra credit facilities and is not an obligor with respect to Concentra's debt under such agreements; however, if Concentra fails to meet its obligations and defaults on the Concentra credit facilities, a portion of or all of Select's equity investment in Group Holdings, the indirect parent company of Concentra, could be at risk of loss.

Item 1B.    Unresolved Staff Comments.

        None.

Item 2.    Properties.

        We currently lease most of our facilities, including clinics, offices, specialty hospitals and our corporate headquarters. We own 25 of our specialty hospitals.

        We currently lease all of our outpatient rehabilitation clinics and related offices, which, as of December 31, 2015 included 896 leased outpatient rehabilitation clinics throughout the United States. We also lease the majority of our LTCH facilities except for the facilities described above. As of December 31, 2015, in our specialty hospitals we had 77 HIH leases and 16 free-standing building leases. As of December 31, 2015, in our Concentra segment we owned six of our medical centers and had 294 leased medical centers and 33 CBOC leases.

        We lease our corporate headquarters from companies owned by a related party affiliated with us through common ownership or management. Our corporate headquarters is approximately 167,203 square feet and is located in Mechanicsburg, Pennsylvania. We lease several other administrative spaces related to administrative and operational support functions. As of December 31, 2015, this was comprised of eight locations throughout the United States with approximately 49,000 square feet in total.

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        The following is a list by state of the number of facilities we operated as of December 31, 2015.

	Specialty Hospitals
	Long Term Acute Care		Inpatient Rehabilitation		Outpatient Clinics		Concentra Medical Centers		Total Facilities
Alabama		1								1
Alaska						7				7
Arizona		3		1		15		12		31
Arkansas		2				1		2		5
California						12		17		29
Colorado		2				17		17		36
Connecticut						48		10		58
Delaware		1				2		1		4
District of Columbia						2				2
Florida		10		1		98		8		117
Georgia		6		1		23		14		44
Hawaii								1		1
Illinois						47		12		59
Indiana		5				19		3		27
Iowa		2						3		5
Kansas		2				15		2		19
Kentucky		2				46		6		54
Louisiana						3		4		7
Maine						12		5		17
Maryland						20		10		30
Massachusetts						7		2		9
Michigan		11				10		18		39
Minnesota		1				25				26
Mississippi		5						11		16
Missouri		3		2		63				68
Nebraska		2						3		5
Nevada						7		7		14
New Hampshire								3		3
New Jersey		1		3		153		13		170
New Mexico						2		4		6
North Carolina		3				32		6		41
Ohio		15		2		60		8		85
Oklahoma		2				20		7		29
Oregon								4		4
Pennsylvania		9		2		129		13		153
Rhode Island								2		2
South Carolina		2				16		2		20
South Dakota		1								1
Tennessee		5				13		8		26
Texas		9		6		93		46		154
Utah								2		2
Vermont								2		2
Virginia						21		4		25
West Virginia		1								1
Wisconsin		3						8		11
Total Company		109		18		1,038		300		1,465

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Item 3.    Legal Proceedings.

        The Company is a party to various legal actions, proceedings and claims (some of which are not insured), and regulatory and other governmental audits and investigations in the ordinary course of its business. The Company cannot predict the ultimate outcome of pending litigation, proceedings and regulatory and other governmental audits and investigations. These matters could potentially subject the Company to sanctions, damages, recoupments, fines and other penalties. The Department of Justice, CMS or other federal and state enforcement and regulatory agencies may conduct additional investigations related to the Company's businesses in the future that may, either individually or in the aggregate, have a material adverse effect on the Company's business, financial position, results of operations and liquidity.

        To address claims arising out of the operations of the Company's specialty hospitals and outpatient rehabilitation facilities, the Company maintains professional malpractice liability insurance and general liability insurance, subject to self-insured retention of $2.0 million per medical incident for professional liability claims and $2.0 million per occurrence for general liability claims. The Company also maintains umbrella liability insurance covering claims which, due to their nature or amount, are not covered by or not fully covered by the Company's other insurance policies. These insurance policies also do not generally cover punitive damages and are subject to various deductibles and policy limits. Significant legal actions, as well as the cost and possible lack of available insurance, could subject the Company to substantial uninsured liabilities. In the Company's opinion, the outcome of these actions, individually or in the aggregate, will not have a material adverse effect on its financial position, results of operations, or cash flows.

        Healthcare providers are subject to lawsuits under the qui tam provisions of the federal False Claims Act. Qui tam lawsuits typically remain under seal (hence, usually unknown to the defendant) for some time while the government decides whether or not to intervene on behalf of a private qui tam plaintiff (known as a relator) and take the lead in the litigation. These lawsuits can involve significant monetary damages and penalties and award bounties to private plaintiffs who successfully bring the suits. The Company has been a defendant in these cases in the past, and may be named as a defendant in similar cases from time to time in the future.

        On October 19, 2015, the plaintiff-relators filed a Second Amended Complaint in United States of America, ex rel. Tracy Conroy, Pamela Schenk and Lisa Wilson v. Select Medical Corporation, Select Specialty Hospital—Evansville, LLC ("SSH-Evansville"), Select Employment Services, Inc., and Dr. Richard Sloan. The case is a civil action filed in the United States District Court for the Southern District of Indiana by private plaintiff-relators on behalf of the United States under the federal False Claims Act. The plaintiff-relators are the former CEO and two former case managers at SSH-Evansville, and the defendants currently include the Company, SSH-Evansville, a subsidiary of the Company serving as common paymaster for its employees, and a physician who practices at SSH-Evansville. The plaintiff-relators allege that that SSH-Evansville discharged patients too early or held patients too long, improperly discharged patients to and readmitted them from short stay hospitals, up-coded diagnoses at admission, and admitted patients for whom long-term acute care was not medically necessary. They also allege that the defendants engaged in retaliation in violation of federal and state law. The Second Amended Complaint replaces a prior complaint that was filed under seal on September 28, 2012 and served on the Company on February 15, 2013, after a federal magistrate judge unsealed it on January 8, 2013. All deadlines in the case had been stayed after the seal was lifted in order to allow the government time to complete its investigation and to decide whether or not to intervene. On June 19, 2015, the U.S. Department of Justice notified the court of its decision not to intervene in the case, and the court thereafter approved a case management plan imposing certain deadlines. The plaintiff-relators filed a Second Amended Complaint in October 2015, and defendants filed a Motion to Dismiss such Complaint in December 2015. The Company intends to vigorously defend this action, but at this time the Company is unable to predict the timing and outcome of this matter.

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        On July 13, 2015, the federal District Court for the Eastern District of Tennessee unsealed a qui tam Complaint in Armes v. Garman, et al, No. 3:14-cv-00172-TAV-CCS, which named as defendants Select, Select Specialty Hospital—Knoxville, Inc. ("SSH-Knoxville"), Select Specialty Hospital—North Knoxville, Inc. and ten current or former employees of these facilities. The Complaint was unsealed after the United States and the State of Tennessee notified the Court on July 13, 2015 that each had decided not to intervene in the case. The Complaint is a civil action that was filed under seal on April 29, 2014 by a respiratory therapist formerly employed at SSH-Knoxville. The Complaint alleges violations of the federal False Claims Act and the Tennessee Medicaid False Claims Act based on extending patient stays to increase reimbursement and to increase average length of stay; artificially prolonging the lives of patients to increase Medicare reimbursements and decrease inspections; admitting patients who do not require medically necessary care; performing unnecessary procedures and services; and delaying performance of procedures to increase billing. The Complaint was served on some of the defendants during October 2015. The defendants filed a Motion to Dismiss such Complaint in November 2015. The Company intends to vigorously defend this action if the relators pursue it, but at this time the Company is unable to predict the timing and outcome of this matter.

Item 4.    Mine Safety Disclosures.

        None.

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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

        Select Medical Holdings Corporation common stock is quoted on the New York Stock Exchange under the symbol "SEM." The following table sets forth, for the periods indicated, the high and low sales prices of our common stock, reported by the New York Stock Exchange.

	Market Prices
Fiscal Year Ended December 31, 2014	High		Low
First Quarter	$	12.45	$	10.15
Second Quarter	$	15.86	$	12.43
Third Quarter	$	16.17	$	12.01
Fourth Quarter	$	15.07	$	11.46

	Market Prices
Fiscal Year Ended December 31, 2015	High		Low
First Quarter	$	15.75	$	12.10
Second Quarter	$	17.20	$	14.38
Third Quarter	$	16.51	$	10.41
Fourth Quarter	$	12.66	$	10.07

Holders

        At the close of business on February 1, 2016, Holdings had 131,282,798 shares of common stock issued and outstanding. As of that date, there were 111 registered holders of record. This does not reflect beneficial stockholders who hold their stock in nominee or "street" name through brokerage firms.

Dividend Policy

        On February 19, April 30, August 6 and October 29, 2014, Holdings declared cash dividends of $0.10 per share. Such dividends were paid on March 10, May 28, August 29 and December 1, 2014, respectively, to stockholders of record as of the close of business on March 3, May 16, August 20 and November 19, 2014, respectively.

        On February 18, 2015, Holdings declared cash dividends of $0.10 per share. Such dividends were paid on March 11, 2015 to stockholders of record as of the close of business on March 4, 2015.

        Since the dividend described above, Holdings has not paid or declared any dividends on its common stock. We do not anticipate paying any further dividends on Holdings' common stock in the foreseeable future. We intend to retain future earnings to finance the ongoing operations and growth of our business. Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on conditions at that time, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. Additionally, certain contractual agreements we are party to, including the Select credit facilities and the Indenture governing Select's 6.375% senior notes, restrict our capacity to pay dividends.

Securities Authorized For Issuance Under Equity Compensation Plans

        For information regarding securities authorized for issuance under equity compensation plans, see Part III "Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters."

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Stock Performance Graph

        The graph below compares the cumulative total stockholder return on $100 invested at the close of the market on December 31, 2010, with dividends being reinvested on the date paid through and including the market close on December 31, 2015 with the cumulative total return of the same time period on the same amount invested in the Standard & Poor's 500 Index (S&P 500) and the S&P Health Care Services Select Industry Index (SPSIHP). The chart below the graph sets forth the actual numbers depicted on the graph.

	12/31/10		12/31/11		12/31/12		12/31/13		12/31/14		12/31/15
Select Medical Holdings Corporation (SEM)	$	100.00	$	116.01	$	147.70	$	188.48	$	240.71	$	200.60
S&P Health Care Services Select Industry Index (SPSIHP)	$	100.00	$	102.93	$	126.05	$	172.56	$	215.72	$	222.36
S&P 500	$	100.00	$	100.00	$	113.40	$	147.01	$	163.71	$	162.49

Item 6.    Selected Financial Data.

        You should read the following selected historical consolidated financial data in conjunction with our consolidated financial statements and the accompanying notes. Upon the consummation of the Concentra acquisition, Concentra's financial results are consolidated with Select's effective June 1, 2015. You should also read "Management's Discussion and Analysis of Financial Condition and Results of Operations," which is contained elsewhere herein. The selected historical financial data as of December 31, 2011, 2012, 2013, 2014 and 2015 and for the years ended December 31, 2011, 2012, 2013, 2014 and 2015 have been

56

derived from consolidated financial statements audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm. The selected historical consolidated financial data as of December 31, 2014 and 2015, and for the years ended December 31, 2013, 2014 and 2015 have been derived from our consolidated financial information included elsewhere herein. The selected historical consolidated financial data as of December 31, 2011, 2012 and 2013 and for the years ended December 31, 2011 and 2012 have been derived from our audited consolidated financial information not included elsewhere herein.

	Select Medical Holdings Corporation
	Year Ended December 31,
	2011			2012			2013			2014			2015
	(In thousands, except per share data)
Statement of Operations Data:
Net operating revenues	$	2,804,507		$	2,948,969		$	2,975,648		$	3,065,017		$	3,742,736
Operating expenses(1)(2)		2,422,271			2,548,799			2,609,820			2,712,187			3,362,965
Depreciation and amortization		71,517			63,311			64,392			68,354			104,981
Income from operations		310,719			336,859			301,436			284,476			274,790
Loss on early retirement of debt(3)		(31,018	)		(6,064	)		(18,747	)		(2,277	)		—
Equity in earnings of unconsolidated subsidiaries		2,923			7,705			2,476			7,044			16,811
Gain on sale of equity investment		—			—			—			—			29,647
Interest expense, net(4)		(98,894	)		(94,950	)		(87,364	)		(85,446	)		(112,816	)
Income before income taxes		183,730			243,550			197,801			203,797			208,432
Income tax expense		70,968			89,657			74,792			75,622			72,436
Net income		112,762			153,893			123,009			128,175			135,996
Less: Net income attributable to non-controlling interests(5)		4,916			5,663			8,619			7,548			5,260
Net income attributable to Select Medical Holdings Corporation	$	107,846		$	148,230		$	114,390		$	120,627		$	130,736
Income per common share:
Basic	$	0.71		$	1.05		$	0.82		$	0.91		$	1.00
Diluted	$	0.71		$	1.05		$	0.82		$	0.91		$	0.99
Weighted average common shares outstanding:
Basic		150,501			138,767			136,879			129,026			127,478
Diluted		150,725			139,042			137,047			129,465			127,752
Balance Sheet Data (at end of period):
Cash and cash equivalents	$	12,043		$	40,144		$	4,319		$	3,354		$	14,435
Working capital		99,472			80,397			82,878			133,220			11,465
Total assets		2,772,147			2,761,361			2,817,622			2,924,809			4,426,666
Total debt		1,396,798			1,470,243			1,445,275			1,522,976			2,423,884
Total Select Medical Holdings Corporation stockholders' equity		819,679			717,048			786,234			739,515			859,253

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	Select Medical Corporation
	Year Ended December 31,
	2011			2012			2013			2014			2015
	(In thousands)
Statement of Operations Data:
Net operating revenues	$	2,804,507		$	2,948,969		$	2,975,648		$	3,065,017		$	3,742,736
Operating expenses(1)(2)		2,422,271			2,548,799			2,609,820			2,712,187			3,362,965
Depreciation and amortization		71,517			63,311			64,392			68,354			104,981
Income from operations		310,719			336,859			301,436			284,476			274,790
Loss on early retirement of debt(3)		(20,385	)		(6,064	)		(17,788	)		(2,277	)		—
Equity in earnings of unconsolidated subsidiaries		2,923			7,705			2,476			7,044			16,811
Gain on sale of equity investment		—			—			—			—			29,647
Interest expense, net(4)		(80,910	)		(83,759	)		(84,954	)		(85,446	)		(112,816	)
Income before income taxes		212,347			254,741			201,170			203,797			208,432
Income tax expense		80,984			93,574			75,971			75,622			72,436
Net income		131,363			161,167			125,199			128,175			135,996
Less: Net income attributable to non-controlling interests(5)		4,916			5,663			8,619			7,548			5,260
Net income attributable to Select Medical Corporation	$	126,447		$	155,504		$	116,580		$	120,627		$	130,736
Balance Sheet Data (at end of period):
Cash and cash equivalents	$	12,043		$	40,144		$	4,319		$	3,354		$	14,435
Working capital		97,348			78,414			82,878			133,220			11,465
Total assets		2,770,738			2,760,313			2,817,622			2,924,809			4,426,666
Total debt		1,229,498			1,302,943			1,445,275			1,552,976			2,423,884
Total Select Medical Corporation stockholders' equity		983,446			881,317			786,234			739,515			859,253

(1)

Operating expenses include cost of services, general and administrative expenses, and bad debt expenses.

(2)

Includes stock compensation expense related to restricted stock and stock options for the years ended December 31, 2011, 2012, 2013, 2014 and 2015.

(3)

During the year ended December 31, 2011, we refinanced the Select credit facilities, repurchased and retired $266.5 million principal amount of Select's 7⁵/8% senior subordinated notes, and repurchased and retired $150.0 million principal amount of Holdings 10% senior subordinated notes. A loss on early retirement of debt of $31.0 million and $20.4 million for Holdings and Select, respectively, was recognized for the year ended December 31, 2011, which included the write-off of unamortized debt issuance costs, tender premiums and original issue discount.

During the year ended December 31, 2012, we repurchased and retired an aggregate of $275.0 million principal amount of Select's outstanding 7⁵/8% senior subordinated notes. A loss on early retirement of debt of $6.1 million was recognized by Holdings and Select for the year ended December 31, 2012, which included the write-off of unamortized debt issuance costs and call premiums.

During the year ended December 31, 2013, Select entered into a credit extension amendment on February 20, 2013, the proceeds of which were used to redeem all of its outstanding 7⁵/8% senior subordinated notes, to finance Holdings' redemption of all of its 10% senior floating rate, and to repay a portion of the balance outstanding under the Select credit facilities. Additionally, on May 28,

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2013, Select issued and sold $600.0 million aggregate principal amount of its 6.375% senior notes due 2021, the proceeds of which were used to pay a portion of the Select term loans then outstanding and to pay related fees and expenses. A loss on early retirement of debt of $18.7 million and $17.8 million for Holdings and Select, respectively, was recognized for the year ended December 31, 2013, which included the write-off of unamortized debt issuance costs.

During the year ended December 31, 2014, Select amended its term loans under the Select credit facilities. A loss on early retirement of debt of $2.3 million was recognized for unamortized debt issuance costs, unamortized original issue discount, and certain frees incurred related to term loan modifications.

(4)

Interest expense, net equals interest expense minus interest income.

(5)

Reflects interests held by other parties in subsidiaries, limited liability companies and limited partnerships owned and controlled by us.

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

You should read this discussion together with the "Selected Financial Data" and consolidated financial statements and accompanying notes included elsewhere herein.

Overview

        We began operations in 1997, and we believe that we are one of the largest operators of both specialty hospitals and outpatient rehabilitation clinics in the United States based on number of facilities. On June 1, 2015, a joint venture created by Select and WCAS consummated the acquisition of Concentra, which provides occupational medicine, consumer health, physical therapy, and veteran's healthcare services throughout the United States. As of December 31, 2015, we operated 127 specialty hospitals in 27 states, and 1,038 outpatient rehabilitation clinics in 31 states and the District of Columbia. Through our contract therapy business we provide medical rehabilitation services on a contracted basis to nursing homes, hospitals, assisted living and senior care centers, schools, and work sites. As of December 31, 2015, Concentra operated 300 medical centers in 38 states. Concentra also provides contract services at employer worksites and Department of Veterans Affairs CBOCs. As of December 31, 2015, we had operations in 46 states and the District of Columbia.

        We manage our Company through three business segments; specialty hospitals, outpatient rehabilitation and, as of June 1, 2015, our Concentra segment. We had net operating revenues of $3,742.7 million for the year ended December 31, 2015. Of this total, we earned approximately 63% of our net operating revenues from our specialty hospitals segment, approximately 22% from our outpatient rehabilitation segment, and approximately 15% from our Concentra segment. Our specialty hospitals segment consists of hospitals designed to serve the needs of long term acute care patients and hospitals designed to serve patients that require intensive medical rehabilitation care. Patients are typically admitted to our specialty hospitals from general acute care hospitals. These patients have specialized needs, and serious and often complex medical conditions such as respiratory failure, neuromuscular disorders, traumatic brain and spinal cord injuries, strokes, non-healing wounds, cardiac disorders, renal disorders, and cancer. Our outpatient rehabilitation segment consists of clinics and contract therapy that provide physical, occupational, and speech rehabilitation services. Our outpatient rehabilitation patients are typically diagnosed with musculoskeletal impairments that restrict their ability to perform normal activities of daily living. Our Concentra segment consists of medical centers and contract services provided at employer worksites and Department of Veterans Affairs CBOCs that deliver occupational medicine, consumer health, physical therapy, and veteran's healthcare services. The financial and statistical information related to the operation of the Concentra segment, and used for calculations in our discussion and analysis of our financial condition and results of operations for the period ended December 31, 2015, discussed herein, began as of June 1, 2015, which is the date the Concentra acquisition was consummated.

Significant 2015 Events

Concentra Transaction

        On June 1, 2015, MJ Acquisition Corporation, a joint venture that Select created with WCAS, consummated the acquisition of Concentra. Pursuant to the terms of the stock purchase agreement, MJ Acquisition Corporation acquired 100% of the issued and outstanding equity securities of Concentra from Humana, Inc. ("Humana") for $1,047.2 million, net of $3.8 million of cash acquired. Select used borrowings under the Select revolving facility to fund its portion of the equity contribution to Group Holdings in an aggregate amount equal to $217.9 million. Group Holdings contributed those funds along with $217.1 million of equity contributions of its other members to MJ Acquisition Corporation, which used the funds, together with the borrowings under the Concentra credit facilities to pay the purchase price to Humana.

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        Group Holdings is the parent company of Concentra, the surviving entity of the merger between MJ Acquisition Corporation and Concentra. Select owns 50.1% of the voting equity interests of Group Holdings. Concentra's financial results are consolidated with Select's as of June 1, 2015.

        Our acquisition costs related to the acquisition of Concentra were $4.7 million and are included in general and administrative expenses for the year ended December 31, 2015. Concentra incurred $23.3 million of debt issuance costs related to the Concentra credit facilities through December 31, 2015. The original issue discounts and debt issuance costs associated with the Concentra term loans are being amortized in interest expense beginning June 1, 2015 using the interest method which will continue over the total term of each respective facility.

Financing Transactions

Select Credit Facilities

        On May 20, 2015, Select entered into an additional credit extension amendment to the Select credit facilities. Pursuant to the terms and conditions of the additional credit extension amendment, the lenders named therein committed an additional $100.0 million in incremental revolving commitments that mature on March 1, 2018. All other material terms and conditions applicable to the Select revolving facility commitments are applicable to incremental revolving commitments created under the additional credit extension amendment.

        On December 11, 2015, Select amended the Select credit facilities in order to, among other things: (i) convert $56.2 million of its series D term loan into series E term loan, which have a maturity date of June 1, 2018; (ii) increase the interest rate payable on the series E term loan from Adjusted LIBO plus 2.75% (subject to an Adjusted LIBO rate floor of 1.00%), or Alternative Base Rate plus 1.75%, to Adjusted LIBO plus 4.00% (subject to an Adjusted LIBO rate floor of 1.00%), or Alternative Base Rate plus 3.00%; (iii) beginning with the quarter ending December 31, 2015, increase the quarterly compliance threshold set forth in the leverage ratio financial maintenance covenant to a level of 5.75 to 1.00 from 5.00 to 1.00; (iv) increase the capacity for incremental extensions of credit to $450.0 million; and (v) amend the definition of "Consolidated EBITDA" to add back certain specialty hospital start-up losses.

Concentra Credit Facilities

        On June 1, 2015, MJ Acquisition Corporation, as the initial borrower, entered into the Concentra credit facilities. Concentra, as the surviving entity of the merger between MJ Acquisition Corporation and Concentra, became the borrower under the Concentra credit facilities on June 1, 2015. The Concentra credit facilities consist of the Concentra first lien credit agreement and the Concentra second lien credit agreement. The Concentra first lien credit agreement provides for $500.0 million in first lien loans composed of a $450.0 million, seven-year term loan and a $50.0 million, five-year revolving credit facility. The $450.0 million Concentra first lien term loan was issued with a discount of $1.1 million resulting in proceeds of $448.9 million. The Concentra second lien credit agreement (as defined below) provides for a $200.0 million eight-year second lien term loan. The $200.0 million Concentra second lien term loan (as defined below) was issued with a discount of $2.0 million resulting in proceeds of $198.0 million.

New Specialty Hospital Start-up Operating Expenses

        Select is developing several new specialty hospitals resulting in start-up costs which have the effect of increasing our operating expenses. Start-up Adjusted EBITDA losses were $16.8 million for the year ended December 31, 2015, compared to $14.5 million for the year ended December 31, 2014. We define Adjusted EBITDA as net income before interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, Concentra acquisition costs, equity in earnings (losses) of unconsolidated subsidiaries, and gain on sale of equity investment. See the section titled "Results of Operations" for a reconciliation of net income to Adjusted EBITDA.

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Gain on Sale of Equity Investment

        For the year ended December 31, 2015, we had a gain on the sale of an equity investment of $29.6 million. The equity investment was a start-up company investment in which we owned a non-controlling interest.

Subsequent Events

        On January 25, 2016, Select announced that it has entered into an Agreement and Plan of Merger, dated as of January 22, 2016, with Grip Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Select, Physiotherapy, and KHR Physio, LLC, a Delaware limited liability company, solely in its capacity as the Holder Representative (as defined in the merger agreement). Pursuant to the terms of the merger agreement, Select will acquire Physiotherapy for $400.0 million in cash, subject to certain adjustments in accordance with the terms set forth in the merger agreement, through the merger of Grip Merger Sub, Inc. with and into Physiotherapy, with Physiotherapy continuing as the surviving corporation under its present name as a wholly owned subsidiary of Select (the "Transaction").

        Select expects to finance the transaction and related expenses using a combination of cash on hand and the proceeds from a proposed $400.0 million senior secured incremental term facility under its existing credit facilities, for which JP Morgan Chase, N.A. has provided Select with a debt commitment letter. Should the merger agreement be terminated by Physiotherapy under specified conditions, including circumstances where Select is required to close the transaction under the merger agreement and there is a failure of the debt financing to be funded in accordance with its terms, a reverse termination fee of $24.0 million would be payable by Select to Physiotherapy. The transaction, which is expected to close in the first half of 2016, is subject to a number of closing conditions.

Summary Financial Results

Year Ended December 31, 2015

        For the year ended December 31, 2015, our net operating revenues increased 22.1% to $3,742.7 million compared to $3,065.0 million for the year ended December 31, 2014, principally due to the addition of our Concentra segment and increases in net operating revenues in our specialty hospitals segment. We had income from operations for the year ended December 31, 2015 of $274.8 million, compared to $284.5 million for the year ended December 31, 2014. The decrease in our income from operations was principally due to increases in operating expenses at our specialty hospitals as further discussed below under "Results of Operations". Our Adjusted EBITDA for the year ended December 31, 2015 was $399.2 million, compared to $363.9 million for the year ended December 31, 2014 and our Adjusted EBITDA margin was 10.7% for the year ended December 31, 2015, compared to 11.9% for the year ended December 31, 2014. See the section titled "Results of Operations" for a reconciliation of net income to Adjusted EBITDA. Our increase in Adjusted EBITDA was principally due to the effects of the Concentra acquisition, offset in part by increases in our specialty hospitals segment operating expenses discussed above. The decrease in our Adjusted EBITDA margin is principally due to a decline in Adjusted EBITDA from our specialty hospitals segment caused by the increases in operating expenses discussed above, and the fact that incremental Adjusted EBITDA contributed by Concentra has a lower Adjusted EBITDA margin than our overall Adjusted EBITDA margin for the year ended December 31, 2014, thus reducing the overall Adjusted EBITDA margin.

        Net income attributable to Holdings was $130.7 million for the year ended December 31, 2015, compared to $120.6 million for the year ended December 31, 2014. The increase in Holdings' net income was principally due to increases in our equity in earnings of unconsolidated subsidiaries and a gain on the sale of an equity investment, offset in part by the decrease in our income from operations as discussed above and increases in interest expense associated with Concentra indebtedness.

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        Cash flow from operations for Holdings provided $208.4 million and $170.6 million of cash for the years ended December 31, 2015 and 2014, respectively.

Year Ended December 31, 2014

        For the year ended December 31, 2014, our net operating revenues increased 3.0% to $3,065.0 million compared to $2,975.6 million for the year ended December 31, 2013. We experienced increases in net operating revenues in both our specialty hospitals and outpatient rehabilitation segments. We had income from operations for the year ended December 31, 2014 of $284.5 million, compared to $301.4 million for the year ended December 31, 2013. Our Adjusted EBITDA for the year ended December 31, 2014 was $363.9 million, compared to $372.9 million for the year ended December 31, 2013 and our Adjusted EBITDA margin was 11.9% for the year ended December 31, 2014, compared to 12.5% for the year ended December 31, 2013. The decrease in our income from operations, Adjusted EBITDA and Adjusted EBITDA margin is principally due to increases in our operating expenses, primarily related to incremental start-up costs associated with new and recently expanded specialty hospitals, the Sequestration Reduction and the MPPR Reduction.

        Net income attributable to Holdings was $120.6 million for the year ended December 31, 2014, compared to $114.4 million for the year ended December 31, 2013. The increase in Holdings' net income resulted principally from lower losses related to early retirement of debt, lower interest expense, and increases in equity earnings of unconsolidated subsidiaries, offset in part by a decrease in our income from operations as discussed above.

        Cash flow from operations for Holdings provided $170.6 million and $192.5 million of cash for the years ended December 31, 2014 and 2013, respectively.

Regulatory Changes

        The Medicare program reimburses us for services furnished to Medicare beneficiaries, which are generally persons age 65 and older, those who are chronically disabled, and those suffering from end stage renal disease. Net operating revenues generated directly from the Medicare program represented approximately 46%, 45% and 37% of our consolidated net operating revenues for the years ended December 31, 2013, 2014 and 2015, respectively.

        The Medicare program reimburses our LTCHs, IRFs and outpatient rehabilitation providers, using different payment methodologies. Those payment methodologies are complex and are described elsewhere in this report under "Business—Government Regulations." The following is a summary of some of the more significant healthcare regulatory changes that have affected our financial performance in the periods covered by this report or are likely to affect our financial performance and financial condition in the future.

        The Medicare Access and CHIP Reauthorization Act of 2015, enacted on April 16, 2015, reforms Medicare payment policy for services paid under the Medicare physician fee schedule, including our outpatient rehabilitation services. The law repeals the SGR formula effective January 1, 2015, and establishes a new payment framework consisting of specified updates to the Medicare physician fee schedule, a new MIPS, and incentives for participation in APMs. To finance these provisions, the Medicare Access and CHIP Reauthorization Act of 2015 reduces market basket updates for post-acute care providers, including LTCHs and IRFs, among other Medicare payment cuts. As noted below, the law sets the annual prospective payment system update for fiscal year 2018 at 1% for LTCHs and IRFs, as well as skilled nursing facilities, home health agencies, and hospices. The law also extends the exceptions process for outpatient therapy caps through December 31, 2017.

        The Bipartisan Budget Act of 2015, enacted on November 2, 2015, extends the 2% reductions to Medicare payments through fiscal year 2025. This reduction was originally enacted in the BCA of 2011,

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which required automatic reductions in federal spending by approximately $1.2 trillion split evenly between domestic and defense spending. Payments to Medicare providers are subject to these automatic spending reductions, subject to a 2% cap. On April 1, 2013 a 2% reduction to Medicare payments was implemented. The BBA of 2013 extended the automatic spending reductions through 2023 and the Bipartisan Budget Act of 2015 further extended the automatic spending reductions through fiscal year 2025.

Medicare Reimbursement of LTCH Services

        There have been significant regulatory changes affecting LTCHs that have affected our net operating revenues and, in some cases, caused us to change our operating models and strategies. We have been subject to regulatory changes that occur through the rulemaking procedures of CMS. All Medicare payments to our LTCHs are made in accordance with LTCH-PPS. Proposed rules specifically related to LTCHs are generally published in May, finalized in August and effective on October 1st of each year.

        The following is a summary of significant changes to the Medicare prospective payment system for LTCHs which have affected our results of operations, as well as the policies and payment rates for fiscal year 2016 that affect our patient discharges and cost reporting periods beginning on or after October 1, 2015.

        Fiscal Year 2014.    On August 19, 2013, CMS published the final rule updating the policies and payment rates for LTCH-PPS for fiscal year 2014 (affecting discharges and cost reporting periods beginning on or after October 1, 2013 through September 30, 2014). The standard federal rate was set at $40,607, an increase from the standard federal rate applicable during the period from December 29, 2012 through September 30, 2013 of $40,398. The update to the standard federal rate for fiscal year 2014 included a market basket increase of 2.5%, less a productivity adjustment of 0.5%, less a reduction of 0.3% mandated by the ACA, and less a budget neutrality adjustment of 1.266%. The fixed-loss amount for high cost outlier cases was set at $13,314, which was a decrease from the fixed-loss amount in the 2013 fiscal year of $15,408.

        Fiscal Year 2015.    On August 22, 2014, CMS published the final rule updating policies and payment rates for LTCH-PPS for fiscal year 2015 (affecting discharges and cost reporting periods beginning on or after October 1, 2014 through September 30, 2015). The standard federal rate was set at $41,044, an increase from the standard federal rate applicable during fiscal year 2014 of $40,607. The update to the standard federal rate for fiscal year 2015 included a market basket increase of 2.9%, less a productivity adjustment of 0.5%, less a reduction of 0.2% mandated by the ACA, and less a budget neutrality adjustment of 1.266%. The fixed-loss amount for high cost outlier cases was set at $14,972, which was an increase from the fixed-loss amount in the 2014 fiscal year of $13,314.

        Fiscal Year 2016.    On August 17, 2015, CMS published the final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2016 (affecting discharges and cost reporting periods beginning on or after October 1, 2015 through September 30, 2016). The standard federal rate is set at $41,763, an increase from the standard federal rate applicable during fiscal year 2015 of $41,044. The update to the standard federal rate for fiscal year 2016 includes a market basket increase of 2.4%, less a productivity adjustment of 0.5%, and less a reduction of 0.2% mandated by the ACA. The fixed-loss amount for high cost outlier cases paid under LTCH-PPS is set at $16,423, which is an increase from the fixed-loss amount in the 2015 fiscal year of $14,972. The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate described below is set at $22,544.

Patient Criteria

        The BBA of 2013, enacted December 26, 2013, establishes new payment limits for Medicare patients discharged from an LTCH who do not meet specified criteria. Specifically, for Medicare patients discharged in cost reporting periods beginning on or after October 1, 2015, LTCHs will be reimbursed

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under LTCH-PPS only if, immediately preceding the patient's LTCH admission, the patient was discharged from a general acute care hospital paid under IPPS and the patient's stay included at least three days in an intensive care unit (ICU) or coronary care unit (CCU) or the patient is assigned to an MS-LTC-DRG for cases receiving at least 96 hours of ventilator services in the LTCH. In addition, to be paid under LTCH-PPS the patient's discharge from the LTCH may not include a principal diagnosis relating to psychiatric or rehabilitation services. For any Medicare patient who does not meet the new criteria, the LTCH will be paid a lower "site-neutral" payment rate, which will be the lower of (1) the IPPS comparable per-diem payment rate capped at the MS-DRG including any outlier payments, or (2) 100 percent of the estimated costs for services.

        The BBA of 2013 provides for a transition to the site-neutral payment rate for those patients not paid under LTCH-PPS. During the transition period (cost reporting periods beginning on or after October 1, 2015 through September 30, 2017), a blended rate will be paid for Medicare patients not meeting the new criteria. The blended rate will comprise half the site-neutral payment rate and half the LTCH-PPS payment rate. For discharges in cost reporting periods beginning on or after October 1, 2017, only the site-neutral payment rate will apply for Medicare patients not meeting the new criteria.

        In addition, for cost reporting periods beginning on or after October 1, 2019, qualifying discharges from an LTCH will continue to be paid at the LTCH-PPS payment rate, unless the number of discharges for which payment is made under the site-neutral payment rate is greater than 50% of the total number of discharges from the LTCH. If the number of discharges for which payment is made under the site-neutral payment rate is greater than 50%, then beginning in the next cost reporting period all discharges from the LTCH will be reimbursed at the site-neutral payment rate. The BBA of 2013 requires CMS to establish a process for an LTCH subject to the site-neutral payment rate to re-qualify for payment under LTCH-PPS.

        Payment adjustments, including the interrupted stay policy and the 25 Percent Rule (discussed below), apply to LTCH discharges regardless of whether the case is paid at the LTCH-PPS payment rate or the site-neutral payment rate. However, short stay outlier payment adjustments do not apply to cases paid at the site-neutral payment rate. Beginning with fiscal year 2016, CMS will calculate the annual recalibration of the MS-LTC-DRG relative payment weighting factors using only data from LTCH discharges that meet the criteria for exclusion from the site-neutral payment rate. In addition, beginning in fiscal year 2016, CMS will apply the IPPS fixed-loss amount to site-neutral cases, rather than the LTCH PPS fixed-loss amount. For fiscal year 2016, the IPPS fixed-loss amount is set at $22,544 and the LTCH-PPS fixed-loss amount is estimated to be $16,423. CMS will calculate the LTCH-PPS fixed-loss amount using only data from cases paid at the LTCH-PPS payment rate, excluding cases paid at the site-neutral rate.

        Each of our LTCHs has their own unique annual cost reporting period. As a result, the new payment limits will become effective for each of our LTCHs at different points in time over a twelve month period that began on October 1, 2015. As of December 31, 2015, 16 of our LTCHs have cost reporting periods that began during the fourth quarter of 2015 and 37, 19 and 36 of our LTCHs have cost reporting periods commencing during the first quarter, second quarter and third quarters of 2016, respectively.

Medicare Market Basket Adjustments

        The ACA instituted a market basket payment adjustment to LTCHs. In fiscal years 2017 through 2019, the market basket update will be reduced by 0.75%. The Medicare Access and CHIP Reauthorization Act of 2015 sets the annual update for fiscal year 2018 at 1% after taking into account the market basket payment reduction of 0.75% mandated by the ACA. The ACA specifically allows these market basket reductions to result in a less than 0% payment update and payment rates that are less than the prior year.

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25 Percent Rule

        The "25 Percent Rule" is a downward payment adjustment that applies if the percentage of Medicare patients discharged from LTCHs who were admitted from a referring hospital (regardless of whether the LTCH or LTCH satellite is co-located with the referring hospital) exceeds the applicable percentage admissions threshold during a particular cost reporting period. As more full described under "business—Government Regulations," various legislation has limited or deferred the full application of the 25 Percent Rule. These regulatory changes will have an adverse financial impact on the net operating revenues and profitability of many of our LTCHs for cost reporting periods beginning on or after July 1, 2016.

Moratorium on New LTCHs, LTCH Satellite Facilities and LTCH Beds

        The BBA of 2013, as amended by the PAMA, reinstated a moratorium on the establishment and classification of new LTCHs or LTCH satellite facilities, and on the increase of LTCH beds in existing LTCHs or satellite facilities beginning April 1, 2014 through September 30, 2017 with certain exceptions to the moratorium that are applicable to the establishment and classification of new LTCHs or LTCH satellite facilities currently under development.

Medicare Reimbursement of Inpatient Rehabilitation Facility Services

        The following is a summary of significant changes to the Medicare prospective payment system for IRFs which have affected our results of operations during the periods presented in this report, as well as the policies and payment rates for fiscal year 2016 that affect our patient discharges and cost reporting periods beginning on or after October 1, 2015.

        Fiscal Year 2014.    On August 6, 2013, CMS published the final rule updating policies and payment rates for IRF-PPS for fiscal year 2014 (affecting discharges and cost reporting periods beginning on or after October 1, 2013 through September 30, 2014). The standard payment conversion factor for discharges for fiscal year 2014 was $14,846, which was an increase from the fiscal year 2013 standard payment conversion factor of $14,343. The update to the standard payment conversion factor for fiscal year 2014 included a market basket increase of 2.6%, less a productivity adjustment of 0.5%, and less a reduction of 0.3% mandated by the ACA. CMS decreased the outlier threshold amount for fiscal year 2014 to $9,272 from $10,466 established in the final rule for fiscal year 2013.

        Fiscal Year 2015.    On August 6, 2014, CMS published the final rule updating policies and payment rates for IRF-PPS for fiscal year 2015 (affecting discharges and cost reporting periods beginning on or after October 1, 2014 through September 30, 2015). The standard payment conversion factor for discharges for fiscal year 2015 was $15,198, which was an increase from the fiscal year 2014 standard payment conversion factor of $14,846. The update to the standard payment conversion factor for fiscal year 2015 included a market basket increase of 2.9%, less a productivity adjustment of 0.5%, and less a reduction of 0.2% mandated by the ACA. CMS decreased the outlier threshold amount for fiscal year 2015 to $8,848 from $9,272 established in the final rule for fiscal year 2014.

        Fiscal Year 2016.    On August 6, 2015, CMS published the final rule updating policies and payment rates for IRF-PPS for fiscal year 2016 (affecting discharges and cost reporting periods beginning on or after October 1, 2015 through September 30, 2016). The standard payment conversion factor for discharges for fiscal year 2016 is set at $15,478, which is an increase from the fiscal year 2015 standard payment conversion factor of $15,198. The update to the standard payment conversion factor for fiscal year 2016 includes a market basket increase of 2.4%, less a productivity adjustment of 0.5%, and less a reduction of 0.2% mandated by the ACA. CMS decreased the outlier threshold amount for fiscal year 2016 to $8,658 from $8,848 established in the final rule for fiscal year 2015.

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Medicare Market Basket Adjustments

        The ACA instituted a market basket payment adjustment for IRFs. In fiscal years 2017 through 2019, the market basket update will be reduced by 0.75%. The Medicare Access and CHIP Reauthorization Act of 2015 sets the annual update for fiscal year 2018 at 1% after taking into account the market basket payment reduction of 0.75% mandated by the ACA. The ACA specifically allows these market basket reductions to result in less than a 0% payment update and payment rates that are less than the prior year.

Medicare Reimbursement of Outpatient Rehabilitation Services

        The Medicare program reimburses outpatient rehabilitation providers based on the Medicare physician fee schedule. Historically, the Medicare physician fee schedule rates have updated annually based on the SGR formula. The SGR formula has resulted in automatic reductions in rates every year since 2002; however, for each year through March 31, 2015 CMS or Congress has taken action to prevent the SGR formula reductions. The Medicare Access and CHIP Reauthorization Act of 2015 repeals the SGR formula effective for services provided on or after January 1, 2015, and establishes a new payment framework consisting of specified updates to the Medicare physician fee schedule, a new MIPS, and APMs. For services provided between January 1, 2015 and June 30, 2015, a 0% payment update was applied to the Medicare physician fee schedule payment rates. For services provided between July 1, 2015 and December 31, 2015, a 0.5% update was applied to the fee schedule payment rates. For services provided in 2016 through 2019, a 0.5% update will be applied each year to the fee schedule payment rates, subject to MIPS adjustment beginning in 2019. For services provided in 2020 through 2025, a 0.0% percent update will be applied each year to the fee schedule payment rates, subject to MIPS and APM adjustments. Finally, in 2026 and subsequent years eligible professionals participating in APMs that meet certain criteria would receive annual updates of 0.75%, while all other professionals would receive annual updates of 0.25%.

        The Medicare Access and CHIP Reauthorization Act of 2015 requires that payments under the fee schedule be adjusted starting in 2019 based on performance in MIPS, which will consolidate the three existing incentive programs focused on quality, resource use, and meaningful use of electronic health records. The law requires the Secretary of Health and Human Services to establish the MIPS requirements under which a provider's performance is assessed according to established performance standards and used to determine an adjustment factor that is then applied to the professional's payment for a year. Each year from 2019-2024 professionals who receive a significant share of their revenues through an APM (such as accountable care organizations or bundled payment arrangements) that involves risk of financial losses and a quality measurement component will receive a 5% bonus. The bonus payment for APM participation is intended to encourage participation and testing of new APMs and promotes the alignment of incentives across payors. The specifics of the MIPS and APM adjustments beginning in 2019 and 2020, respectively, will be subject to future notice and comment rule-making. For the year ended December 31, 2015, we received approximately 11% of our outpatient rehabilitation net operating revenues from Medicare.

Development of New Specialty Hospitals and Clinics

        In addition to the growth of our business through the acquisition and integration of other businesses, we have also grown our business by developing specialty hospitals and outpatient rehabilitation facilities. Since our inception in 1997 through December 31, 2015, we have internally developed 73 specialty hospitals and 434 outpatient rehabilitation clinics. The BBA of 2013, as amended by the PAMA, reinstated a moratorium on the establishment and classification of new LTCHs, LTCH satellite facilities and LTCH beds in existing LTCHs or satellite facilities beginning April 1, 2014 through September 30, 2017, with certain exceptions to the moratorium that are applicable to the establishment and classification of new LTCHs or LTCH satellite facilities currently under development. We continue to evaluate opportunities to develop new joint venture relationships with significant health systems and from time to time we may also develop new inpatient rehabilitation hospitals. We also intend to open new outpatient rehabilitation clinics

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in the local areas that we currently serve where we can benefit from existing referral relationships and brand awareness to produce incremental growth.

Critical Accounting Matters

Sources of Revenue

        Our net operating revenues are derived from a number of sources, including commercial, managed care, private and governmental payors. Our net operating revenues include amounts estimated by management to be reimbursable from each of the applicable payors and the federal Medicare program. Amounts we receive for treatment of patients are generally less than the standard billing rates. We account for the differences between the estimated reimbursement rates and the standard billing rates as contractual adjustments, which we deduct from gross revenues to arrive at net operating revenues.

        Net operating revenues generated directly from the Medicare program from all segments represented approximately 36%, 45% and 46% of net operating revenues for the years ended December 31, 2015, 2014 and 2013, respectively. Approximately 55%, 57% and 59% of our specialty hospital revenues for the years ended December 31, 2015, 2014 and 2013, respectively, were received from the Medicare program.

        Most of our specialty hospitals receive bi-weekly periodic interim payments from Medicare instead of being paid on an individual claim basis. Under a periodic interim payment methodology, Medicare estimates a hospital's claim volume based on historical trends and makes bi-weekly interim payments to us based on these estimates. Generally, twice a year per hospital, Medicare reconciles the differences between the actual claim data and the estimated payments. To the extent our actual hospital's experience is different from the historical trends used by Medicare to develop the estimate, the periodic interim payments will result in our being either temporarily over-paid or under-paid for our Medicare claims. At each balance sheet date, we record any aggregate under-payment as an account receivable or any aggregate over-payment as a payable to third-party payors on our balance sheet. The timing of when we receive our bi-weekly periodic interim payments, in relation to our balance sheet date, has an impact on our accounts receivable balance and our days sales outstanding as of the end of any reporting period.

Contractual Adjustments

        Net operating revenues include amounts estimated by us to be reimbursable by Medicare and Medicaid under prospective payment systems and provisions of cost-reimbursement and other payment methods. In addition, we are reimbursed by non-governmental payors using a variety of payment methodologies. Amounts we receive for treatment of patients covered by these programs are generally less than the standard billing rates. Contractual allowances are calculated and recorded through our internally developed systems. In our specialty hospitals segment our billing system automatically calculates estimated Medicare reimbursement and associated contractual allowances. For non-governmental payors in our specialty hospitals segment, we either manually calculate the contractual allowance for each patient based upon the contractual provisions associated with the specific payor or where we have a relatively homogeneous patient population, we monitor individual payors' historical closed paid claims data and apply those payment rates to the existing patient population. The net payments are converted into per diem rates. The per diem rates are applied to unpaid patient days to determine the expected payment and a contractual adjustment is recorded to adjust the recorded amount to agree with the expected payment. Quarterly, we update our analysis of historical closed paid claims. In our outpatient rehabilitation and Concentra segments, we perform provision testing, using internally developed systems, whereby we monitor a payors' historical paid claims data and compare it against the associated gross charges. This difference is determined as a percentage of gross charges and is applied against gross billing revenue to determine the contractual allowances for the period. Additionally, these contractual percentages are applied against the gross receivables on the balance sheet to determine that adequate contractual reserves are maintained for the gross accounts receivables reported on the balance sheet. We account for any

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difference as additional contractual adjustments to gross revenues to arrive at net operating revenues in the period that the difference is determined. We believe the processes described above and used in recording our contractual adjustments have resulted in reasonable estimates determined on a consistent basis.

Allowance for Doubtful Accounts

        Substantially all of our accounts receivable are related to providing healthcare services to patients. Collection of these accounts receivable is our primary source of cash and is critical to our financial performance. Our primary collection risks relate to non-governmental payors who insure these patients, and deductibles, co-payments and self-insured amounts owed by the patient. Deductibles, co-payments and self-insured amounts are an immaterial portion of our net accounts receivable balance. At December 31, 2015, deductibles, co-payments and self-insured amounts owed by patients accounted for approximately 1.2% of our net accounts receivable balance before doubtful accounts. Our general policy is to verify insurance coverage prior to the date of admission for a patient admitted to our specialty hospitals, or in the case of our outpatient rehabilitation clinics and Concentra medical centers, we verify insurance coverage prior to their first visit. Our estimate for the allowance for doubtful accounts is calculated by providing a reserve allowance based upon the age of an account balance. This method is based on our historical cash collections experience and is periodically assessed in light of any changes to such experience. Collections are impacted by the effectiveness of our collection efforts with non-governmental payors and regulatory or administrative disruptions with the fiscal intermediaries that pay our governmental receivables.

        We estimate bad debts for total accounts receivable within each of our operating units. We believe our policies have resulted in reasonable estimates determined on a consistent basis. We have historically collected substantially all of our third-party insured receivables (net of contractual allowances) which include receivables from governmental agencies. Historically, there has not been a material difference between our bad debt allowances and the ultimate historical collection rates on accounts receivable. We review our overall reserve adequacy by monitoring historical cash collections as a percentage of net revenue less the provision for bad debts. Uncollected accounts are charged against the reserve when they are turned over to an outside collection agency, or when management determines that the balance is uncollectible, whichever occurs first.

        The following table is an aging of our accounts receivable (after allowances for contractual adjustments but before doubtful accounts) as of the dates indicated (in thousands):

	Balance as of December 31,
	2014				2015
	0 - 180 Days		Over 180 Days		0 - 180 Days		Over 180 Days
Commercial insurance and other	$	254,623	$	46,556	$	311,800	$	51,507
Medicare and Medicaid		180,005		9,510		291,403		9,981
Total accounts receivable	$	434,628	$	56,066	$	603,203	$	61,488

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        The approximate percentage of total accounts receivable (after allowance for contractual adjustments but before doubtful accounts) summarized by aging categories as of the dates indicated is as follows:

	As of December 31,
	2014			2015
0 to 90 days		80.0	%		81.4	%
91 to 180 days		8.6	%		9.6	%
181 to 365 days		6.3	%		4.8	%
Over 365 days		5.1	%		4.2	%
Total		100.0	%		100.0	%

        The approximate percentage of total accounts receivable (after allowance for contractual adjustments but before doubtful accounts) summarized by insured status as of the dates indicated is as follows:

	As of December 31,
	2014			2015
Commercial insurance and other		61.2	%		68.5	%
Medicare and Medicaid		38.6	%		30.3	%
Self-pay receivables (including deductibles and co-payments)		0.2	%		1.2	%
Total		100.0	%		100.0	%

Insurance

        Under a number of our insurance programs, which include our employee health insurance program and certain components under our property and casualty insurance program, we are liable for a portion of our losses. In these cases we accrue for our losses under an occurrence based principle whereby we estimate the losses that will be incurred by us in a given accounting period and accrue that estimated liability. We utilize actuarial methods in estimating the losses. We monitor these programs quarterly and revise our estimates as necessary to take into account additional information. At December 31, 2015 and December 31, 2014, we recorded a liability of $157.4 million and $101.9 million, respectively, for our estimated losses under these insurance programs.

Related Party Transactions

        We are party to various rental and other agreements with companies affiliated with us through common ownership. Our payments to these related parties amounted to $4.7 million, $4.4 million and $4.2 million for the years ended December 31, 2015, 2014 and 2013, respectively. Our future commitments are related to commercial office space we lease for our corporate headquarters in Mechanicsburg, Pennsylvania. These future commitments as of December 31, 2015 amount to $31.0 million through 2023. These transactions and commitments are described more fully in the notes to our consolidated financial statements included herein. Our practice is that any such transaction must receive the prior approval of both the audit and compliance committee of the board of directors and a majority of non-interested members of the board of directors. It is our practice that an independent third-party appraisal supporting the amount of rent for such leased space is obtained prior to approving the related party lease of office space.

        During the year ended December 31, 2014, shares were repurchased from Welsh, Carson, Anderson & Stowe IX, L.P. and WCAS Capital Partners IV, L.P. pursuant to stock purchase agreements dated February 26, 2014 and May 5, 2014. Two of the Company's directors are affiliated with these entities.

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        We also provide contracted services, principally employee leasing services and charge management fees to related parties affiliated through our equity investments. Net operating revenues generated from the provision of contracted services and management fees amounted to $146.0 million, $129.3 million and $110.1 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Goodwill and Other Intangible Assets

        On February 24, 2005, EGL Acquisition Corp., a subsidiary of Holdings, was merged with and into Select, with Select continuing as the surviving corporation and a wholly owned subsidiary of Holdings. We refer to the merger and the related transactions collectively as the "Merger." As a result of the Merger, the majority of Select's assets and liabilities were adjusted to their fair value as of February 25, 2005. The excess of the total purchase price over the fair value of Select's tangible and identifiable intangible assets was allocated to goodwill. Additionally, a portion of the equity related to our continuing stockholders was recorded at the stockholder's predecessor basis and a corresponding portion of the fair value of the acquired assets was reduced accordingly.

        Goodwill and certain other indefinite-lived intangible assets are subject to periodic impairment evaluations. For purposes of goodwill impairment assessment, we have defined our reporting units as specialty hospitals, outpatient rehabilitation clinics, contract therapy, and Concentra. Goodwill has been allocated among reporting units based on the relative fair value of those divisions when the Merger occurred in 2005 and based on subsequent acquisitions. Our most recent impairment assessment was completed during the fourth quarter of 2015, which indicated that there was no impairment with respect to goodwill or other recorded intangible assets. We have recorded total goodwill and other intangible assets of $2.6 billion, of which goodwill and other intangible assets of $1.4 billion relates to our specialty hospitals reporting unit, $869.2 billion relates to the Concentra reporting unit, $337.0 million relates to our outpatient clinic reporting unit, and $2.3 million relates to our contract therapy reporting unit. In performing periodic impairment tests, the fair value of the reporting unit is compared to the carrying value, including goodwill and other intangible assets. If the carrying value exceeds the fair value, an impairment condition exists, which results in an impairment loss equal to the excess carrying value. Impairment tests are required to be conducted at least annually, or when events or conditions occur that might suggest a possible impairment. These events or conditions include, but are not limited to, a significant adverse change in the business environment, regulatory environment or legal factors; a current period operating or cash flow loss combined with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these events or conditions could significantly impact an impairment assessment, necessitating an impairment charge and adversely affecting our results of operations.

        Regulatory changes governing the provision of our services in our specialty hospitals, outpatient rehabilitation, and Concentra segments and development activities can have both positive and negative effects on our results of operations and future cash flows which impact the fair value of our reporting units. The excess fair value, as a percentage of carrying value, of our specialty hospitals reporting unit was approximately 39.6%, 37.6% and 10.4% as of October 1, 2015, 2014 and 2013, respectively. The fair value of our outpatient rehabilitation clinics and our contract therapy reporting units significantly exceeded the carrying values of each of those corresponding reporting units as of October 1, 2015, 2014 and 2013. The fair value of our Concentra reporting unit approximated the carrying value as of October 1, 2015.

        To determine the fair value of our reporting units, we use a discounted cash flow approach. Included in the discounted cash flow are assumptions regarding revenue growth rates, internal development of specialty hospitals, rehabilitation clinics, and Concentra medical centers, future Adjusted EBITDA margin estimates, future general and administrative expenses and the weighted average cost of capital for our industry. We also must estimate residual values at the end of the forecast period and future capital expenditure requirements. Each of these assumptions requires us to use our knowledge of (1) our industry, (2) our recent transactions, and (3) reasonable performance expectations for our operations. If any one of

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the above assumptions changes or fails to materialize, the resulting decline in our estimated fair value could result in a material impairment charge to the goodwill associated with any one of the reporting units. We have consistently applied the discounted cash flow approach methodology to determine the fair value of each of our reporting units at each annual impairment test dated October 1, 2015, 2014 and 2013.

Realization of Deferred Tax Assets

        Deferred tax assets and liabilities are required to be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Deferred tax assets are also required to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. As part of the process of preparing our consolidated financial statements, we estimate our income taxes based on our actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. We also recognize as deferred tax assets the future tax benefits from net operating loss carry forwards. We evaluate the realizability of these deferred tax assets by assessing their valuation allowances and by adjusting the amount of such allowances, if necessary. Among the factors used to assess the likelihood of realization are our projections of future taxable income streams, the expected timing of the reversals of existing temporary differences, and the impact of tax planning strategies that could be implemented to avoid the potential loss of future tax benefits. However, changes in tax codes, statutory tax rates or future taxable income levels could materially impact our valuation of tax accruals and assets and could cause our provision for income taxes to vary significantly from period to period.

        At December 31, 2015, we had deferred tax liabilities in excess of deferred tax assets of approximately $190.1 million for both Holdings and Select principally due to depreciation deductions that have been accelerated for tax purposes. This amount includes approximately $7.6 million of valuation reserves related primarily to state net operating losses.

Uncertain Tax Positions

        We record and review quarterly our uncertain tax positions. Reserves for uncertain tax positions are established for exposure items related to various federal and state tax matters. Income tax reserves are recorded when an exposure is identified and when, in the opinion of management, it is more likely than not that a tax position will not be sustained and the amount of the liability can be estimated. While we believe that our reserves for uncertain tax positions are adequate, the settlement of any such exposures at amounts that differ from current reserves may require us to materially increase or decrease our reserves for uncertain tax positions.

Stock Based Compensation

        We measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Our share-based compensation arrangements comprise both stock options and restricted share plans. We value employee stock options using the Black-Scholes option valuation method that uses assumptions that relate to the expected volatility of our common stock, the expected dividend yield of our stock, the expected life of the options and the risk free interest rate. Such compensation amounts, if any, are recognized over the respective vesting periods or period of service of the option grant. We value restricted stock grants by using the closing market price of our stock on the date of grant.

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Operating Statistics

        The following tables set forth operating statistics for each of our operating segments for each of the periods presented. The operating statistics reflect data for the period of time these operations were managed by us.

	Year Ended December 31, 2013			Year Ended December 31, 2014			Year Ended December 31, 2015
Specialty hospitals data:(1)
Number of hospitals owned—start of period		116			115			120
Number of hospital start-ups		—			7			2
Number of hospitals acquired		1			1			1
Number of hospitals closed/sold		(2	)		(3	)		(5	)
Number of hospitals owned—end of period		115			120			118
Number of hospitals managed—end of period		8			9			9
Total number of hospitals (all)—end of period		123			129			127
Long term acute care hospitals		108			113			109
Rehabilitation hospitals		15			16			18
Available licensed beds(2)		5,172			5,326			5,172
Admissions(2)		55,729			55,581			56,570
Patient days(2)		1,353,847			1,340,506			1,373,780
Average length of stay (days)(2)		24			24			24
Net revenue per patient day(2)(3)	$	1,514		$	1,546		$	1,569
Occupancy rate(2)		72	%		70	%		72	%
Percent patient days—Medicare(2)		64	%		63	%		60	%
Outpatient rehabilitation data:
Number of clinics owned—start of period		867			885			880
Number of clinic start-ups		27			18			34
Number of clinics acquired		5			14			7
Number of clinics closed/sold		(14	)		(37	)		(25	)
Number of clinics owned—end of period		885			880			896
Number of clinics managed—end of period		121			143			142
Total number of clinics (all)—end of period		1,006			1,023			1,038
Number of visits(2)		4,780,723			4,970,724			5,218,532
Net revenue per visit(2)(4)	$	104		$	103		$	103
Concentra data:(5)
Number of medical centers owned—start of period								—
Number of medical centers acquired								300
Number of medical centers owned—end of period								300
Number of visits(6)								4,436,977
Net revenue per visit(6)(7)							$	114

(1)

Specialty hospitals consist of LTCHs and IRFs.

(2)

Data excludes specialty hospitals and outpatient clinics managed by the Company.

(3)

Net revenue per patient day is calculated by dividing specialty hospital direct patient service revenues by the total number of patient days.

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(4)

Net revenue per visit is calculated by dividing outpatient rehabilitation clinic direct patient service revenue by the total number of visits. For purposes of this computation, outpatient rehabilitation direct patient service clinic revenue does not include contract therapy revenue.

(5)

The selected financial data for the Company's Concentra segment for the periods presented begins as of June 1, 2015, which is the date the Concentra acquisition was consummated.

(6)

Data excludes onsite clinics and CBOCs.

(7)

Net revenue per visit is calculated by dividing center direct patient service revenue by the total number of center visits.

Results of Operations

        The following table outlines, for the periods indicated, selected operating data as a percentage of net operating revenues:

	Select Medical Holdings Corporation
	Year Ended December 31, 2013			Year Ended December 31, 2014			Year Ended December 31, 2015
Net operating revenues		100.0	%		100.0	%		100.0	%
Cost of services(1)		83.8			84.2			85.8
General and administrative		2.6			2.8			2.5
Bad debt expense		1.3			1.5			1.6
Depreciation and amortization		2.2			2.2			2.8
Income from operations		10.1			9.3			7.3	%
Loss on early retirement of debt		(0.6	)		(0.0	)		—
Equity in earnings of unconsolidated subsidiaries		0.1			0.2			0.4
Gain on sale of equity investment		—			—			0.8
Interest expense, net		(2.9	)		(2.8	)		(2.9	)
Income before income taxes		6.7			6.7			5.6
Income tax expense		2.6			2.5			2.0
Net income		4.1			4.2			3.6
Net income attributable to non-controlling interests		0.3			0.3			0.1
Net income attributable to Holdings		3.8	%		3.9	%		3.5	%

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	Select Medical Corporation
	Year Ended December 31, 2013			Year Ended December 31, 2014			Year Ended December 31, 2015
Net operating revenues		100.0	%		100.0	%		100.0	%
Cost of services(1)		83.8			84.2			85.8
General and administrative		2.6			2.8			2.5
Bad debt expense		1.3			1.5			1.6
Depreciation and amortization		2.2			2.2			2.8
Income from operations		10.1			9.3			7.3	%
Loss on early retirement of debt		(0.6	)		(0.0	)		—
Equity in earnings of unconsolidated subsidiaries		0.1			0.2			0.4
Gain on sale of equity investment		—			—			0.8
Interest expense, net		(2.8	)		(2.8	)		(2.9	)
Income before income taxes		6.8			6.7			5.6
Income tax expense		2.6			2.5			2.0
Net income		4.2			4.2			3.6
Net income attributable to non-controlling interests		0.3			0.3			0.1
Net income attributable to Select		3.9	%		3.9	%		3.5	%

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        The following tables summarize the Company's selected financial data by business segment, for the periods indicated:

	Year Ended December 31, 2013			Year Ended December 31, 2014			Year Ended December 31, 2015			% Change 2013 - 2014			% Change 2014 - 2015
	(In thousands)
Net operating revenues:
Specialty hospitals	$	2,198,121		$	2,244,899		$	2,346,781			2.1	%		4.5	%
Outpatient rehabilitation		777,177			819,397			810,009			5.4			(1.1	)
Concentra(2)								585,222			N/A			N/A
Other(3)		350			721			724			106.0			0.4
Total company	$	2,975,648		$	3,065,017		$	3,742,736			3.0	%		22.1	%
Income (loss) from operations:
Specialty hospitals	$	305,222		$	290,001		$	273,631			(5.0	)%		(5.6	)%
Outpatient rehabilitation		78,289			84,739			85,167			8.2			0.5
Concentra(2)								8,926			N/A			N/A
Other(3)		(82,075	)		(90,264	)		(92,934	)		(10.0	)		(3.0	)
Total company	$	301,436		$	284,476		$	274,790			(5.6	)%		(3.4	)%
Adjusted EBITDA:(4)
Specialty hospitals	$	353,843		$	341,787		$	327,623			(3.4	)%		(4.1	)%
Outpatient rehabilitation		90,313			97,584			98,220			8.1			0.7
Concentra(2)								48,301			N/A			N/A
Other(3)		(71,295	)		(75,499	)		(74,979	)		(5.9	)		0.7
Total company	$	372,861		$	363,872		$	399,165			(2.4	)%		9.7	%
Adjusted EBITDA margins:(4)
Specialty hospitals		16.1	%		15.2	%		14.0	%
Outpatient rehabilitation		11.6			11.9			12.1
Concentra(2)								8.3
Other(3)		N/M			N/M			N/M
Total company		12.5	%		11.9	%		10.7	%
Total assets:
Specialty hospitals	$	2,205,921		$	2,279,665		$	2,425,113
Outpatient rehabilitation		512,539			532,685			548,242
Concentra(2)								1,331,837
Other(3)		99,162			112,459			121,474
Total company	$	2,817,622		$	2,924,809		$	4,426,666
Purchases of property and equipment, net:
Specialty hospitals	$	56,523		$	77,742		$	126,014
Outpatient rehabilitation		14,113			12,506			17,768
Concentra(2)								26,771
Other(3)		3,024			4,998			12,089
Total company	$	73,660		$	95,246		$	182,642

N/M—Not Meaningful.

N/A—Not Applicable

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(1)

Cost of services includes salaries, wages and benefits, operating supplies, lease and rent expense and other operating costs.

(2)

Concentra's financial results are consolidated with Select's effective June 1, 2015.

(3)

Other includes our corporate services and certain other non-consolidating joint ventures and minority investments in other healthcare related businesses.

(4)

We define Adjusted EBITDA as net income before interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, Concentra acquisition costs, equity in earnings (losses) of unconsolidated subsidiaries, and gain on sale of equity investment. We believe that the presentation of Adjusted EBITDA is important to investors because Adjusted EBITDA is commonly used as an analytical indicator of performance by investors within the healthcare industry. Adjusted EBITDA is used by management to evaluate financial performance and determine resource allocation for each of our operating units. Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles. Items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because Adjusted EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies.

Following is a reconciliation of net income to Adjusted EBITDA as utilized by us in reporting our segment performance.

	Select Medical Holdings Corporation
	Year Ended December 31,
	2013			2014			2015
	(In thousands)
Net income	$	123,009		$	128,175		$	135,996
Income tax expense		74,792			75,622			72,436
Loss on early retirement of debt		18,747			2,277			—
Gain on sale of equity investment		—			—			(29,647	)
Interest expense		87,364			85,446			112,816
Equity in earnings of unconsolidated subsidiaries		(2,476	)		(7,044	)		(16,811	)
Stock compensation expense:
Included in general and administrative		5,276			9,027			11,633
Included in cost of services		1,757			2,015			3,046
Depreciation and amortization		64,392			68,354			104,981
Concentra acquisition costs		—			—			4,715
Adjusted EBITDA	$	372,861		$	363,872		$	399,165

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	Select Medical Corporation
	Year Ended December 31,
	2013			2014			2015
	(In thousands)
Net income	$	125,199		$	128,175		$	135,996
Income tax expense		75,971			75,622			72,436
Loss on early retirement of debt		17,788			2,277			—
Gain on sale of equity investment		—			—			(29,647	)
Interest expense		84,954			85,446			112,816
Equity in earnings of unconsolidated subsidiaries		(2,476	)		(7,044	)		(16,811	)
Stock compensation expense:
Included in general and administrative		5,276			9,027			11,633
Included in cost of services		1,757			2,015			3,046
Depreciation and amortization		64,392			68,354			104,981
Concentra acquisition costs		—			—			4,715
Adjusted EBITDA	$	372,861		$	363,872		$	399,165

Year Ended December 31, 2015 Compared to Year Ended December 31, 2014

        In the following, we discuss our results of operations related to net operating revenues, operating expenses, Adjusted EBITDA, depreciation and amortization, income from operations, loss on early retirement of debt, equity in earnings of unconsolidated subsidiaries, gain on sale of equity investment, interest expense, income taxes, and non-controlling interest, which, in each case, are the same for Holdings and Select.

Net Operating Revenues

        Our net operating revenues increased by $677.7 million to $3,742.7 million for the year ended December 31, 2015 compared to $3,065.0 million for the year ended December 31, 2014.

        Specialty Hospitals.    Our specialty hospitals segment net operating revenues increased 4.5% to $2,346.8 million for the year ended December 31, 2015 compared to $2,244.9 million for the year ended December 31, 2014. The segment experienced growth in its patient services revenues which resulted from increases in patient days and an increase in our net revenues per patient day. Patient days increased to 1,373,780 days for the year ended December 31, 2015, as compared to 1,340,506 days for the year ended December 31, 2014. The average net revenue per patient day increased to $1,569 for the year ended December 31, 2015, compared to $1,546 for the year ended December 31, 2014, due to increases in both our Medicare and non-Medicare net revenue per patient day. The occupancy percentage was 72% for the year ended December 31, 2015, compared to 70% for the year ended December 31, 2014.

        Outpatient Rehabilitation.    Our outpatient rehabilitation segment net operating revenues decreased to $810.0 million for the year ended December 31, 2015 compared to $819.4 million for the year ended December 31, 2014. This decrease resulted from a reduction in net operating revenues at our contract therapy business, offset in part by increases in net operating revenues at our outpatient rehabilitation clinics. The net operating revenues generated by our outpatient rehabilitation clinics for the year ended December 31, 2015 increased 5.3% compared to the year ended December 31, 2014. This growth was principally due to a 5.0% increase in visits to 5,218,532 at our owned clinics. Net revenue per visit in our owned outpatient rehabilitation clinics was $103 for both the years ended December 31, 2015 and 2014. The net operating revenues generated by our contract therapy business for the year ended December 31, 2015 decreased $42.3 million compared to the year ended December 31, 2014, which principally resulted from contract terminations.

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        Concentra Segment.    For the period from June 1, 2015 to December 31, 2015, net operating revenues were $585.2 million, visits were 4,436,977 in the medical centers, and net revenue per visit was $114.

Operating Expenses

        Our operating expenses include our cost of services, general and administrative expense and bad debt expense. Our operating expenses increased by $650.8 million to $3,363.0 million, or 89.9% of net operating revenues for the year ended December 31, 2015 compared to $2,712.2 million, or 88.5% of net operating revenues for the year ended December 31, 2014, principally due to the acquisition of Concentra on June 1, 2015. Our cost of services, a major component of which is labor expense, was $3,211.5 million, or 85.8% of net operating revenues for the year ended December 31, 2015 compared to $2,582.3 million, or 84.2% of net operating revenues for the year ended December 31, 2014. Approximately half of the increase in cost of services as a percent of net operating revenues resulted from the addition of Concentra which operated with a higher relative cost of services percentage to net operating revenues during the year ended December 31, 2015 as compared to the relative cost of services percentage to net operating revenues experienced overall by Select in the year ended December 31, 2015. The other half of the increase occurred in our specialty hospitals segment and resulted principally from non-recurring increases in labor costs associated with several training initiatives, including training to prepare for the adoption of patient criteria and incremental costs resulting from a higher staff turnover rate for the year ended December 31, 2015 as compared to 2014. Facility rent expense, a component of cost of services, was $135.1 million for the year ended December 31, 2015 compared to $128.7 million for the year ended December 31, 2014. General and administrative expenses were $92.1 million for the year ended December 31, 2015 compared to $85.2 million for the year ended December 31, 2014 and as a percentage of net operating revenues were 2.5% and 2.8% for the year ended December 31, 2015 and 2014, respectively. The increase in general and administrative expenses resulted primarily from Concentra acquisition costs of $4.7 million. Our bad debt expense was $59.4 million or 1.6% of net operating revenues for the year ended December 31, 2015 compared to $44.6 million or 1.5% of net operating revenues for the year ended December 31, 2014. This is principally a result of higher relative bad debt expense in our specialty hospitals segment compared to the year ended December 31, 2014, and at Concentra.

Adjusted EBITDA

        Specialty Hospitals.    Adjusted EBITDA for our specialty hospitals decreased to $327.6 million for the year ended December 31, 2015 compared to $341.8 million for the year ended December 31, 2014. Our Adjusted EBITDA margin for the segment was 14.0% for the year ended December 31, 2015 compared to 15.2% for the year ended December 31, 2014. The decline in Adjusted EBITDA and Adjusted EBITDA margin for our specialty hospitals segment was attributable to increases in our cost of services and bad debt expense as discussed above under "Operating Expenses."

        Outpatient Rehabilitation.    Our Adjusted EBITDA for our outpatient rehabilitation segment increased 0.7% to $98.2 million for the year ended December 31, 2015 compared to $97.6 million for the year ended December 31, 2014. Our Adjusted EBITDA margin for the outpatient rehabilitation segment was 12.1% for the year ended December 31, 2015 compared to 11.9% for the year ended December 31, 2014. The Adjusted EBITDA in our outpatient rehabilitation clinics increased by $7.4 million for the year ended December 31, 2015 compared to the year ended December 31, 2014. The increase in Adjusted EBITDA for our outpatient rehabilitation clinics was principally the result of increases in net operating revenues as discussed above under "Net Operating Revenues." Our Adjusted EBITDA margin for our outpatient rehabilitation clinics was 13.8% for the year ended December 31, 2015 compared to 13.3% for the year ended December 31, 2014. Our contract therapy business experienced a decrease in Adjusted EBITDA of $6.8 million, compared to the year ended December 31, 2014, which principally resulted from contract terminations as discussed above under "Net Operating Revenues."

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        Concentra Segment.    For the period June 1, 2015 to December 31, 2015, Adjusted EBITDA was $48.3 million and the Adjusted EBITDA margin for the segment was 8.3%.

        Other.    The Adjusted EBITDA loss was $75.0 million for the year ended December 31, 2015 compared to an Adjusted EBITDA loss of $75.5 million for the year ended December 31, 2014.

Depreciation and Amortization

        Depreciation and amortization expense was $105.0 million, including $33.6 million in our Concentra segment, for the year ended December 31, 2015, compared to $68.4 million for the year ended December 31, 2014.

Income from Operations

        For the year ended December 31, 2015, we had income from operations of $274.8 million compared to $284.5 million for the year ended December 31, 2014. The decrease in our income from operations resulted principally from increases in operating expenses at our specialty hospitals segment, as discussed above under "Operating Expenses," and was offset in part by the incremental contribution from of our Concentra segment since June 1, 2015.

Loss on Early Retirement of Debt

        On March 4, 2014, we amended the Select term loans. During the year ended December 31, 2014, we recognized a loss of $2.3 million for unamortized debt issuance costs, unamortized original issue discount and certain fees incurred related to the Select term loan modifications.

Equity in Earnings of Unconsolidated Subsidiaries

        For the year ended December 31, 2015, we had equity in earnings of unconsolidated subsidiaries of $16.8 million compared to equity in earnings of unconsolidated subsidiaries of $7.0 million for the year ended December 31, 2014. The increase in our equity in earnings of unconsolidated subsidiaries resulted from increased earnings associated with several of our inpatient rehabilitation joint ventures and improved financial results at the start-up companies in which we own a non-controlling interest.

Gain on Sale of Equity Investment

        For the year ended December 31, 2015, we had a gain on the sale of an equity investment of $29.6 million. The equity investment was a start-up company investment in which we owned a non-controlling interest.

Interest Expense

        Interest expense was $112.8 million for the year ended December 31, 2015 compared to $85.4 million for the year ended December 31, 2014. The increase in interest expense was principally due to increases in our indebtedness to finance the Concentra acquisition.

Income Taxes

        We recorded income tax expense of $72.4 million for the year ended December 31, 2015, which represented an effective tax rate of 34.8%. We recorded income tax expense of $75.6 million for the year ended December 31, 2014, which represented an effective tax rate of 37.1%. The decrease in the effective tax rate has resulted principally from the resolution of uncertain tax positions.

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Non-Controlling Interests

        Non-controlling interests in consolidated earnings were $5.3 million for the year ended December 31, 2015 and $7.5 million for the year ended December 31, 2014. These amounts represent the minority owner's share of income and losses in consolidated entities, such as Concentra, in which our ownership is less than 100.0%. The decrease was principally caused by net losses in our Concentra segment for the year ended December 31, 2015, which offset positive net income from other consolidated entities.

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

        In the following, we discuss our results of operations related to net operating revenues, operating expenses, Adjusted EBITDA, income from operations, equity in earnings of unconsolidated subsidiaries, and non-controlling interest, which in each case, are the same for both Holdings and Select. In addition, we discuss separately for Holdings and Select changes related to loss on early retirement of debt, interest expense, and income taxes.

Net Operating Revenues

        Our net operating revenues increased by 3.0% to $3,065.0 million for the year ended December 31, 2014 compared to $2,975.6 million for the year ended December 31, 2013.

        Specialty Hospitals.    Our specialty hospitals segment net operating revenues increased 2.1% to $2,244.9 million for the year ended December 31, 2014 compared to $2,198.1 million for the year ended December 31, 2013. We experienced growth in our net operating revenues primarily resulting from increases in our patient services revenues in our specialty hospitals and the expansion of contracted labor services provided to certain of our non-consolidated joint ventures. Our patient services revenues increased principally due to an increase in our average net revenue per patient day, offset in part by a decrease in patient days. Our average net revenue per patient day increased to $1,546 for the year ended December 31, 2014 compared to $1,514 for the year ended December 31, 2013, primarily driven by an increase in our average Medicare net revenue per patient day. Our Medicare revenues per patient day increased despite a reduction in our Medicare net operating revenue due to the Sequestration Reduction of $28.2 million for the year ended December 31, 2014 compared to $22.8 million for the year ended December 31, 2013. Our patient days decreased 1.0% to 1,340,506 days for the year ended December 31, 2014 as compared to 1,353,847 days for the year ended December 31, 2013. Our occupancy percentage was 70% for the year ended December 31, 2014 compared to 72% for the year ended December 31, 2013.

        Outpatient Rehabilitation.    Our outpatient rehabilitation segment net operating revenues increased 5.4% to $819.4 million for the year ended December 31, 2014 compared to $777.2 million for the year ended December 31, 2013. This increase resulted from a growth in patient visits and the expansion of contracted management services in our outpatient rehabilitation clinic business and growth in our contract therapy business. The net operating revenues generated by our outpatient rehabilitation clinics for the year ended December 31, 2014 increased 5.0% compared to the year ended December 31, 2013. Our growth was principally due to a 4.0% increase in visits to 4,970,724 at our owned clinics and additional contracted management service revenue at our managed clinics for the year ended December 31, 2014 compared to the year ended December 31, 2013. Net revenue per visit in our owned outpatient rehabilitation clinics was $103 for the year ended December 31, 2014 compared to $104 for the year ended December 31, 2013. The net operating revenues generated by our contract therapy business for the year ended December 31, 2014 increased 6.9% compared to the year ended December 31, 2013, which principally resulted from new contracts and expansion of services of existing contracts, which more than offset reductions from terminated contracts. Growth at our outpatient rehabilitation segment was offset in part by a reduction in our net operating revenues caused by the Sequestration Reduction of $1.8 million and the MPPR Reduction of $9.2 million for the year ended December 31, 2014 compared to a Sequestration Reduction of $1.1 million and the MPPR Reduction of $5.7 million for the year ended December 31, 2013.

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Operating Expenses

        Our operating expenses include our cost of services, general and administrative expense and bad debt expense. Our operating expenses increased by $102.4 million to $2,712.2 million, or 88.5% of net operating revenues for the year ended December 31, 2014 compared to $2,609.8 million, or 87.7% of net operating revenues for the year ended December 31, 2013. Our cost of services, a major component of which is labor expense, was $2,582.3 million, or 84.2% of net operating revenues for the year ended December 31, 2014 compared to $2,495.5 million, or 83.8% of net operating revenues for the year ended December 31, 2013. The principal causes of the increases in cost of services as a percentage of net operating revenues resulted from incremental start-up costs associated with new and recently expanded specialty hospitals and an increase in labor costs to provide contracted services to certain of our non-consolidated joint ventures. Facility rent expense, a component of cost of services, was $128.7 million for the year ended December 31, 2014 compared to $123.7 million for the year ended December 31, 2013. General and administrative expenses were $85.2 million for the year ended December 31, 2014 compared to $76.9 million for the year ended December 31, 2013 and as a percentage of net operating revenues were 2.8% and 2.6% for the year ended December 31, 2014 and 2013, respectively. The growth in general and administrative expenses as a percentage of net operating revenues resulted primarily from increased stock compensation expense and healthcare costs. Our bad debt expense was $44.6 million or 1.5% of net operating revenues for the year ended December 31, 2014 compared to $37.4 million or 1.3% of net operating revenues for the year ended December 31, 2013. The increase in bad debt expense occurred principally in our specialty hospitals segment.

Adjusted EBITDA

        Specialty Hospitals.    Adjusted EBITDA for our specialty hospitals segment decreased 3.4% to $341.8 million for the year ended December 31, 2014 compared to $353.8 million for the year ended December 31, 2013. Our Adjusted EBITDA margin for the segment was 15.2% for the year ended December 31, 2014 compared to 16.1% for the year ended December 31, 2013. The decrease in Adjusted EBITDA and Adjusted EBITDA margin for our specialty hospitals segment was principally the result of incremental start-up costs of $14.5 million associated with new and recently expanded specialty hospitals, the Sequestration Reduction, as discussed above under "Net Operating Revenues," and an increase in bad debt expense, discussed above under "Operating Expenses."

        Outpatient Rehabilitation.    Our Adjusted EBITDA for our outpatient rehabilitation segment increased 8.1% to $97.6 million for the year ended December 31, 2014 compared to $90.3 million for the year ended December 31, 2013. Our Adjusted EBITDA margin for the outpatient rehabilitation segment was 11.9% for the year ended December 31, 2014 compared to 11.6% for the year ended December 31, 2013. The Adjusted EBITDA in our outpatient rehabilitation clinics increased by $5.7 million for the year ended December 31, 2014 compared to the year ended December 31, 2013. The increase in Adjusted EBITDA for our outpatient rehabilitation clinics was principally the result of our growth in net operating revenues as discussed above under "Net Operating Revenues." Our Adjusted EBITDA margin for our outpatient rehabilitation clinics was 13.3% for the year ended December 31, 2014 compared to 13.0% for the year ended December 31, 2013. Our contract therapy business experienced an increase in Adjusted EBITDA of $1.5 million compared to the year ended December 31, 2013, which principally resulted from revenue growth, as discussed above under "Net Operating Revenues."

        Other.    The Adjusted EBITDA loss was $75.5 million for the year ended December 31, 2014 compared to an Adjusted EBITDA loss of $71.3 million for the year ended December 31, 2013.

Income from Operations

        For the year ended December 31, 2014, we had income from operations of $284.5 million compared to $301.4 million for the year ended December 31, 2013. The decrease in our income from operations

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resulted principally from incremental start-up costs associated with new and recently expanded specialty hospitals, the Sequestration Reduction and MPPR Reduction, as discussed above under "Net Operating Revenues," and an increase in bad debt expense, discussed above under "Operating Expenses."

Loss on Early Retirement of Debt

        Select Medical Corporation.    On March 4, 2014, we amended the Select term loans. During the year ended December 31, 2014, we recognized a loss of $2.3 million for unamortized debt issuance costs, unamortized original issue discount and certain fees incurred related to the Select term loan modifications.

        On May 28, 2013, we repaid a portion of Select's original term loan and series A term loan under the Select credit facilities, and on June 3, 2013, we amended the Select credit facilities. During the year ended December 31, 2013, we recognized a loss of $17.3 million for unamortized debt issuance costs, unamortized original issue discount and certain debt issuance costs associated with these refinancing activities.

        On March 22, 2013, we redeemed Select's 7⁵/8% senior subordinated notes due 2015. During the year ended December 31, 2013, we recognized a loss on early retirement of debt of $0.5 million for unamortized debt issuance costs associated with Select's redemption of its 7⁵/8% senior subordinated notes due 2015.

        Select Medical Holdings Corporation.    On March 4, 2014, we amended Select's term loans under the Select credit facilities. During the year ended December 31, 2014, we recognized a loss of $2.3 million for unamortized debt issuance costs, unamortized original issue discount and certain fees incurred related to the Select term loan modifications.

        On May 28, 2013, we repaid a portion of Select's original term loan and series A term loan under the Select credit facilities, and on June 3, 2013, we amended the Select credit facilities. During the year ended December 31, 2013, we recognized a loss of $17.3 million for unamortized debt issuance costs, unamortized original issue discount and certain debt issuance costs associated with these refinancing activities.

        On March 22, 2013, we redeemed Select's 7⁵/8% senior subordinated notes due 2015 and redeemed Holdings' senior floating rate notes due 2015. During the year ended December 31, 2013, we recognized a loss on early retirement of debt of $1.5 million for unamortized debt issuance costs of which approximately $0.5 million was associated with Select's redemption of its 7⁵/8% senior subordinated notes due 2015 and approximately $1.0 million was associated with Holdings' redemption of its senior floating rate notes due 2015.

Equity in Earnings of Unconsolidated Subsidiaries

        For the year ended December 31, 2014, we had equity in earnings of unconsolidated subsidiaries of $7.0 million compared to equity in earnings of unconsolidated subsidiaries of $2.5 million for the year ended December 31, 2013. The principal increase in our equity in earnings of unconsolidated subsidiaries resulted from the earnings associated with several of our inpatient rehabilitation joint ventures in which we own a non-controlling interest.

Interest Expense

        Select Medical Corporation.    Interest expense was $85.4 million for the year ended December 31, 2014 compared to $85.0 million for the year ended December 31, 2013. The increase in interest expense was principally due to increases in our indebtedness.

        Select Medical Holdings Corporation.    Interest expense was $85.4 million for the year ended December 31, 2014 compared to $87.4 million for the year ended December 31, 2013. The decrease in interest expense was principally due to lower interest rates on borrowings during year ended December 31, 2014.

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Income Taxes

        Select Medical Corporation.    We recorded income tax expense of $75.6 million for the year ended December 31, 2014. The expense represented an effective tax rate of 37.1%. We recorded income tax expense of $76.0 million for the year ended December 31, 2013. The expense represented an effective tax rate of 37.8%. Select is part of the consolidated federal tax return for Holdings. We allocate income taxes between Select and Holdings for purposes of financial statement presentation. Because Holdings is a passive investment company incorporated in Delaware, it does not incur any state income tax expense or benefit on its specific income or loss and, as such, receives a tax allocation equal to the federal statutory rate of 35% on its specific income or loss. Based upon the relative size of Holdings' income or loss, this can cause the effective tax rate for Select to differ from the effective tax rate for the consolidated company.

        Select Medical Holdings Corporation.    We recorded income tax expense of $75.6 million for the year ended December 31, 2014, which represented an effective tax rate of 37.1%. We recorded income tax expense of $74.8 million for the year ended December 31, 2013, which represented an effective tax rate of 37.8%. The decrease in the effective tax rate has resulted principally from a decrease in our state effective tax rate that has resulted from a lower proportion of our income being generated in states with higher tax rates, lower state tax rates in certain states, a decrease in non-deductible expenses and the favorable effect of IRS settlements.

Non-Controlling Interests

        Non-controlling interests in consolidated earnings were $7.5 million for the year ended December 31, 2014 and $8.6 million for the year ended December 31, 2013. These amounts represent the minority owner's share of income and losses for these consolidated entities.

Liquidity and Capital Resources

Years Ended December 31, 2013, 2014 and 2015

	Select Medical Holdings Corporation									Select Medical Corporation
	Year Ended December 31,									Year Ended December 31,
	2013			2014			2015			2013			2014			2015
	(In thousands)									(In thousands)
Cash flows provided by operating activities	$	192,523		$	170,642		$	208,415		$	198,102		$	170,642		$	208,415
Cash flows used in investing activities		(107,306	)		(101,091	)		(1,211,754	)		(107,306	)		(101,091	)		(1,211,754	)
Cash flows provided by (used in) financing activities		(121,042	)		(70,516	)		1,014,420			(126,621	)		(70,516	)		1,014,420
Net increase (decrease) in cash and cash equivalents		(35,825	)		(965	)		11,081			(35,825	)		(965	)		11,081
Cash and cash equivalents at beginning of period		40,144			4,319			3,354			40,144			4,319			3,354
Cash and cash equivalents at end of period	$	4,319		$	3,354		$	14,435		$	4,319		$	3,354		$	14,435

        Operating activities for Holdings and Select provided $208.4 million of cash flows for the year ended December 31, 2015. The increase in operating cash flows for both Holdings and Select for the year ended

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December 31, 2015 compared to the year ended December 31, 2014 is principally due to the addition of Concentra.

        Operating activities for Holdings and Select provided $170.6 million of cash flows for the year ended December 31, 2014. The decrease in operating cash flows for both Holdings and Select for the year ended December 31, 2014 compared to the year ended December 31, 2013 is principally due to reductions in our income from operations as discussed above under "Year Ended December 31, 2014 Compared to Year Ended December 31, 2013—Income from Operations" and decrease in the turnover of our accounts receivable.

        Our days sales outstanding were 53 days at December 31, 2015, 53 days at December 31, 2014, and 48 days at December 31, 2013. Our days sales outstanding will fluctuate based upon variability in our collection cycles. Our days sales outstanding at December 31, 2015, 2014 and 2013 all fall within our normal range for accounts receivable turnover.

        The operating cash flow of Select exceeds the operating cash flow of Holdings by $5.6 million for the year ended December 31, 2013. The difference relates to interest payments on Holdings' indebtedness, which indebtedness was repaid in 2013.

        Investing activities used $1,211.8 million, $101.1 million and $107.3 million of cash flow for the years ended December 31, 2015, 2014 and 2013, respectively. For the year ended December 31, 2015, the principal use of cash related to the Concentra acquisition costs of $1,047.2 million and $182.6 million for purchases of property and equipment, offset in part by the proceeds from the sale of an equity investment. For the year ended December 31, 2014, the principal use of cash was for purchases of property and equipment of $95.2 million. For the year ended December 31, 2013, the principal use of cash was for purchases of property and equipment of $73.7 million and equity investments in unconsolidated businesses of $34.9 million.

        Financing activities provided $1,014.4 million of cash flow for the year ended December 31, 2015. Cash was principally provided from $235.0 million of net borrowings under the Select revolving facility, $5.0 million of net borrowings under the Concentra revolving facility, $646.9 million borrowed under the Concentra term loans, and $217.1 million attributable to non-consolidating interests in Group Holdings. The principal uses of cash for financing activities were $26.9 million mandatory prepayment of term loans under the Select credit facilities, $23.3 million for Concentra's debt issuance costs, $13.6 million for common stock repurchases and $13.1 million for dividend payments to common stockholders.

        Financing activities used $70.5 million of cash flow for the year ended December 31, 2014. Cash was principally used by a $34.0 million mandatory prepayment of term loans under the Select credit facilities, $10.0 million for purchases of non-controlling interests and $184.1 million of dividends paid to Holdings in the aggregate that were used to repurchase shares of common stock and pay dividends to common stockholders, offset in part by $40.0 million in net borrowings under the Select revolving facility and $111.7 million from the issuance of additional 6.375% senior notes.

        Financing activities used $126.6 million of cash flow for the year ended December 31, 2013. The primary financing activities were associated with a $600.0 million 6.375% senior notes offering. The proceeds of this senior notes offering were used to repay $587.0 million of Select's term loans and fund certain transaction costs amounting to $14.7 million. In addition, $298.5 million was provided through the issuance of the Select term loans which were used to pay dividends to Holdings to fund the redemption of $167.3 million principal amount of Holdings' senior floating rate notes and pay $4.2 million of transaction costs related to the financing transactions. In addition, during the year ended December 31, 2013, Select paid dividends to Holdings to fund $42.0 million of dividends paid to common stockholders, $11.8 million to fund Holdings' repurchase of common stock and $5.6 million to fund interest payments on Holdings' debt. Select also made net repayments on the Select revolving facility of $110.0 million.

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        The difference in cash flows used in financing activities of Holdings compared to Select of $5.6 million for the year ended December 31, 2013 relates to dividends paid by Select to Holdings to service Holdings' interest obligations related to its indebtedness.

Capital Resources

        Working capital—We had net working capital of $11.5 million at December 31, 2015 compared to net working capital of $133.2 million at December 31, 2014. The decrease in net working capital is primarily due to the December 20, 2016 maturity of the portion of Select's D term loan that were not extended pursuant to the December 11, 2015 amendment.

        Select credit facilities—On March 4, 2015, Select made a principal prepayment of $26.9 million associated with the Select series D term loan and Select series E term loan (collectively, the "Select term loans") in accordance with the provision in the Select credit facilities that requires mandatory prepayments of the Select term loans as a result of annual excess cash flow as defined in the Select credit facilities.

        On May 20, 2015, Select entered into an additional credit extension amendment of its revolving credit facility (the "Select revolving facility" and together with the Select term loans, the "Select credit facilities"). Pursuant to the terms and conditions of the additional credit extension amendment, the lenders named therein committed an additional $100.0 million in incremental revolving commitments that mature on March 1, 2018. All other material terms and conditions applicable to the Select revolving facility are applicable to incremental revolving commitments created under the additional credit extension amendment.

        On December 11, 2015, Select amended the Select credit facilities in order to, among other things: (i) convert $56.2 million of its series D term loan into series E term loan, which have a maturity date of June 1, 2018; (ii) increase the interest rate payable on the series E term loan from Adjusted LIBO plus 2.75% (subject to an Adjusted LIBO rate floor of 1.00%), or Alternative Base Rate plus 1.75%, to Adjusted LIBO plus 4.00% (subject to an Adjusted LIBO rate floor of 1.00%), or Alternative Base Rate plus 3.00%; (iii) beginning with the quarter ending December 31, 2015, increase the quarterly compliance threshold set forth in the leverage ratio financial maintenance covenant to a level of 5.75 to 1.00 from 5.00 to 1.00; (iv) increase the capacity for incremental extensions of credit to $450.0 million; and (v) amend the definition of "Consolidated EBITDA" to add back certain specialty hospital start-up losses.

        At December 31, 2015, Select had outstanding borrowings under the Select credit facilities of $753.3 million of Select term loans (excluding unamortized original issue discounts of $2.8 million) and borrowings of $295.0 million (excluding letters of credit) under the Select revolving facility. Select had $116.1 million of availability under the Select revolving facility (after giving effect to $38.9 million of outstanding letters of credit) at December 31, 2015.

        The Select credit facilities require Select to maintain certain leverage ratios (as defined in the Select credit facilities). For the four consecutive fiscal quarters ended December 31, 2015, Select was required to maintain its leverage ratio (its ratio of total indebtedness to consolidated EBITDA) at less than 5.75 to 1.00. Select's leverage ratio was 4.78 to 1.00 as of December 31, 2015. Additionally, the Select credit facilities will require a prepayment of borrowings of 50% of excess cash flow, which will result in a prepayment of approximately $10.2 million. Select expects to have the borrowing capacity and intends to use borrowings under its revolving facility to make the required prepayment during the first quarter ended March 31, 2016.

        Concentra credit facilities—MJ Acquisition Corporation used borrowings under the Concentra credit facilities to pay a portion of the purchase price for the stock of Concentra. While this debt is non-recourse to Select, it is included in Select's consolidated financial statements.

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        Concentra Transaction—On June 1, 2015, MJ Acquisition Corporation, as the initial borrower, entered into the Concentra first lien credit agreement (the "Concentra first lien credit agreement"). Concentra, as the surviving entity of the merger between MJ Acquisition Corporation and Concentra, became the borrower under the Concentra first lien credit agreement on June 1, 2015. The Concentra first lien credit agreement provides for $500.0 million in first lien loans comprised of a $450.0 million, seven-year term loan ("Concentra first lien term loan") and a $50.0 million, five-year revolving credit facility ("Concentra revolving facility"). The borrowings under the Concentra first lien credit agreement are guaranteed, on a first lien basis, by Concentra Holdings, Inc., the direct parent of Concentra, the domestic subsidiaries of Concentra and will be guaranteed by a lien on Concentra's future domestic subsidiaries and are secured by substantially all of Concentra's and its domestic subsidiaries' existing and future property and assets and by a pledge of Concentra's capital stock, the capital stock of Concentra's domestic subsidiaries and up to 65% of the voting capital stock and 100% of the non-voting capital stock of Concentra's foreign subsidiaries, if any.

        Borrowings under the Concentra first lien credit agreement bear interest at a rate equal to:

•

in the case of the Concentra first lien term loan, Adjusted LIBO (as defined in the Concentra first lien credit agreement) plus 3.00% (subject to a LIBOR floor of 1.00%), or Alternate Base Rate (as defined in the Concentra first lien credit agreement) plus 2.00% (subject to an Alternate Base Rate floor of 2.00%); and

•

in the case of the Concentra revolving facility, Adjusted LIBO plus a percentage ranging from 2.75% to 3.00%, or Alternate Base Rate plus a percentage ranging from 1.75% to 2.00%, in each case based on Concentra's leverage ratio.

        The Concentra first lien term loan will amortize in equal quarterly installments on the last day of each March, June, September and December in aggregate annual amounts equal to 0.25% of the original principal amount of the Concentra first lien term loan commencing in September 2015. The balance of the Concentra first lien term loan will be payable on June 1, 2022. The Concentra revolving facility will be payable on June 1, 2020.

        Concentra will be required to prepay borrowings under the Concentra first lien credit agreement with (i) 100% of the net cash proceeds received from non-ordinary course asset sales or other dispositions, or as a result of a casualty or condemnation, subject to reinvestment provisions and other customary carveouts and the payment of certain indebtedness secured by liens, (ii) 100% of the net cash proceeds received from the issuance of debt obligations other than certain permitted debt obligations, and (iii) 50% of excess cash flow (as defined in the Concentra first lien credit agreement) if Concentra's leverage ratio is greater than 4.25 to 1.00 and 25% of excess cash flow if Concentra's leverage ratio is less than or equal to 4.25 to 1.00 and greater than 3.75 to 1.00, in each case, reduced by the aggregate amount of term loans and certain debt secured on a pari passu basis optionally prepaid during the applicable fiscal year and the aggregate amount of revolving commitments hereunder reduced permanently during the applicable fiscal year (other than in connection with a refinancing). Concentra will not be required to prepay borrowings with excess cash flow if Concentra's leverage ratio is less than or equal to 3.75 to 1.00.

        The Concentra first lien credit agreement requires Concentra to maintain a leverage ratio (based upon the ratio of indebtedness for money borrowed to consolidated EBITDA, as defined in the Concentra first lien credit agreement) of 5.25 to 1.00 which is tested quarterly, but only if Revolving Exposure (as defined in the Concentra first lien credit agreement) exceeds 30% of Revolving Commitments (as defined in the Concentra first lien credit agreement) on such day. Failure to comply with this covenant would result in an event of default under the Concentra revolving facility only and, absent a waiver or an amendment from the lenders, preclude Concentra from making further borrowings under the Concentra revolving facility and permit the lenders to accelerate all outstanding borrowings under the Concentra revolving facility. Upon such acceleration, Concentra's failure to comply with the financial covenant would result in an Event of Default with respect to the Concentra first lien term loan.

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        On June 1, 2015, MJ Acquisition Corporation, as the initial borrower, also entered into the Concentra second lien credit agreement (the "Concentra second lien credit agreement" and, together with the Concentra first lien credit agreement, the "Concentra credit facilities"). Concentra, as the surviving entity of the merger between MJ Acquisition Corporation and Concentra, became the borrower under the Concentra second lien credit agreement on June 1, 2015. The Concentra second lien credit agreement provides for a $200.0 million eight-year second lien term loan ("Concentra second lien term loan" and, together with the Concentra first lien term loans, the "Concentra term loans"). The borrowings under the Concentra second lien term loan are guaranteed, on a second lien basis, by Concentra Holdings, Inc., the domestic subsidiaries of Concentra and will be guaranteed by Concentra's future domestic subsidiaries and are secured by a lien on substantially all of Concentra's and its domestic subsidiaries' existing and future property and assets and by a pledge of Concentra's capital stock, the capital stock of Concentra's domestic subsidiaries and up to 65% of the voting capital stock and 100% of the non-voting capital stock of Concentra's foreign subsidiaries, if any.

        Borrowings under the Concentra second lien term loan bear interest at a rate equal to Adjusted LIBO Rate (as defined in the Concentra second lien credit agreement) plus 8.00% (subject to a LIBOR floor of 1.00%), or Alternate Base Rate (as defined in the Concentra second lien credit agreement) plus 7.00% (subject to an Alternate Base Rate floor of 2.00%).

        In the event that, on or prior to June 1, 2016, Concentra prepays any of the Concentra second lien term loan, Concentra shall pay a premium of 2.00% of the aggregate principal amount of the Concentra second lien term loan so prepaid and if Concentra prepays any of the Concentra second lien term loan on or prior to June 1, 2017, Concentra shall pay a premium of 1.00% of the aggregate principal amount of the Concentra second lien term loan so prepaid. The Concentra second lien term loan will be payable on June 1, 2023.

        Concentra will be required to prepay borrowings under the Concentra second lien term loan to the extent that such amounts were not used to make mandatory prepayments under the Concentra first lien credit facilities.

        The Concentra credit facilities also contain a number of affirmative and restrictive covenants, including limitations on mergers, consolidations and dissolutions; sales of assets; investments and acquisitions; indebtedness; liens; affiliate transactions; and dividends and restricted payments. The Concentra credit facilities contain events of default for non-payment of principal and interest when due (subject to a grace period for interest), cross-default and cross-acceleration provisions and an event of default that would be triggered by a change of control.

        Select and Holdings are not parties to the Concentra credit facilities and are not obligors with respect to Concentra's debt under such agreements.

        At December 31, 2015, Concentra had outstanding borrowings of $647.8 million under the Concentra term loans (excluding unamortized original issue discounts of $2.9 million) and borrowings of $5.0 million (excluding letters of credit) under the Concentra revolving facility. Concentra had $39.0 million of availability under its revolving facility (after giving effect to $6.0 million of outstanding letters of credit) at December 31, 2015.

        6.375% Senior Notes due 2021—On March 11, 2014, Select issued and sold $110.0 million aggregate principal amount of additional 6.375% senior notes due June 1, 2021, at 101.50% of the aggregate principal amount resulting in gross proceeds of $111.7 million. The notes were issued as Additional Notes under the indenture pursuant to which it previously issued $600.0 million of 6.375% senior notes due June 1, 2021.

        Stock Repurchase Program—Holdings' board of directors has authorized a common stock repurchase program to repurchase up to $500.0 million worth of shares of its common stock. The program will remain in effect until December 31, 2016, unless extended or earlier terminated by the board of directors. Stock

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repurchases under this program may be made in the open market or through privately negotiated transactions, and at times and in such amounts as Holdings deems appropriate. Holdings is funding this program with cash on hand and borrowings under the Select revolving facility. During the year ended December 31, 2015, Holdings repurchased 1,032,334 shares at an aggregate cost of approximately $13.6 million, an average cost per share of $13.20, which includes transaction costs. Since the inception of the program through December 31, 2015, Holdings has repurchased 35,924,128 shares at a cost of approximately $314.7 million, or $8.76 per share, which includes transaction costs.

        Liquidity—We intend to refinance a portion of the Select credit facilities as a result of the series D term loan reaching maturity on December 20, 2016. We believe our internally generated cash flows and borrowing capacity under the Select and Concentra credit facilities will be sufficient to finance operations over the next twelve months. We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, tender offers, or otherwise. Such repurchases or exchanges, if any, may be funded from operating cash flows or other sources and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

        Use of Capital Resources—We may from time to time pursue opportunities to develop new joint venture relationships with significant health systems and other healthcare providers, and from time to time we may also develop new inpatient rehabilitation hospitals. We also intend to open new outpatient rehabilitation clinics in local areas that we currently serve where we can benefit from existing referral relationships and brand awareness to produce incremental growth. In addition to our development activities, we may grow through opportunistic acquisitions.

Commitments and Contingencies

        The following contractual obligation table summarizes the contractual obligations for Select and Concentra at December 31, 2015, and the effect such obligations are expected to have on liquidity and cash

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flow in future periods. Reserves for uncertain tax positions of $6.1 million have been excluded from the tables below as we cannot reasonably estimate the amounts or periods in which these liabilities will be paid.

Contractual Obligations	Total		2016		2017 - 2019		2020 - 2021		After 2021
	(in thousands)
6.375% senior notes(1)	$	710,000	$	—	$	—	$	710,000	$	—
Select credit facilities(2)(3)		1,048,277		224,114		824,163		—		—
Select other debt obligations		11,987		5,257		6,730		—		—
Concentra first lien term loan(4)		447,750		4,500		13,500		9,000		420,750
Concentra second lien term loan(5)		200,000		—		—		—		200,000
Concentra revolving facility		5,000		—		—		5,000		—
Concenter other debt obligations		5,312		1,168		293		294		3,557
Total debt		2,428,326		235,039		844,686		724,294		624,307
Interest(6)(7)		590,857		128,494		298,671		134,837		28,855
Letters of credit outstanding		44,886		—		38,906		5,980		—
Purchase obligations		52,253		19,794		30,805		1,654		—
Construction contracts		15,724		15,724		—		—		—
Naming, promotional and sponsorship agreement		34,165		3,075		9,659		6,819		14,612
Operating leases		1,142,485		205,030		436,172		161,772		339,511
Related party operating leases		31,045		4,174		12,960		9,137		4,774
Total contractual cash obligations	$	4,339,741	$	611,330	$	1,671,859	$	1,044,493	$	1,012,059

(1)

Reflects the aggregate principal amount of the 6.375% senior notes which excludes the unamortized premium of $1.2 million at December 31, 2015.

(2)

Reflects the aggregate principal amount of the Select credit facilities which excludes the unamortized original issue discounts of $2.8 million at December 31, 2015.

(3)

The balance of the series D term loan will be payable on December 20, 2016 and the balance of the series E term loan will be payable on June 1, 2018 and the Select revolving facility will be payable on March 1, 2018.

(4)

Reflects the aggregate principal amount of the Concentra first lien term loan which excludes the unamortized original issue discounts of $1.0 million at December 31, 2015.

(5)

Reflects the aggregate principal amount of the Concentra second lien term loan which excludes the unamortized original issue discounts of $1.9 million at December 31, 2015.

(6)

The interest obligation for the Select credit facilities was calculated using the average interest rate at December 31, 2015 of 3.3% for the series D term loan, 5.0% for the series E term loan, and 4.3% for the revolving loan. The interest obligation was calculated using the stated interest rate for the 6.375% senior notes and a weighted average interest rate of 2.8% for the other debt obligations.

(7)

The interest obligation for the Concentra credit facilities was calculated using the average interest rate at December 31, 2015 of 4.0% for the Concentra first lien term loan, 9.0% for the Concentra second lien term loan, and 5.5% for the revolving portion. The interest obligation for other debt obligations was calculated using a weighted average interest of 7.7% for that debt.

Concentra Class A Put Right

        In connection with the acquisition of Concentra, WCAS and the other members of Group Holdings will have the Put Right with respect to their equity interests in Group Holdings. If the Put Right is

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exercised by WCAS, Select will be obligated to purchase up to 33¹/3% of the equity interests of Group Holdings that WCAS purchased on June 1, 2015, at a purchase price based on a valuation of Group Holdings performed by an investment bank to be mutually agreed between Select and WCAS, which valuation will be based on certain precedent transactions using multiples of EBITDA and capped at an agreed upon multiple of EBITDA. Select has the right to elect to pay the purchase price in cash or in shares of Holdings' common stock. WCAS may first exercise its Put Right after June 1, 2018, and then may exercise its Put Right again annually during each fiscal year thereafter. If WCAS exercises its Put Right, the other members of Group Holdings may elect to sell to Select, on the same terms as WCAS, a percentage of their equity interests of Group Holdings that such member purchased on June 1, 2015, up to but not exceeding the percentage of its initial equity interests that WCAS has determined to sell to Select in the exercise of its Put Right. In addition, WCAS and the other members of Group Holdings will have a Put Right with respect to their equity interest in Group Holdings in the event Holdings or Select experiences a change of control that has not been previously approved by WCAS and which results in change in the senior management of Select. If an SEM COC Put Right is exercised by WCAS, WCAS and each other member of Group Holdings will be obligated to sell all (but not less than all) of their equity interests in Group Holdings to Select, at a purchase price based on a valuation of Group Holdings performed by an investment bank to be mutually agreed between Select and WCAS, which valuation will be based on certain precedent transactions using multiples of EBITDA and capped at an agreed upon multiple of EBITDA. Furthermore, Select has a call right (the "Call Right"), whereby each other member of Group Holdings will be obligated to sell all (but not less than all) of their equity interests in Group Holdings to Select at a purchase price based on a valuation of Group Holdings performed by an investment bank to be mutually agreed between Select and WCAS, which valuation will be based on certain precedent transactions using multiples of EBITDA and capped at an agreed upon multiple of EBITDA. Select may first exercise the Call Right after June 1, 2020. We exclude the approximate amount that we may be required to pay to purchase these equity interests in Group Holdings from the contractual obligations table above because of the uncertainty as to: (i) whether or not the Put Right, if exercisable, or the Call Right, will actually be exercised; (ii) the dollar amounts that would be paid if the Put Right or Call Right is exercised; and (iii) the timing and form of consideration of any such payments.

Effects of Inflation and Changing Prices

        We derive a substantial portion of our revenues from the Medicare program. We have been, and could be in the future, affected by the continuing efforts of governmental and private third-party payors to contain healthcare costs by limiting or reducing reimbursement payments.

        Additionally, reimbursement payments under governmental and private third-party payor programs may not increase to sufficiently cover increasing costs. Medicare reimbursement in long term acute care hospitals and inpatient rehabilitation facilities are subject to fixed payments under the Medicare prospective payment systems. In accordance with Medicare laws, CMS makes annual adjustments to Medicare payments under what is commonly known as a "market basket update." Generally, these rates are adjusted for inflation. However, these adjustments may not reflect the actual increase in the costs of providing healthcare services and may be reduced by CMS for other adjustments.

        The healthcare industry is labor intensive and the Company's largest expenses are labor related costs. Wage and other expenses increase during periods of inflation and when labor shortages occur in the marketplace. There can be no guarantee we will not experience increases in the cost of labor, as the need for clinical healthcare professionals is expect to grow. In addition, suppliers pass along rising costs to us in the form of higher prices. We have little or no ability to pass on these increased costs associated with providing services due to federal laws that establish fixed reimbursement rates.

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Recent Accounting Pronouncements

        In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, which supersedes most of the current revenue recognition requirements. The core principle of the new guidance 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. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. The original standard was effective for fiscal years beginning after December 15, 2016; however, in July 2015, the FASB approved a one-year deferral of this standard, with a new effective date for fiscal years beginning after December 15, 2017. The Company is currently evaluating the standard to determine the impact it will have on its consolidated financial statements.

        In April and August 2015, the FASB issued ASU No. 2015-03 and ASU No. 2015-15, Interest—Imputation of Interest, respectively, to simplify the presentation of debt issuance costs. The standard requires debt issuance costs be presented in the balance sheet as a direct deduction from the carrying value of the debt liability. The FASB clarified that debt issuance costs related to line-of-credit arrangements can be presented as an asset and amortized over the term of the arrangement. The guidance is effective for annual fiscal periods beginning after December 15, 2015. The Company will adopt the standard in 2016. As of December 31, 2015, we had approximately $38.0 million in debt issuance costs included in other assets that would be a direct deduction of the debt liability under the new standard.

        In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement—Period Adjustments, which changes the reporting requirement for retrospective adjustments to provisional amounts in the measurement period. The amendments in this update require an entity to present separately on the face of the income statement or disclose in the notes, the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The revised guidance is effective for annual fiscal periods beginning after December 15, 2015. Early adoption is permitted and the Company intends to prospectively adopt ASU No. 2015-16.

        In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which changes the presentation of deferred income taxes. The intent is to simplify the presentation of deferred income taxes through the requirement that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The revised guidance is effective for annual fiscal periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the standard to determine the impact it will have on its consolidated financial statements.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.

        We are subject to interest rate risk in connection with our variable rate long-term indebtedness. Our principal interest rate exposure relates to the loans outstanding under the Select credit facilities and Concentra credit facilities.

        As of December 31, 2015, Select had $753.3 million (excluding unamortized original issue discount) in term loans outstanding under the Select credit facilities and $295.0 million in revolving borrowings outstanding under the Select credit facilities, which bear interest at variable rates.

        As of December 31, 2015, Concentra had outstanding borrowings under the Concentra credit facilities of $647.8 million (excluding unamortized original issue discounts) of term loans and $5.0 million in revolving borrowings, which bear interest at variable rates. Certain of Select's and Concentra's outstanding borrowings that bear interest at variable rates were effectively fixed as of December 31, 2015 based upon

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then current interest rates because the Adjusted LIBO Rate did not then exceed the applicable Adjusted LIBO Rate floors for such borrowings:

•

Select's aggregate $534.7 million in the Select series E term loan is subject to an Adjusted LIBO Rate floor of 1.00%. Therefore, until the Adjusted LIBO Rate exceeds 1.00%, Select's interest rate on this indebtedness is effectively fixed at 5.00%.

•

the $447.8 million Concentra first lien term loan is subject to an Adjusted LIBO Rate floor of 1.00%. Therefore, until the Adjusted LIBO Rate exceeds 1.00%, Concentra's interest rate on this indebtedness is effectively fixed at 4.00%.

•

the $200.0 million Concentra second lien term loan is subject to an Adjusted LIBO Rate floor of 1.00%. Therefore, until the Adjusted LIBO Rate exceeds 1.00%, Concentra's interest rate on this indebtedness is effectively fixed at 9.00%.

        However, the $218.6 million Select series D term loan, and Select and Concentra revolving borrowings are not subject to an Adjusted LIBO Rate floor.

        The following table summarizes the impact of hypothetical increases in market interest rates as of December 31, 2015 on our consolidated interest expense:

Increase in Market Interest Rate			Interest Rate Expense Increases Per Annum (in thousands)(1)
	0.25	%	$	1,296.5
	0.50	%	$	3,893.7
	0.75	%	$	8,146.3
	1.00	%	$	12,398.9

(1)

Based on the 3-month LIBOR rate of 0.61% as of December 31, 2015, a change in interest rates of up to 0.39% would only increase interest expense with respect to the Select series D term loan, and Select and Concentra revolving borrowings, which are not subject to an Adjusted LIBO Rate floor. Increases in interest rates greater than 0.39% as of December 31, 2015 would impact the interest rate paid on all of Select's and Concentra's variable rate debt, as indicated in the table above.

Item 8.    Financial Statements and Supplementary Data.

        See Consolidated Financial Statements and Notes thereto commencing at Page F-1.

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 carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered in this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures, including the accumulation and communication of disclosure to our principal executive officer and principal financial officer as appropriate to allow timely decisions regarding disclosure, are effective as of December 31, 2015

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to provide reasonable assurance that material information required to be included in our periodic SEC reports is recorded, processed, summarized and reported within the time periods specified in the relevant SEC rules and forms.

Concentra Acquisition

        On June 1, 2015, MJ Acquisition Corporation, a joint venture that Select created with WCAS, consummated the acquisition of Concentra. SEC guidance permits management to omit an assessment of an acquired business' internal control over financial reporting from management's assessment of internal control over financial reporting for a period not to exceed one year from the date of the acquisition, and at this time Select is omitting an assessment of Concentra's internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

        There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) identified in connection with the evaluation required by Rule 13a-15(d) of the Securities Exchange Act of 1934 that occurred during the fourth quarter of the year ended December 31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management's Report on Internal Control Over Financial Reporting

        Management is responsible for establishing and maintaining an adequate system of internal control over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria of "Internal Control—Integrated Framework (2013)," issued by the Committee of Sponsoring Organizations of the Treadway Commission, or "COSO," as of December 31, 2015. Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

        The operations and related assets of Concentra are excluded from management's assessment of internal control over financial reporting as of December 31, 2015 because it was acquired by the Company in a purchase business combination during 2015. Concentra's assets (excluding its goodwill and intangible assets) represented 9.8% of our total assets and revenues represented 15.6% of our total revenues of the related consolidated financial statements as of and for the year ended December 31, 2015.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Management assessed the effectiveness of the Company's internal control over financial reporting excluding the recently completed acquisition of Concentra as of December 31, 2015. This assessment was based on criteria for effective internal control over financial reporting described in "Internal Control—Integrated Framework (2013)," issued by COSO. Based on this assessment, management concludes that, as of December 31, 2015, internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles. The effectiveness of the Company's internal control over financial reporting as of December 31, 2015 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm as stated in their report which appears herein.

Item 9B.    Other Information.

        None.

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PART III

Item 10.    Directors, Executive Officers and Corporate Governance.

        The information regarding directors and nominees for directors of the Company, including identification of the audit committee and audit committee financial expert, and Compliance with Section 16(a) of the Exchange Act is presented under the headings "Corporate Governance—Committees of the Board of Directors," "Election of Directors—Directors and Nominees" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's definitive proxy statement for use in connection with the 2016 Annual Meeting of Stockholders (the "Proxy Statement") to be filed within 120 days after the end of the Company's fiscal year ended December 31, 2015. The information contained under these headings is incorporated herein by reference. Information regarding the executive officers of the Company is included in this Annual Report on Form 10-K under Item 1 of Part I as permitted by Instruction 3 to Item 401(b) of Regulation S-K.

        We have adopted a written code of business conduct and ethics, known as our code of conduct, which applies to all of our directors, officers, and employees, as well as a code of ethics applicable to our senior financial officers, including our chief executive officer, our chief financial officer and our chief accounting officer. Our code of conduct and code of ethics for senior financial officers are available on our Internet website, www.selectmedicalholdings.com. Our code of conduct and code of ethics for senior financial officers may also be obtained by contacting investor relations at (717) 972-1100. Any amendments to our code of conduct or code of ethics for senior financial officers or waivers from the provisions of the codes for our chief executive officer, our chief financial officer and our chief accounting officer will be disclosed on our Internet website promptly following the date of such amendment or waiver.

Item 11.    Executive Compensation.

        Information concerning executive compensation is presented under the headings "Executive Compensation" and "Compensation Committee Report" in the Proxy Statement. The information contained under these headings is incorporated herein by reference.

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

        Information with respect to security ownership of certain beneficial owners and management is set forth under the heading "Security Ownership of Certain Beneficial Owners and Directors and Officers" in the Proxy Statement. The information contained under this heading is incorporated herein by reference.

Equity Compensation Plan Information

        Set forth in the table below is a list of all of our equity compensation plans and the number of securities to be issued on exercise of equity rights, average exercise price, and number of securities that

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would remain available under each plan if outstanding equity rights were exercised as of December 31, 2015.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
Equity compensation plans approved by security holders:
Select Medical Holdings Corporation 2005 Equity Incentive Plan		716,360	$	8.84		0	(1)
Select Medical Holdings Corporation 2011 Equity Incentive Plan		6,000	$	7.14		3,406,808
Director equity incentive plan		21,000	$	9.52		188,923

(1)

In connection with the approval of the Select Medical Holdings Corporation 2011 Equity Incentive Plan, we no longer issued awards under the Select Medical Holdings Corporation 2005 Equity Incentive Plan.

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

        Information concerning related transactions is presented under the heading "Certain Relationships, Related Transactions and Director Independence" in the Proxy Statement. The information contained under this heading is incorporated herein by reference.

Item 14.    Principal Accountant Fees and Services.

        Information concerning principal accountant fees and services is presented under the heading "Ratification of Appointment of Independent Registered Public Accounting Firm" in the Proxy Statement. The information contained under this heading is incorporated herein by reference.

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PART IV

Item 15.    Exhibits and Financial Statement Schedules.

(a)

The following documents are filed as part of this report:

        1)    Financial Statements: See Index to Financial Statements appearing on page F-1 of this report.

        2)    Financial Statement Schedule: See Schedule II—Valuation and Qualifying Accounts appearing on page F-41 of this report.

        3)    The following exhibits are filed as part of, or incorporated by reference into, this report:

Number		Description
	2.1	Stock Purchase Agreement dated as of March 22, 2015 by and among MJ Acquisition Corporation, Concentra Inc. and Human Inc., incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed March 24, 2015 (Reg. Nos. 001-34465 and 001-31441).
	2.2	Amendment No. 1 to the Stock Purchase Agreement dated as of June 1, 2015 by and among MJ Acquisition Corporation, Concentra Inc. and Human Inc., incorporated by reference to Exhibit 2.1 of the Quarterly Report on Form 10-Q of Select Medical Holdings Corporation and Select Medical Corporation filed August 6, 2015 (Reg. Nos. 001-34465 and 001-31441).
	3.1	Amended and Restated Certificate of Incorporation of Select Medical Corporation, incorporated by reference to Exhibit 3.1 of Select Medical Corporation's Form S-4 filed June 15, 2005 (Reg. no. 001-31441).
	3.2	Form of Restated Certificate of Incorporation of Select Medical Holdings Corporation, incorporated by reference to Exhibit 3.3 of Select Medical Holdings Corporation's Form S-1/A filed September 21, 2009 (Reg No. 333-152514).
	3.3	Amended and Restated Bylaws of Select Medical Corporation, as amended, incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q of Select Medical Holdings Corporation and Select Medical Corporation filed on October 30, 2014 (Reg. Nos. 001-34465 and 001-31441).
	3.4	Amended and Restated Bylaws of Select Medical Holdings Corporation, as amended.
	4.1	Indenture, dated as of May 28, 2013, by and among Select Medical Holdings Corporation, the guarantors named therein and U.S. Bank National Association, as trustee, incorporated herein by reference to Exhibit 4.1 of the Current Report on Form 8-K of Select Medical Holdings Corporation on May 28, 2013 (Reg. No. 001-34465).
	4.2	Forms of 6.375% Senior Notes due 2021, incorporated herein by reference to Exhibit 4.2 of the Current Report on Form 8-K of Select Medical Holdings Corporation on May 28, 2013 (Reg. No. 001-34465).
	4.3	Supplemental Indenture, dated as of March 11, 2014, by and among the Company, the guarantors named therein and U.S. Bank National Association, as trustee, incorporated herein by reference to Exhibit 4.1 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed on March 11, 2014 (Reg. Nos. 001-34465 and 001-31441).

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10.1	Credit Agreement, dated as of June 1, 2011, among Select Medical Holdings Corporation, Select Medical Corporation, JPMorgan Chase Bank, N.A., as Administrative and Collateral Agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Goldman Sachs Bank USA, as Co-Syndication Agents and Morgan Stanley Senior Funding, Inc. and Wells Fargo Bank, National Association, LLC, as Co-Documentation Agents and the other lenders party thereto, incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed on June 2, 2011 (Reg. Nos. 001-34465 and 001-31441).
10.2	Employment Agreement, dated as of March 1, 2000, between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.16 of Select Medical Corporation's Registration Statement on Form S-1 filed October 27, 2000 (Reg. No. 333-48856).
10.3	Amendment No. 1 to Employment Agreement, dated as of August 8, 2000, between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.17 of Select Medical Corporation's Registration Statement on Form S-1 filed October 27, 2000 (Reg. No. 333-48856).
10.4	Amendment No. 2 to Employment Agreement, dated as of February 23, 2001, between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.47 of Select Medical Corporation's Registration Statement on Form S-1 March 30, 2001 (Reg. No. 333-48856).
10.5	Amendment No. 3 to Employment Agreement, dated as of April 24, 2001, between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.50 of Select Medical Corporation's Registration Statement on Form S-4 filed June 26, 2001 (Reg. No. 333-63828).
10.6	Amendment No. 4 to Employment Agreement, dated as of September 17, 2001, between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.52 of Select Medical Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (Reg. No. 000-32499).
10.7	Amendment No. 5 to Employment Agreement, dated as of February 24, 2005, between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.10 of Select Medical Corporation's Form S-4 filed June 16, 2005 (Reg. No. 333-125846).
10.8	Employment Agreement, dated as of March 1, 2000, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.14 of Select Medical Corporation's Registration Statement on Form S-1 filed October 27, 2000 (Reg. No. 333-48856).
10.9	Amendment No. 1 to Employment Agreement, dated as of August 8, 2000, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.15 of Select Medical Corporation's Registration Statement on Form S-1 filed October 27, 2000 (Reg. No. 333-48856).
10.10	Amendment No. 2 to Employment Agreement, dated as of February 23, 2001, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.48 of Select Medical Corporation's Registration Statement on Form S-1 filed March 30, 2001 (Reg. No. 333-48856).
10.11	Amendment No. 3 to Employment Agreement, dated as of September 17, 2001, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.53 of Select Medical Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (Reg. No. 000-32499).

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10.12	Amendment No. 4 to Employment Agreement, dated as of December 10, 2004, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 99.3 of Select Medical Corporation's Current Report on Form 8-K filed December 16, 2004 (Reg. No. 001-31441).
10.13	Amendment No. 5 to Employment Agreement, dated as of February 24, 2005, between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.16 of Select Medical Corporation's Form S-4 filed June 16, 2005 (Reg. No. 333-125846).
10.14	Change of Control Agreement, dated as of March 1, 2000, between Select Medical Corporation and Martin F. Jackson, incorporated by reference to Exhibit 10.11 of Select Medical Corporation's Registration Statement on Form S-1 filed October 27, 2000 (Reg. No. 333-48856).
10.15	Amendment to Change of Control Agreement, dated as of February 23, 2001, between Select Medical Corporation and Martin F. Jackson, incorporated by reference to Exhibit 10.52 of Select Medical Corporation's Registration Statement on Form S-1 filed March 30, 2001 (Reg. No. 333-48856).
10.16	Second Amendment to Change of Control Agreement, dated as of February 24, 2005, between Select Medical Corporation and Martin F. Jackson, incorporated by reference to Exhibit 10.24 of Select Medical Corporation's Form S-4 filed June 16, 2005 (Reg. No. 333-125846).
10.17	Change of Control Agreement, dated as of March 1, 2000, between Select Medical Corporation and Michael E. Tarvin, incorporated by reference to Exhibit 10.22 of Select Medical Corporation's Registration Statement on Form S-1 filed October 27, 2000 (Reg. No. 333-48856).
10.18	Amendment to Change of Control Agreement, dated as of February 23, 2001, between Select Medical Corporation and Michael E. Tarvin, incorporated by reference to Exhibit 10.54 of Select Medical Corporation's Registration Statement on Form S-1 filed March 30, 2001 (Reg. No. 333-48856).
10.19	Second Amendment to Change of Control Agreement, dated as of February 24, 2005, between Select Medical Corporation and Michael E. Tarvin, incorporated by reference to Exhibit 10.39 of Select Medical Corporation's Form S-4 filed June 16, 2005 (Reg. No. 333-125846).
10.20	Change of Control Agreement, dated as of March 1, 2000, between Select Medical Corporation and Scott A. Romberger, incorporated by reference to Exhibit 10.56 of Select Medical Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (Reg. No. 000-32499).
10.21	Amendment to Change of Control Agreement, dated as of February 23, 2001, between Select Medical Corporation and Scott A. Romberger, incorporated by reference to Exhibit 10.57 of Select Medical Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (Reg. No. 000-32499).
10.22	Second Amendment to Change of Control Agreement, dated as of February 24, 2005, between Select Medical Corporation and Scott A. Romberger, incorporated by reference to Exhibit 10.42 of Select Medical Corporation's Form S-4 filed June 16, 2005 (Reg. No. 333-125846).
10.23	Form of Unit Award Agreement, incorporated by reference to Exhibit 10.54 of Select Medical Holdings Corporation's Form S-1 filed July 24, 2008 (Reg. No. 333-152514).
10.24	Office Lease Agreement, dated as of June 17, 1999, between Select Medical Corporation and Old Gettysburg Associates III, incorporated by reference to Exhibit 10.27 of Select Medical Corporation's Registration Statement on Form S-1 filed October 27, 2000 (Reg. No. 333-48856).

99

10.25	First Addendum to Lease Agreement, dated as of April 25, 2008, between Old Gettysburg Associates III and Select Medical Corporation, incorporated by reference to Exhibit 10.65 of Select Medical Holdings Corporation's Form S-1 filed July 24, 2008 (Reg. No. 333-152514).
10.26	Second Addendum to Lease Agreement, dated as of November 1, 2012, between Old Gettysburg Associates III LP and Select Medical Corporation, incorporated by reference to Exhibit 10.37 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on February 26, 2013 (Reg. Nos. 001-34465 and 001-31441).
10.27	Office Lease Agreement, dated August 25, 2006, between Old Gettysburg Associates IV, L.P. and Select Medical Corporation, incorporated by reference to Exhibit 10.1 of Select Medical Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (Reg. No. 001-31441).
10.28	First Addendum to Lease Agreement, dated as of November 1, 2012, between Old Gettysburg Associates IV LP and Select Medical Corporation, incorporated by reference to Exhibit 10.39 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on February 26, 2013 (Reg. Nos. 001-34465 and 001-31441).
10.29	Office Lease Agreement, dated November 1, 2012, by and between Select Medical Corporation and Old Gettysburg Associates, incorporated by reference to Exhibit 10.40 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on February 26, 2013 (Reg. Nos. 001-34465 and 001-31441).
10.30	Office Lease Agreement, dated November 1, 2012, by and between Select Medical Corporation and Old Gettysburg Associates II, LP., incorporated by reference to Exhibit 10.41 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on February 26, 2013 (Reg. Nos. 001-34465 and 001-31441).
10.31	Naming, Promotional and Sponsorship Agreement, dated as of October 1, 1997, between NovaCare, Inc. and the Philadelphia Eagles Limited Partnership, assumed by Select Medical Corporation in a Consent and Assumption Agreement dated November 19, 1999 by and among NovaCare, Inc., Select Medical Corporation and the Philadelphia Eagles Limited Partnership, incorporated by reference to Exhibit 10.36 of Select Medical Corporation's Registration Statement on Form S-1 filed December 7, 2000 (Reg. No. 333-48856).
10.32	First Amendment to Naming, Promotional and Sponsorship Agreement, dated as of January 1, 2004, between Select Medical Corporation and Philadelphia Eagles, LLC, incorporated by reference to Exhibit 10.63 of Select Medical Corporation's Form S-4 filed June 16, 2005 (Reg. No. 333-125846).
10.33	Select Medical Holdings Corporation 2005 Equity Incentive Plan, as amended and restated, incorporated by reference to Exhibit 10.88 of Select Medical Holdings Corporation's Form S-1/A filed September 9, 2009 (Reg. No. 333-152514).
10.34	Select Medical Holdings Corporation 2011 Equity Incentive Plan, incorporated by reference to Exhibit A to Select Medical Holdings Corporation's Definitive Proxy Statement on Schedule 14A filed on March 25, 2011 (Reg. No. 333-174393).
10.35	Select Medical Holdings Corporation 2005 Equity Incentive Plan for Non-Employee Directors, as amended and restated, incorporated by reference to Exhibit 10.89 of Select Medical Holdings Corporation's Form S-1/A filed September 9, 2009 (Reg. No. 333-152514).

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10.36	Amendment No. 6 to Employment Agreement between Select Medical Corporation and Rocco A. Ortenzio, incorporated by reference to Exhibit 10.95 of Select Medical Holdings Corporation's Form S-1/A filed June 18, 2009 (Reg. No. 333-152514).
10.37	Amendment No. 6 to Employment Agreement between Select Medical Corporation and Robert A. Ortenzio, incorporated by reference to Exhibit 10.96 of Select Medical Holdings Corporation's Form S-1/A filed June 18, 2009 (Reg. No. 333-152514).
10.38	Third Amendment to Change of Control Agreement between Select Medical Corporation and Michael E. Tarvin, incorporated by reference to Exhibit 10.100 of Select Medical Holdings Corporation's Form S-1/A filed June 18, 2009 (Reg. No. 333-152514).
10.39	Third Amendment to Change of Control Agreement between Select Medical Corporation and Scott A. Romberger, incorporated by reference to Exhibit 10.102 of Select Medical Holdings Corporation's Form S-1/A filed June 18, 2009 (Reg. No. 333-152514).
10.40	Third Amendment to Change of Control Agreement between Select Medical Corporation and Martin F. Jackson, incorporated by reference to Exhibit 10.103 of Select Medical Holdings Corporation's Form S-1/A filed June 18, 2009 (Reg. No. 333-152514).
10.41	Form of Restricted Stock Agreement under the 2005 Equity Incentive Plan, incorporated by reference to Exhibit 10.119 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on March 17, 2010 (Reg. Nos. 001-34465 and 001-31441).
10.42	Restricted Stock Award Agreement, dated August 11, 2010, by and between Select Medical Holdings Corporation and Bryan C. Cressey, incorporated by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q of Select Medical Holdings Corporation and Select Medical Corporation filed on November 12, 2010 (Reg. Nos. 001-34465 and 001-31441).
10.43	Restricted Stock Award Agreement, dated August 11, 2010, by and between Select Medical Holdings Corporation and James E. Dalton, Jr., incorporated by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q of Select Medical Holdings Corporation and Select Medical Corporation filed on November 12, 2010 (Reg. Nos. 001-34465 and 001-31441).
10.44	Restricted Stock Award Agreement, dated August 11, 2010, by and between Select Medical Holdings Corporation and James S. Ely III, incorporated by reference to Exhibit 10.4 of the Quarterly Report on Form 10-Q of Select Medical Holdings Corporation and Select Medical Corporation filed on November 12, 2010 (Reg. Nos. 001-34465 and 001-31441).
10.45	Restricted Stock Award Agreement, dated August 11, 2010, by and between Select Medical Holdings Corporation and William H. Frist, M.D., incorporated by reference to Exhibit 10.5 of the Quarterly Report on Form 10-Q of Select Medical Holdings Corporation and Select Medical Corporation filed on November 12, 2010 (Reg. Nos. 001-34465 and 001-31441).
10.46	Restricted Stock Award Agreement, dated August 11, 2010, by and between Select Medical Holdings Corporation and Leopold Swergold, incorporated by reference to Exhibit 10.6 of the Quarterly Report on Form 10-Q of Select Medical Holdings Corporation and Select Medical Corporation filed on November 12, 2010 (Reg. Nos. 001-34465 and 001-31441).
10.47	Employment Agreement, dated September 13, 2010, by and between Select Medical Corporation and David S. Chernow, incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed on September 15, 2010. (Reg. Nos. 001-34465 and 001-31441).

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10.48	Restricted Stock Award Agreement, dated September 13, 2010, by and between Select Medical Holdings Corporation and David S. Chernow, incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select filed on September 15, 2010. (Reg. Nos. 001-34465 and 001-31441).
10.49	Amendment No. 1 to Employment Agreement, dated March 21, 2011, between Select Medical Corporation and David S. Chernow, incorporated herein by reference to Exhibit 10.8 of the Quarterly Report on Form 10-Q of Select Medical Holdings Corporation and Select Medical Corporation filed on May 5, 2011. (Reg. Nos. 001-34465 and 001-31441).
10.50	Amendment No. 7 to Employment Agreement, dated November 10, 2010, by and between Select Medical Corporation and Rocco A. Ortenzio, incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select filed on November 15, 2010. (Reg. Nos. 001-34465 and 001-31441).
10.51	Amendment No. 7 to Employment Agreement, dated November 10, 2010, by and between Select Medical Corporation and Robert A. Ortenzio, incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select filed on November 15, 2010. (Reg. Nos. 001-34465 and 001-31441).
10.52	Fourth Amendment to Change of Control Agreement, dated March 8, 2011, between Select Medical Corporation and Martin F. Jackson, incorporated herein by reference to Exhibit 10.111 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on March 9, 2011 (Reg. Nos. 001-34465 and 001-31441).
10.53	Amendment No. 8 to Employment Agreement, dated March 8, 2011, between Select Medical Corporation and Robert A. Ortenzio, incorporated herein by reference to Exhibit 10.112 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on March 9, 2011 (Reg. Nos. 001-34465 and 001-31441).
10.54	Amendment No. 8 to Employment Agreement, dated March 8, 2011, between Select Medical Corporation and Rocco A. Ortenzio, incorporated herein by reference to Exhibit 10.113 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on March 9, 2011 (Reg. Nos. 001-34465 and 001-31441).
10.55	Fourth Amendment to Change of Control Agreement, dated March 8, 2011, between Select Medical Corporation and Scott A. Romberger, incorporated herein by reference to Exhibit 10.115 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on March 9, 2011 (Reg. Nos. 001-34465 and 001-31441).
10.56	Fourth Amendment to Change of Control Agreement, dated March 8, 2011, between Select Medical Corporation and Michael E. Tarvin, incorporated herein by reference to Exhibit 10.117 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on March 9, 2011 (Reg. Nos. 001-34465 and 001-31441).
10.57	Form of Restricted Stock Award Agreement under the Select Medical Holdings Corporation 2011 Equity Incentive Plan, incorporated herein by reference to Exhibit 10.107 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on March 2, 2012 (Reg. Nos. 001-34465 and 001-31441).

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10.58	Additional Credit Extension Amendment, dated as of August 13, 2012, among Select Medical Holdings Corporation, Select Medical Corporation, the subsidiaries of Select Medical Corporation named therein and the financial institutions party thereto, incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed on August 14, 2012 (Reg. Nos. 001-34465 and 001-31441).
10.59	Amendment No. 1 to the Credit Agreement, dated as of August 8, 2012, among Select Medical Holdings Corporation, Select Medical Corporation and JPMorgan Chase Bank, N.A., incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed on August 14, 2012 (Reg. Nos. 001-34465 and 001-31441).
10.60	Amendment No. 2 to the Credit Agreement, dated as of November 6, 2012, among Select Medical Holdings Corporation, Select Medical Corporation and JPMorgan Chase Bank, N.A., incorporated by reference to Exhibit 10.85 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on February 26, 2013 (Reg. Nos. 001-34465 and 001-31441).
10.61	Additional Credit Extension Amendment, dated as of February 20, 2013, among Select Medical Holdings Corporation, Select Medical Corporation, the subsidiaries of Select Medical Corporation named therein and the financial institutions party thereto, incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed on February 20, 2013 (Reg. Nos. 001-34465 and 001-31441).
10.62	Amendment No. 3 to the Credit Agreement, dated as of February 15, 2013, among Select Medical Holdings Corporation, Select Medical Corporation and JPMorgan Chase Bank, N.A., incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed on February 20, 2013 (Reg. Nos. 001-34465 and 001-31441).
10.63	Amendment No. 4 to the Credit Agreement, dated as of June 3, 2013, among Select Medical Holdings Corporation, Select Medical Corporation and JPMorgan Chase Bank, N.A., incorporated by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q of Select Medical Holdings Corporation filed on August 8, 2013 (Reg. No. 001-34465).
10.64	Consulting Agreement, dated October 30, 2013, by and between Select Medical Corporation and William H. Frist, incorporated by reference to Exhibit 10.83 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on February 25, 2014 (Reg. Nos. 001-34465 and 001-31441).
10.65	Consulting Agreement, dated October 30, 2013, by and between Select Medical Corporation and Thomas A. Scully, incorporated by reference to Exhibit 10.84 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on February 25, 2014 (Reg. Nos. 001-34465 and 001-31441).
10.66	Restricted Stock Award Agreement Under the 2011 Equity Incentive Plan, dated October 30, 2013, by and between Select Medical Corporation and William H. Frist, incorporated by reference to Exhibit 10.85 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on February 25, 2014 (Reg. Nos. 001-34465 and 001-31441).

103

10.67	Restricted Stock Award Agreement Under the 2011 Equity Incentive Plan, dated October 30, 2013, by and between Select Medical Corporation and Thomas A. Scully, incorporated by reference to Exhibit 10.86 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on February 25, 2014 (Reg. Nos. 001-34465 and 001-31441).
10.68	Stock Purchase Agreement, dated February 26, 2014, by and among Select Medical Holdings Corporation, Welsh, Carson, Anderson & Stowe IX, L.P. and WCAS Capital Partners IV, L.P., incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q of Select Medical Holdings Corporation and Select Medical Corporation filed on October 30, 2014 (Reg. Nos. 001-34465 and 001-31441).
10.69	Amendment No. 5 to the Credit Agreement, dated as of March 4, 2014, among Select Medical Holdings Corporation, Select Medical Corporation and JPMorgan Chase Bank, N.A., incorporated herein by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q of Select Medical Holdings Corporation and Select Medical Corporation filed on May 1, 2014 (Reg. Nos. 001-34465 and 001-31441).
10.70	Stock Purchase Agreement, dated May 5, 2014, by and among Select Medical Holdings Corporation, Welsh, Carson, Anderson & Stowe IX, L.P. and WCAS Capital Partners IV, L.P., incorporated herein by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q of Select Medical Holdings Corporation and Select Medical Corporation filed on August 7, 2014 (Reg. Nos. 001-34465 and 001-31441).
10.71	Additional Credit Extension Amendment, dated as of October 23, 2014, among Holdings, Select, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent and the additional lender named therein, incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed on October 24, 2014 (Reg. Nos. 001-34465 and 001-31441).
10.72	Additional Credit Extension Amendment, dated as of October 23, 2014, among Holdings, Select, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent and the additional lender named therein, incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed on October 24, 2014 (Reg. Nos. 001-34465 and 001-31441).
10.73	Office Lease Agreement, dated October 30, 2014, between Century Park Investments, L.P. and Select Medical Corporation, incorporated herein by reference to Exhibit 10.80 of the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation filed on February 25, 2015 (Reg. Nos. 001-34465 and 001-31441).
10.74	Separation Agreement, dated March 9, 2015, by and between James J. Talalai and Select Medical Corporation, incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed on March 11, 2014 (Reg. Nos. 001-34465 and 001-31441).
10.75	Additional Credit Extension Amendment, dated as of May 20, 2015, among Select Medical Holdings Corporation, Select Medical Corporation, JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and lender and the additional lenders names therein, incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed on May 20, 2015 (Reg. Nos. 001-34465 and 001-31441).

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10.76	Amended and Restated Limited Liability Agreement, dated June 1, 2015, by and among Select Medical Corporation, Select Medical Holdings Corporation, Welsh, Carson, Anderson & Stowe XII, L.P., Cressey & Company Fund IV LP, James Greenwood and Daniel Thomas, incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed on August 6, 2015 (Reg. Nos. 001-34465 and 001-31441).
10.77	First Lien Credit Agreement, dated June 1, 2015, by and among, Concentra Holdings, Inc., Concentra, Inc., JPMorgan Chase Bank, N.A. as administrative agent, collateral agent and lender and the additional lenders names therein, incorporated herein by reference to Exhibit 10.3 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed on August 6, 2015 (Reg. Nos. 001-34465 and 001-31441).
10.78	Second Lien Credit Agreement, dated June 1, 2015, by and among, Concentra Holdings, Inc., Concentra, Inc., Deutsche Bank AG New York Branch, as administrative agent, collateral agent and lender and the additional lenders names therein, incorporated herein by reference to Exhibit 10.4 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed on August 6, 2015 (Reg. Nos. 001-34465 and 001-31441).
10.79	Subscription Agreement, dated June 1, 2015, by and among Select Medical Corporation, Welsh, Carson, Anderson & Stowe XII, L.P., Concentra Group Holdings, LLC and Cressey & Company Fund IV LP, incorporated herein by reference to Exhibit 10.5 of the Current Report on Form 8-K of Select Medical Holdings Corporation and Select Medical Corporation filed on August 6, 2015 (Reg. Nos. 001-34465 and 001-31441).
10.80	Restricted Stock Award Agreement, dated August 5, 2015, by and between Select Medical Holdings Corporation and Russell L. Carson.
10.81	Amendment No. 6 to the Credit Agreement, dated as of December 11, 2015, among Select Medical Holdings Corporation, Select Medical Corporation and JPMorgan Chase Bank, N.A.
10.82	First Amendment to Lease Agreement, dated February 24, 2016, between Old Gettysburg II, LP and Select Medical Corporation.

12	Statement of Ratio of Earnings to Fixed Charges.
21.1	Subsidiaries of Select Medical Holdings Corporation.
23	Consent of PricewaterhouseCoopers LLP.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Executive Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer, and Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial information from the Registrant's Annual Report on Form 10-K for the year ended December 31, 2015 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2015, 2014 and 2013 (ii) Consolidated Balance Sheets as of December 31, 2015 and 2014, (iii) Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013, (iv) Consolidated Statements of Changes in Equity and Income for the years ended December 31, 2015, 2014 and 2013 and (v) Notes to Consolidated Financial Statements.

105

Signatures

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SELECT MEDICAL HOLDINGS CORPORATION SELECT MEDICAL CORPORATION
By:	/s/ MICHAEL E. TARVIN Michael E. Tarvin (Executive Vice President, General Counsel and Secretary)

Date: February 26, 2016

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of February 26, 2016.

/s/ ROCCO A. ORTENZIO Rocco A. Ortenzio Director, Vice Chairman and Co-Founder	/s/ ROBERT A. ORTENZIO Robert A. Ortenzio Director, Executive Chairman and Co-Founder
/s/ DAVID S. CHERNOW David S. Chernow President and Chief Executive Officer (principal executive officer)	/s/ MARTIN F. JACKSON Martin F. Jackson Executive Vice President and Chief Financial Officer (principal financial officer)
/s/ SCOTT A. ROMBERGER Scott A. Romberger Senior Vice President, Controller and Chief Accounting Officer (principal accounting officer)	/s/ RUSSELL L. CARSON Russell L. Carson Director
/s/ BRYAN C. CRESSEY Bryan C. Cressey Director	/s/ JAMES E. DALTON, JR. James E. Dalton, Jr. Director
/s/ JAMES S. ELY III James S. Ely III Director	/s/ WILLIAM H. FRIST, M.D. William H. Frist, M.D. Director
/s/ THOMAS A. SCULLY Thomas A. Scully Director	/s/ LEOPOLD SWERGOLD Leopold Swergold Director

106

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION
INDEX TO FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-6
Consolidated Statements of Operations and Comprehensive Income	F-7
Consolidated Statement of Changes in Equity and Income	F-9
Consolidated Statements of Cash Flows	F-11
Notes to Consolidated Financial Statements	F-13
Financial Statements Schedule II—Valuation and Qualifying Accounts	F-59

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders
of Select Medical Holdings Corporation:

        In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Select Medical Holdings Corporation and its subsidiaries at December 31, 2015 and December 31, 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        As described in Management's Report on Internal Control Over Financial Reporting, management has excluded Concentra Inc. ("Concentra") from its assessment of internal control over financial reporting as of December 31, 2015 because it was acquired by the Company in a purchase business combination

F-2

during 2015. We have also excluded Concentra from our audit of internal control over financial reporting. Concentra is a subsidiary whose total assets and total revenues represent 9.8% and 15.6%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2015.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania
February 26, 2016

F-3

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholder
of Select Medical Corporation:

        In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Select Medical Corporation and its subsidiaries at December 31, 2015 and December 31, 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

        A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        As described in Management's Report on Internal Control Over Financial Reporting, management has excluded Concentra Inc. ("Concentra") from its assessment of internal control over financial reporting as of December 31, 2015 because it was acquired by the Company in a purchase business combination

F-4

during 2015. We have also excluded Concentra from our audit of internal control over financial reporting. Concentra is a subsidiary whose total assets and total revenues represent 9.8% and 15.6%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2015.

/s/ PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania
February 26, 2016

F-5

PART I FINANCIAL INFORMATION

ITEM 1.    CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

	Select Medical Holdings Corporation				Select Medical Corporation
	December 31, 2014		December 31, 2015		December 31, 2014			December 31, 2015
ASSETS
Current Assets:
Cash and cash equivalents	$	3,354	$	14,435	$	3,354		$	14,435
Accounts receivable, net of allowance for doubtful accounts of $46,425 and $61,133 at 2014 and 2015, respectively		444,269		603,558		444,269			603,558
Current deferred tax asset		15,991		28,688		15,991			28,688
Prepaid income taxes		17,888		16,694		17,888			16,694
Other current assets		46,142		85,779		46,142			85,779
Total Current Assets		527,644		749,154		527,644			749,154
Property and equipment, net		542,310		864,124		542,310			864,124
Goodwill		1,642,083		2,314,624		1,642,083			2,314,624
Other identifiable intangibles, net		72,519		318,675		72,519			318,675
Other assets		140,253		180,089		140,253			180,089
Total Assets	$	2,924,809	$	4,426,666	$	2,924,809		$	4,426,666
LIABILITIES AND EQUITY
Current Liabilities:
Bank overdrafts	$	21,746	$	28,615	$	21,746		$	28,615
Current portion of long-term debt and notes payable		10,874		233,570		10,874			233,570
Accounts payable		108,532		137,409		108,532			137,409
Accrued payroll		97,090		120,989		97,090			120,989
Accrued vacation		63,132		73,977		63,132			73,977
Accrued interest		10,674		9,401		10,674			9,401
Accrued other		82,376		133,728		82,376			133,728
Total Current Liabilities		394,424		737,689		394,424			737,689
Long-term debt, net of current portion		1,542,102		2,190,314		1,542,102			2,190,314
Non-current deferred tax liability		109,203		218,705		109,203			218,705
Other non-current liabilities		92,855		133,220		92,855			133,220
Total Liabilities		2,138,584		3,279,928		2,138,584			3,279,928
Commitments and contingencies (Note 15)
Redeemable non-controlling interests		10,985		238,221		10,985			238,221
Stockholders' Equity:
Common stock of Holdings, $0.001 par value, 700,000,000 shares authorized,131,233,308 and 131,282,798 shares issued and outstanding at 2014 and 2015, respectively		131		131		—			—
Common stock of Select, $0.01 par value, 100 shares issued and outstanding		—		—		0			0
Capital in excess of par		413,706		424,506		885,407			904,375
Retained earnings (accumulated deficit)		325,678		434,616		(145,892	)		(45,122	)
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity		739,515		859,253		739,515			859,253
Non-controlling interest		35,725		49,264		35,725			49,264
Total Equity		775,240		908,517		775,240			908,517
Total Liabilities and Equity	$	2,924,809	$	4,426,666	$	2,924,809		$	4,426,666

The accompanying notes are an integral part of these consolidated financial statements.

F-6

Select Medical Holdings Corporation

Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per share amounts)

	For the Year Ended December 31,
	2013			2014			2015
Net operating revenues	$	2,975,648		$	3,065,017		$	3,742,736
Costs and expenses:
Cost of services		2,495,476			2,582,340			3,211,541
General and administrative		76,921			85,247			92,052
Bad debt expense		37,423			44,600			59,372
Depreciation and amortization		64,392			68,354			104,981
Total costs and expenses		2,674,212			2,780,541			3,467,946
Income from operations		301,436			284,476			274,790
Other income and expense:
Loss on early retirement of debt		(18,747	)		(2,277	)		—
Equity in earnings of unconsolidated subsidiaries		2,476			7,044			16,811
Gain on sale of equity investment		—			—			29,647
Interest expense		(87,364	)		(85,446	)		(112,816	)
Income before income taxes		197,801			203,797			208,432
Income tax expense		74,792			75,622			72,436
Net income		123,009			128,175			135,996
Less: Net income attributable to non-controlling interests		8,619			7,548			5,260
Net income attributable to Select Medical Holdings Corporation	$	114,390		$	120,627		$	130,736
Basic	$	0.82		$	0.91		$	1.00
Diluted	$	0.82		$	0.91		$	0.99
Dividends paid per share	$	0.30		$	0.40		$	0.10
Weighted average shares outstanding:
Basic		136,879			129,026			127,478
Diluted		137,047			129,465			127,752

The accompanying notes are an integral part of these consolidated financial statements.

F-7

Select Medical Corporation

Consolidated Statements of Operations and Comprehensive Income

(in thousands)

	For the Year Ended December 31,
	2013			2014			2015
Net operating revenues	$	2,975,648		$	3,065,017		$	3,742,736
Costs and expenses:
Cost of services		2,495,476			2,582,340			3,211,541
General and administrative		76,921			85,247			92,052
Bad debt expense		37,423			44,600			59,372
Depreciation and amortization		64,392			68,354			104,981
Total costs and expenses		2,674,212			2,780,541			3,467,946
Income from operations		301,436			284,476			274,790
Other income and expense:
Loss on early retirement of debt		(17,788	)		(2,277	)		—
Equity in earnings of unconsolidated subsidiaries		2,476			7,044			16,811
Gain on sale of equity investment		—			—			29,647
Interest expense		(84,954	)		(85,446	)		(112,816	)
Income before income taxes		201,170			203,797			208,432
Income tax expense		75,971			75,622			72,436
Net income		125,199			128,175			135,996
Less: Net income attributable to non-controlling interests		8,619			7,548			5,260
Net income attributable to Select Medical Corporation	$	116,580		$	120,627		$	130,736

The accompanying notes are an integral part of these consolidated financial statements.

F-8

Select Medical Holdings Corporation

Consolidated Statement of Changes in Equity and Income

(in thousands)

							Select Medical Holdings Corporation Stockholders
	Comprehensive Income			Total			Common Stock Issued			Common Stock Par Value			Capital in Excess of Par			Retained Earnings			Non-controlling Interests
Balance at December 31, 2012				$	745,478			140,589		$	141		$	473,697		$	243,210		$	28,430
Net income	$	119,946			119,946												114,390			5,556
Net income—attributable to redeemable non-controlling interests		3,063
Total comprehensive income	$	123,009		$	119,946
Dividends paid to common stockholders					(41,961	)											(41,961	)
Issuance and vesting of restricted stock					6,220			953						6,220
Repurchase of common shares					(11,781	)		(1,447	)		(1	)		(7,524	)		(4,256	)
Stock option expense					811									811
Exercise of stock options					1,525			166						1,525
Distributions to non-controlling interests					(1,839	)														(1,839	)
Purchase of non-controlling interests					261															261
Other					(18	)											(18	)
Balance at December 31, 2013				$	818,642			140,261		$	140		$	474,729		$	311,365		$	32,408
Net income	$	126,765			126,765												120,627			6,138
Net income—attributable to redeemable non-controlling interests		1,410
Total comprehensive income	$	128,175		$	126,765
Dividends paid to common stockholders					(53,366	)											(53,366	)
Issuance and vesting of restricted stock					12,080			1,586			2			12,078
Tax benefit from stock based awards					3,119									3,119
Repurchase of common shares					(130,734	)		(11,589	)		(12	)		(76,851	)		(53,871	)
Stock option expense					698									698
Exercise of stock options					7,355			975			1			7,354
Distributions to non-controlling interests					(2,893	)														(2,893	)
Issuance of non-controlling interest					1,693															1,693
Purchase of non-controlling interests					(8,781	)								(7,421	)					(1,360	)
Other					662												923			(261	)
Balance at December 31, 2014				$	775,240			131,233		$	131		$	413,706		$	325,678		$	35,725
Net income	$	138,186			138,186												130,736			7,450
Net loss—attributable to redeemable non-controlling interests		(2,190	)
Total comprehensive income	$	135,996		$	138,186
Dividends paid to common stockholders					(13,129	)											(13,129	)
Issuance and vesting of restricted stock					13,916			1,385			—			13,916
Tax benefit from stock based awards					1,846									1,846
Repurchase of common shares					(15,827	)		(1,441	)		0			(8,168	)		(7,659	)
Stock option expense					53									53
Exercise of stock options					1,649			183			0			1,649
Non-controlling interests acquired in business combination					2,888															2,888
Distributions to non-controlling interests					(9,732	)														(9,732	)
Issuance of non-controlling interests					14,569									1,689						12,880
Purchase of non-controlling interests					(219	)								(194	)					(25	)
Other					(923	)					0			9			(1,010	)		78
Balance at December 31, 2015				$	908,517			131,360		$	131		$	424,506		$	434,616		$	49,264

The accompanying notes are an integral part of these consolidated financial statements.

F-9

Select Medical Corporation

Consolidated Statement of Changes in Equity and Income

(in thousands)

							Select Medical Corporation Stockholders
	Comprehensive Income			Total			Common Stock Issued		Common Stock Par Value		Capital in Excess of Par			Retained Earnings (Accumulated Deficit)			Non- controlling Interests
Balance at December 31, 2012				$	909,747			0	$	0	$	859,839		$	21,478		$	28,430
Net income	$	122,136			122,136										116,580			5,556
Net income—attributable to redeemable non-controlling interests		3,063
Total comprehensive income	$	125,199		$	122,136
Federal tax benefit of losses contributed by Holdings					1,179							1,179
Net change in dividends payable to Holdings					5,239										5,239
Additional investment by Holdings					1,525							1,525
Dividends declared and paid to Holdings					(226,621	)									(226,621	)
Contribution related to restricted stock awards and stock option issuances by Holdings					7,033							7,033
Distributions to non-controlling interests					(1,839	)												(1,839	)
Purchase of non-controlling interests					261													261
Other					(18	)									(18	)
Balance at December 31, 2013				$	818,642			0	$	0	$	869,576		$	(83,342	)	$	32,408
Net income	$	126,765			126,765										120,627			6,138
Net income—attributable to redeemable non-controlling interests		1,410
Total comprehensive income	$	128,175		$	126,765
Additional investment by Holdings					7,355							7,355
Dividends declared and paid to Holdings					(184,100	)									(184,100	)
Contribution related to restricted stock awards and stock option issuances by Holdings					12,778							12,778
Tax benefit from stock based awards					3,119							3,119
Distributions to non-controlling interests					(2,893	)												(2,893	)
Issuance of non-controlling interests					1,693													1,693
Purchase of non-controlling interests					(8,781	)						(7,421	)					(1,360	)
Other					662										923			(261	)
Balance at December 31, 2014				$	775,240			0	$	0	$	885,407		$	(145,892	)	$	35,725
Net income	$	138,186			138,186										130,736			7,450
Net loss—attributable to redeemable non-controlling interests		(2,190	)
Total comprehensive income	$	135,996		$	138,186
Additional investment by Holdings					1,649							1,649
Dividends declared and paid to Holdings					(28,956	)									(28,956	)
Contribution related to restricted stock awards and stock option issuances by Holdings					13,969							13,969
Tax benefit from stock based awards					1,846							1,846
Non-controlling interests acquired in business combination					2,888													2,888
Distributions to non-controlling interests					(9,732	)												(9,732	)
Issuance of non-controlling interests					14,569							1,689						12,880
Purchase of non-controlling interests					(219	)						(194	)					(25	)
Other					(923	)						9			(1,010	)		78
Balance at December 31, 2015				$	908,517			0	$	0	$	904,375		$	(45,122	)	$	49,264

The accompanying notes are an integral part of these consolidated financial statements.

F-10

Select Medical Holdings Corporation

Consolidated Statements of Cash Flows

(in thousands)

	For the Year Ended December 31,
	2013			2014			2015
Operating activities
Net income	$	123,009		$	128,175		$	135,996
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions from unconsolidated subsidiaries		—			11,954			13,969
Depreciation and amortization		64,392			68,354			104,981
Provision for bad debts		37,423			44,600			59,372
Equity in earnings of unconsolidated subsidiaries		(2,476	)		(7,044	)		(16,811	)
Loss on early retirement of debt		18,747			2,277			—
Gain on sale of assets and businesses		(581	)		(1,048	)		(1,098	)
Gain on sale of equity investment		—			—			(29,647	)
Stock compensation expense		7,033			11,186			14,985
Amortization of debt discount, premium and issuance costs		8,433			7,553			9,543
Deferred income taxes		7,032			14,311			(2,058	)
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Accounts receivable		(67,145	)		(97,802	)		(92,572	)
Other current assets		(8,167	)		(1,729	)		(2,503	)
Other assets		(3,484	)		(103	)		4,713
Accounts payable		(1,283	)		5,997			2,345
Accrued expenses		9,590			(16,039	)		7,200
Net cash provided by operating activities		192,523			170,642			208,415
Investing activities
Purchases of property and equipment		(73,660	)		(95,246	)		(182,642	)
Proceeds from sale of assets		2,912			—			1,767
Investment in businesses		(34,893	)		(4,634	)		(2,347	)
Proceeds from sale of equity investment		—			—			33,096
Acquisition of businesses, net of cash acquired		(1,665	)		(1,211	)		(1,061,628	)
Net cash used in investing activities		(107,306	)		(101,091	)		(1,211,754	)
Financing activities
Borrowings on revolving facilities		690,000			910,000			1,135,000
Payments on revolving facilities		(800,000	)		(870,000	)		(895,000	)
Proceeds from term loans, net of discount		298,500			—			646,875
Payments on term loans		(596,720	)		(33,994	)		(29,134	)
Issuance of 6.375% senior notes, includes premium		600,000			111,650			—
Repurchase of senior floating rate notes		(167,300	)		—			—
Repurchase of 75/8% senior subordinated notes		(70,000	)		—			—
Borrowings of other debt		15,310			9,076			13,374
Principal payments on other debt		(10,834	)		(14,673	)		(18,136	)
Debt issuance costs		(18,914	)		(4,434	)		(23,300	)
Proceeds from (repayment of) bank overdrafts		(5,330	)		9,240			6,869
Purchase of non-controlling interests		—			(9,961	)		(1,095	)
Proceeds from issuance of non-controlling interests		—			185			217,065
Dividends paid to common stockholders		(41,961	)		(53,366	)		(13,129	)
Tax benefit from stock based awards		—			3,119			1,846
Repurchase of common stock		(11,781	)		(130,734	)		(15,827	)
Proceeds from issuance of common stock		1,525			7,355			1,649
Distributions to non-controlling interests		(3,537	)		(3,979	)		(12,637	)
Net cash provided by (used in) financing activities		(121,042	)		(70,516	)		1,014,420
Net increase (decrease) in cash and cash equivalents		(35,825	)		(965	)		11,081
Cash and cash equivalents at beginning of period		40,144			4,319			3,354
Cash and cash equivalents at end of period	$	4,319		$	3,354		$	14,435
Supplemental Cash Flow Information
Cash paid for interest	$	89,061		$	78,812		$	103,166
Cash paid for taxes	$	64,963		$	77,771		$	79,420

The accompanying notes are an integral part of these consolidated financial statements.

F-11

Select Medical Corporation

Consolidated Statements of Cash Flows

(in thousands)

	For the Year Ended December 31,
	2013			2014			2015
Operating activities
Net income	$	125,199		$	128,175		$	135,996
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions from unconsolidated subsidiaries		—			11,954			13,969
Depreciation and amortization		64,392			68,354			104,981
Provision for bad debts		37,423			44,600			59,372
Equity in earnings of unconsolidated subsidiaries		(2,476	)		(7,044	)		(16,811	)
Loss on early retirement of debt		17,788			2,277			—
Gain on sale of assets and businesses		(581	)		(1,048	)		(1,098	)
Gain on sale of equity investment		—			—			(29,647	)
Stock compensation expense		7,033			11,186			14,985
Amortization of debt discount, premium and issuance costs		8,344			7,553			9,543
Deferred income taxes		7,032			14,311			(2,058	)
Changes in operating assets and liabilities, net of effects from acquisition of businesses: Accounts receivable		(67,145	)		(97,802	)		(92,572	)
Other current assets		(8,167	)		(1,729	)		(2,503	)
Other assets		(3,484	)		(103	)		4,713
Accounts payable		(1,283	)		5,997			2,345
Accrued expenses		14,027			(16,039	)		7,200
Net cash provided by operating activities		198,102			170,642			208,415
Investing activities
Purchases of property and equipment		(73,660	)		(95,246	)		(182,642	)
Proceeds from sale of assets		2,912			—			1,767
Investment in businesses		(34,893	)		(4,634	)		(2,347	)
Proceeds from sale of equity investment		—			—			33,096
Acquisition of businesses, net of cash acquired		(1,665	)		(1,211	)		(1,061,628	)
Net cash used in investing activities		(107,306	)		(101,091	)		(1,211,754	)
Financing activities
Borrowings on revolving facilities		690,000			910,000			1,135,000
Payments on revolving facilities		(800,000	)		(870,000	)		(895,000	)
Proceeds on term loans, net of discount		298,500			—			646,875
Payments on term loans		(596,720	)		(33,994	)		(29,134	)
Issuance of 6.375% senior notes, includes premium		600,000			111,650			—
Repurchase of 75/8% senior subordinated notes		(70,000	)		—			—
Borrowings of other debt		15,310			9,076			13,374
Principal payments on other debt		(10,834	)		(14,673	)		(18,136	)
Debt issuance costs		(18,914	)		(4,434	)		(23,300	)
Proceeds from (repayment of) bank overdrafts		(5,330	)		9,240			6,869
Purchase of non-controlling interest		—			(9,961	)		(1,095	)
Proceeds from issuance of non-controlling interest		—			185			217,065
Equity investment by Holdings		1,525			7,355			1,649
Dividends paid to Holdings		(226,621	)		(184,100	)		(28,956	)
Tax benefit from stock based awards		—			3,119			1,846
Distributions to non-controlling interests		(3,537	)		(3,979	)		(12,637	)
Net cash provided by (used in) financing activities		(126,621	)		(70,516	)		1,014,420
Net increase (decrease) in cash and cash equivalents		(35,825	)		(965	)		11,081
Cash and cash equivalents at beginning of period		40,144			4,319			3,354
Cash and cash equivalents at end of period	$	4,319		$	3,354		$	14,435
Supplemental Cash Flow Information
Cash paid for interest	$	83,482		$	78,812		$	103,166
Cash paid for taxes	$	64,963		$	77,771		$	79,420

The accompanying notes are an integral part of these consolidated financial statements.

F-12

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Significant Accounting Policies

Business Description

        Select Medical Corporation ("Select") was formed in December 1996 and commenced operations during February 1997 upon the completion of its first acquisition. Select Medical Holdings Corporation ("Holdings") was formed in October 2004 for the purpose of affecting a leveraged buyout of Select, which was a publicly traded entity. On February 24, 2005, Select merged with a subsidiary of Holdings, which resulted in Select becoming a wholly owned subsidiary of Holdings (the "Merger"). On September 30, 2009 Holdings completed its initial public offering of common stock. At the time of the transaction, generally accepted accounting principles ("GAAP") required that any amounts recorded or incurred (such as goodwill and compensation expense) by the parent as a result of the Merger or for the benefit of the subsidiary be "pushed down" and recorded in Select's consolidated financial statements. Holdings and Select and their subsidiaries are collectively referred to as the "Company." The consolidated financial statements of Holdings include the accounts of its wholly owned subsidiary Select. Holdings conducts substantially all of its business through Select and its subsidiaries.

        The Company is managed through three business segments; specialty hospitals, outpatient rehabilitation, and, as of June 1, 2015, the Concentra segment. Through the specialty hospitals segment, the Company provides long term acute care hospital services and inpatient acute rehabilitative hospital care. The specialty hospitals segment consists of hospitals designed to serve the needs of long term stay acute patients and hospitals designed to serve patients that require intensive medical rehabilitation care. Patients are typically admitted to the Company's specialty hospitals from general acute care hospitals. These patients have specialized needs, and serious and often complex medical conditions such as respiratory failure, neuromuscular disorders, traumatic brain and spinal cord injuries, strokes, non-healing wounds, cardiac disorders, renal disorders, and cancer. The Company operated 123, 129, and 127 specialty hospitals at December 31, 2013, 2014 and 2015, respectively. The Company's outpatient rehabilitation segment consists of clinics and contract services that provide physical, occupational, and speech rehabilitation services. The Company's outpatient rehabilitation patients are typically diagnosed with musculoskeletal impairments that restrict their ability to perform normal activities of daily living. At December 31, 2013, 2014 and 2015, the Company operated 1,006, 1,023, and 1,038 outpatient clinics, respectively. The Company's Concentra segment consists of medical centers and contract services provided at employer worksites and Department of Veterans Affairs community-based outpatient clinics, or "CBOCs", that deliver occupational medicine, consumer health, physical therapy, and veteran's healthcare services. At December 31, 2015, the Company operated 300 medical centers, 138 medical facilities located at the workplaces of Concentra's employer customers, and 33 Department of Veterans Affairs CBOCs. At December 31, 2015, the Company had operations in 46 states and the District of Columbia.

Principles of Consolidation

        The consolidated financial statements include the accounts of the Company, its majority owned subsidiaries, limited liability companies, and limited partnerships the Company and its subsidiaries control through ownership of general and limited partnership or membership interests. All intercompany balances and transactions are eliminated in consolidation.

Use of Estimates

        The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and

F-13

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Organization and Significant Accounting Policies (Continued)

liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and amounts of revenue and expenses recognized during the period. Actual results could differ materially from those estimates.

Cash and Cash Equivalents

        The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are stated at cost which approximates market value.

Accounts Receivable and Allowance for Doubtful Accounts

        The Company reports accounts receivable at estimated net realizable values. Substantially all of the Company's accounts receivable are related to providing healthcare services to patients whose costs are primarily paid by federal and state governmental authorities, managed care health plans, commercial insurance companies, and workers' compensation programs. Collection of these accounts receivable is the Company's primary source of cash and is critical to its operating performance. The Company's primary collection risks relate to non-governmental payors who insure these patients and deductibles, co-payments, and amounts owed by the patient. Deductibles, co-payments, and amounts owed by the patient are an immaterial portion of the Company's net accounts receivable balance and accounted for approximately 0.2% and 1.2% of the net accounts receivable balance before doubtful accounts at December 31, 2014 and 2015, respectively. The Company's general policy is to verify insurance coverage prior to the date of admission for a patient admitted to the Company's hospitals, or in the case of the Company's outpatient rehabilitation clinics and Concentra medical centers, the Company verifies insurance coverage prior to their first visit. The Company's estimate for the allowance for doubtful accounts is calculated by providing a reserve allowance based upon the age of an account balance. Generally the Company has reserved as uncollectible all governmental accounts over 365 days and non-governmental accounts over 180 days from discharge. This method is monitored based on historical cash collections experience. Collections are impacted by the effectiveness of the Company's collection efforts with non-governmental payors and regulatory or administrative disruptions with the fiscal intermediaries that pay the Company's governmental receivables. Uncollected accounts are written off the balance sheet when they are turned over to an outside collection agency, or when management determines that the balance is uncollectible, whichever occurs first.

Property and Equipment

        Property and equipment are stated at cost, net of accumulated depreciation. Direct internal and external costs of developing software for internal use, including programming and enhancements, are capitalized and depreciated over the estimated useful lives once the software is placed in service. Capitalized software costs are included within furniture and equipment. Software training costs, maintenance, and repairs are expensed as incurred. Depreciation and amortization are computed using the

F-14

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Organization and Significant Accounting Policies (Continued)

straight-line method over the estimated useful lives of the assets or the term of the lease, as appropriate. The general range of useful lives is as follows:

Leasehold improvements	5 - 15 years
Furniture and equipment	3 - 20 years
Buildings	40 years
Building improvements	5 - 25 years
Land improvements	2 - 25 years

        The Company reviews the realizability of long-lived assets whenever events or circumstances occur which indicate recorded costs may not be recoverable. Gains or losses related to the retirement or disposal of property and equipment are reported as a component of income from operations.

Concentration of Credit Risk

        Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash balances and trade receivables. The Company invests its excess cash with large financial institutions. The Company grants unsecured credit to its patients, most of who reside in the service area of the Company's facilities and are insured under third-party payor agreements. Because of the geographic diversity of the Company's facilities and non-governmental third-party payors, Medicare represents the Company's only significant concentration of credit risk.

Income Taxes

        Deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. As part of the process of preparing its consolidated financial statements, the Company estimates income taxes based on its actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for book and tax purposes. The Company also recognizes as deferred tax assets the future tax benefits from net operating loss carry forwards. The Company evaluates the realizability of these deferred tax assets by assessing their valuation allowances and by adjusting the amount of such allowances, if necessary. Among the factors used to assess the likelihood of realization are projections of future taxable income streams, the expected timing of the reversals of existing temporary differences, and the impact of tax planning strategies that could be implemented to avoid the potential loss of future tax benefits.

        Reserves for uncertain tax positions are established for exposure items related to various federal and state tax matters. Income tax reserves are recorded when an exposure is identified and when, in the opinion of management, it is more likely than not that a tax position will not be sustained and the amount of the liability can be estimated.

Intangible Assets and Liabilities

        Finite-lived intangible assets and liabilities are amortized based on the pattern in which the economic benefits are consumed or otherwise depleted. If such a pattern cannot be reliably determined, other intangible assets are amortized on a straight-line basis over their estimated lives. Goodwill and certain other indefinite-lived intangible assets are not amortized, but instead are subject to periodic impairment

F-15

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Organization and Significant Accounting Policies (Continued)

evaluations. In performing the quantitative periodic impairment tests, the fair value of the reporting unit is compared to its carrying value, including goodwill and other intangible assets. If the carrying value exceeds the fair value and an impairment condition exists, an impairment loss would be recognized.

        To determine the fair value of its reporting units, the Company uses a discounted cash flow approach. Included in this analysis are assumptions regarding revenue growth rate, future Adjusted EBITDA margin estimates, future general and administrative expense rates, and the industry's weighted average cost of capital and industry specific market comparable Adjusted EBITDA multiples. The Company also must estimate residual values at the end of the forecast period and future capital expenditure requirements. Each of these assumptions requires the Company to use its knowledge of (1) its industry, (2) its recent transactions, and (3) reasonable performance expectations for its operations. If any one of the above assumptions changes or fails to materialize, the resulting decline in the Company's estimated fair value could result in a material impairment charge to the goodwill associated with any one of the reporting units.

        Impairment tests are required to be conducted at least annually, or when events or conditions occur that might suggest a possible impairment. These events or conditions include, but are not limited to, a significant adverse change in the business environment, regulatory environment or legal factors; a current period operating or cash flow loss combined with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these events or conditions could significantly impact an impairment assessment, necessitating an impairment charge. For purposes of goodwill impairment assessment, the Company has defined its reporting units as specialty hospitals, Concentra, outpatient rehabilitation clinics, and contract therapy. Goodwill has been allocated among reporting units based on the relative fair value of those divisions when the Merger occurred in 2005 and based on subsequent acquisitions and dispositions. The Company's most recent impairment assessment was completed during the fourth quarter of 2015 utilizing financial information as of October 1, 2015 and indicated that there was no impairment with respect to goodwill or other recorded intangible assets.

        Identifiable assets and liabilities acquired in connection with business combinations accounted for under the purchase method are recorded at their respective fair values. Deferred income taxes have been recorded to the extent of differences between the fair value and the tax basis of the assets acquired and liabilities assumed. Company management has allocated the intangible assets between identifiable intangibles and goodwill. At December 31, 2015, intangible assets other than goodwill consist of the values assigned to trademarks, certificates of need, accreditations, customer relationships, and leasehold interests. Management believes that the estimated useful lives established are reasonable based on the economic factors applicable to each of the intangible assets.

        The approximate useful life of each class of intangible assets and liabilities is as follows:

Trademarks	Indefinite
Certificates of need	Indefinite
Accreditations	Indefinite
Customer relationships	9 - 17 years
Leasehold interests	2 - 10 years

        The Company reviews the realizability of intangible assets whenever events or circumstances occur which indicate recorded amounts may not be recoverable.

F-16

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Organization and Significant Accounting Policies (Continued)

        If the expected future cash flows (undiscounted) are less than the carrying amount of such assets, the Company recognizes an impairment loss for the difference between the carrying amount of the assets and their estimated fair value.

Deferred Financing Costs

        The Company has incurred debt issuance costs related to indebtedness which are recognized as other assets in the consolidated balance sheet. Debt issuance costs are subsequently amortized and recognized as interest expense using the effective interest method over the term of the related indebtedness. Whenever indebtedness is modified from its original terms an evaluation is made whether an accounting modification or accounting extinguishment has occurred in order to determine the accounting treatment.

Due to Third-Party Payors

        Due to third-party payors represents the difference between amounts received under interim payment plans from Medicare and Medicaid for services rendered and amounts estimated to be reimbursed by those third-party payors upon settlement of cost reports.

Insurance Risk Programs

        Under a number of the Company's insurance programs, which include the Company's employee health insurance program, its workers' compensation and professional malpractice liability insurance programs, the Company is liable for a portion of its losses. In these situations the Company accrues for its losses under an occurrence-based approach whereby the Company estimates the losses that will be incurred in a respective accounting period and accrues that estimated liability using actuarial methods. These programs are monitored quarterly and estimates are revised as necessary to take into account additional information. Provisions for losses for professional liability risks retained by the Company at December 31, 2014 and 2015 have been discounted at 3%. At December 31, 2014 and 2015, respectively, the Company had recorded a liability of $101.9 million and $157.4 million related to these programs. If the Company did not discount the provisions for losses for professional liability risks, the aggregate liability for all of the insurance risk programs would be approximately $105.5 million and $165.8 million at December 31, 2014 and 2015, respectively.

Equity Method Investments

        Investments in equity method investees are accounted for using the equity method based upon the level of ownership and/or the Company's ability to exercise significant influence over the operating and financial policies of the investee. Investments of this nature are recorded at original cost and adjusted periodically to recognize the Company's proportionate share of the investees' net income or losses after the date of investment. When net losses from an investment accounted for under the equity method exceeds its carrying amount, the investment balance is reduced to zero. The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company's share of that net income exceeds the share of the net losses not recognized during the period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred. The Company evaluates its investments in companies accounted for using the equity method for impairment when there is evidence or indicators that a decrease in value may be other than temporary. The Company's Other Assets are primarily composed of

F-17

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Organization and Significant Accounting Policies (Continued)

equity method investments of $99.6 million and $101.4 million as of December 31, 2014 and 2015, respectively. The Company's equity method investments consist principally of non-consolidating interests in inpatient and outpatient rehabilitation businesses. These rehabilitation businesses include a 49.0% interest in BIR, JV, LLP; a 49.0% interest in OHRH, LLC, a 49.0% interest in GlobalRehab—Scottsdale, LLC, a 50.0% interest in Rehabilitation Institute of Denton, LLC, and a 49.0% interest in ES Rehabilitation, LLC as of December 31, 2014 and 2015. The Company's equity method investments had equity in earnings of unconsolidated subsidiaries of $2.5 million, $7.0 million and $16.8 million for the years ended December 31, 2013, 2014 and 2015, respectively.

Non-Controlling Interests

        The ownership interests held by other parties in subsidiaries, limited liability companies and limited partnerships controlled by the Company are classified as non-controlling interests. Non-controlling interests' which are reported in the stockholders' equity section of the Company's consolidated balance sheets, were $35.7 million and $49.3 million as of December 31, 2014 and 2015, respectively.

        Some of our non-controlling ownership interests consist of outside parties that have certain redemption rights that, if exercised, require the Company to purchase the parties ownership interest. These interests are classified and reported as redeemable non-controlling interests and they have been adjusted to their approximate redemption values. The redeemable non-controlling interests' balances reported on the Company's consolidated balance sheets were $11.0 million and $238.2 million as of December 31, 2014 and 2015, respectively. As of December 31, 2014 and 2015, the Company believes the redemption amounts of these ownership interests approximates the fair value of those interests. The changes in the redeemable non-controlling interests amounts for the years ended December 31, 2014 and 2015 are as follows:

Balance at January 1, 2014	$	11,584
Changes in the redemption amounts		(923	)
Net income		1,410
Distributions		(1,086	)
Balance at December 31, 2014	$	10,985
Issuance of ownership interests in Concentra		218,005
Ownership interests acquired in business combination		14,196
Repurchase of ownership interests		(876	)
Changes in the redemption amounts		1,010
Net loss		(2,190	)
Distributions		(2,909	)
Balance at December 31, 2015	$	238,221

        Net income (loss) of entities controlled by the Company that are less than wholly owned require attribution of net income (loss) amounts to each non-controlling ownership interest and to the Company in

F-18

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Organization and Significant Accounting Policies (Continued)

the consolidated statement of operations and comprehensive income. The net income (loss) attributable to non controlling interests for the years ended December 31, 2013, 2014, and 2015 are as follows:

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
Net income (loss) attributable to non-controlling interests classified as redeemable non-controlling interests	$	3,063	$	1,410	$	(2,190	)
Net income attributable to non-controlling interests classified as equity		5,556		6,138		7,450
Net income attributable to non-controlling interests	$	8,619	$	7,548	$	5,260

Revenue Recognition

        Net operating revenues consists primarily of patient service revenues and revenues generated from therapy services provided to healthcare institutions under contractual arrangements and are recognized as services are rendered.

        Patient service revenue is reported net of provisions for contractual allowances from third-party payors and patients. The Company has agreements with third-party payors that provide for payments to the Company at amounts different from its established billing rates. The differences between the estimated program reimbursement rates and the standard billing rates are accounted for as contractual adjustments, which are deducted from gross revenues to arrive at net operating revenues. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges, per diem, and per visit payments. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined. Accounts receivable resulting from such payment arrangements are recorded net of contractual allowances.

        A significant portion of the Company's net operating revenues are generated directly from the Medicare program. Net operating revenues generated directly from the Medicare program represented approximately 46%, 45% and 36% of the Company's net operating revenues for the years ended December 31, 2013, 2014 and 2015, respectively. Approximately 32% and 24% of the Company's accounts receivable (after allowances for contractual adjustments but before doubtful accounts) are from Medicare at December 31, 2014 and 2015. As a provider of services to the Medicare program, the Company is subject to extensive regulations. The inability of any of the Company's specialty hospitals or outpatient clinics to comply with regulations can result in significant changes in that specialty hospital's or outpatient clinic's net operating revenues generated from the Medicare program.

        Revenues generated under contractual arrangements are comprised primarily of billings for services rendered to nursing homes, hospitals, schools and other third parties.

Stock Based Compensation

        The Company measures the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognizes the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements comprise both stock

F-19

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Organization and Significant Accounting Policies (Continued)

options and restricted share plans. Employee stock options are valued using the Black-Scholes option valuation method which uses assumptions that relate to the expected volatility of the Company's common stock, the expected dividend yield of the Company's stock, the expected life of the options and the risk free interest rate. Such compensation amounts are amortized over the respective vesting periods or periods of service of the option grant. The Company values restricted stock grants by using the closing market price of its stock on the date of grant.

Recent Accounting Pronouncements

        In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, which supersedes most of the current revenue recognition requirements. The core principle of the new guidance 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. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. The original standard was effective for fiscal years beginning after December 15, 2016; however, in July 2015, the FASB approved a one-year deferral of this standard, with a new effective date for fiscal years beginning after December 15, 2017. The Company is currently evaluating the standard to determine the impact it will have on its consolidated financial statements.

        In April and August 2015, the FASB issued ASU No. 2015-03 and ASU No. 2015-15, Interest—Imputation of Interest, respectively, to simplify the presentation of debt issuance costs. The standard requires debt issuance costs be presented in the balance sheet as a direct deduction from the carrying value of the debt liability. The FASB clarified that debt issuance costs related to line-of-credit arrangements can be presented as an asset and amortized over the term of the arrangement. The guidance is effective for annual fiscal periods beginning after December 15, 2015. The Company will adopt the standard in 2016. As of December 31, 2015, we had approximately $38.0 million in debt issuance costs included in other assets that would be a direct deduction of the debt liability under the new standard.

        In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement—Period Adjustments, which changes the reporting requirement for retrospective adjustments to provisional amounts in the measurement period. The amendments in this update require an entity to present separately on the face of the income statement or disclose in the notes, the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The revised guidance is effective for annual fiscal periods beginning after December 15, 2015. Early adoption is permitted and the Company intends to prospectively adopt ASU No. 2015-16.

        In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which changes the presentation of deferred income taxes. The intent is to simplify the presentation of deferred income taxes through the requirement that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The revised guidance is effective for annual fiscal periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the standard to determine the impact it will have on its consolidated financial statements.

F-20

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Acquisitions

Concentra Acquistion

        On June 1, 2015, MJ Acquisition Corporation, a joint venture that Select created with Welsh, Carson, Anderson & Stowe XII, L.P. ("WCAS"), consummated the acquisition of Concentra, the indirect operating subsidiary of Concentra Group Holdings, LLC ("Group Holdings"), and its subsidiaries. Pursuant to the terms of the stock purchase agreement, dated as of March 22, 2015, by and among MJ Acquisition Corporation, Concentra and Humana Inc. ("Humana"), MJ Acquisition Corporation acquired 100% of the issued and outstanding equity securities of Concentra from Humana for $1,047.2 million, net of $3.8 million of cash acquired.

        MJ Acquisition Corporation entered into the Concentra credit facilities, see Note 6, to fund a portion of the purchase price for all of the issued and outstanding stock of Concentra. Concentra, as the surviving entity of the merger between MJ Acquisition Corporation and Concentra, became the borrower under the Concentra credit facilities.

        Select entered into a Subscription Agreement (the "Subscription Agreement"), by and among Select, WCAS, Group Holdings and the other members of Group Holdings. Pursuant to the Subscription Agreement, Select purchased Class A equity interests of Group Holdings for an aggregate purchase price of $217.9 million, representing a majority (50.1%) of the voting equity interests in Group Holdings. WCAS and the other members purchased redeemable non-controlling Class A interests of Group Holdings for an aggregate purchase price of $217.1 million, representing a 49.9% share of the voting equity interests of Group Holdings.

        Group Holdings contributed cash of $435.0 million, to MJ Acquisition Corporation. MJ Acquisition Corporation used the cash, together with $650.0 million in borrowings under the Concentra credit facilities, to pay the purchase price, and fees and expenses.

        Concentra, formed in 1979, is one of the largest providers of occupational medicine, consumer health, physical therapy and veteran's healthcare services in the United States based on the number of facilities. As of December 31, 2015, Concentra operated 300 medical centers in 38 states, 138 medical facilities located at the workplaces of Concentra's employer customers and 33 Department of Veterans Affairs CBOCs. Concentra's financial results are consolidated with Select's as of June 1, 2015.

        The Concentra acquisition was accounted for under the provisions of Accounting Standards Codification ("ASC") 805, Business Combinations. The Company allocated the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values.

        During the fourth quarter of the year ended December 31, 2015, the Company finalized the purchase price allocation to identifiable intangible assets, fixed assets, non-controlling interests, and certain pre-acquisition contingencies. The Company is in the process of completing the accounting for certain deferred tax matters. The Company expects to complete the purchase price allocation during the second quarter of 2016.

F-21

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Acquisitions (Continued)

        The following table summarizes the allocation of the purchase price to the fair value of identifiable assets acquired and liabilities assumed, in accordance with the acquisition method of accounting (in thousands):

Cash and cash equivalents	$	3,772
Identifiable tangible assets, excluding cash and cash equivalents		405,428
Identifiable intangible assets		254,990
Goodwill		646,466
Total assets		1,310,656
Total current liabilities		90,188
Total non-current liabilities		152,425
Total liabilities		242,613
Acquired non-controlling interests		17,084
Net assets acquired		1,050,959
Less: Cash and cash equivalents acquired		3,772
Net cash paid	$	1,047,187

        The fair value assigned to intangible assets were determined through the use of the income approach, specifically the relief from royalty and the multi-period excess earnings methods. Both valuation methods rely on management judgment, including expected future cash flows resulting from existing customer relationships, customer attrition rates, contributory effects of other assets utilized in the business, peer group cost of capital and royalty rates, and other factors. Useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows. The valuation of tangible assets was derived using a combination of the income, market, and cost approaches. Significant judgments used in valuing tangible assets include estimated reproduction or replacement cost, useful lives of assets, estimated selling prices, costs to complete, and reasonable profit. The fair value assigned to non-controlling interests were determined through the use of a market multiple approach.

        Intangible assets acquired consisted of the following:

	Amount		Weighted Average Amortization Period
	(in thousands)		(in years)
Trademarks	$	104,900	Indefinite
Customer relationships		141,265	10.2
Leasehold interests		8,825	6.3
Total	$	254,990

        Intangible liabilities acquired included unfavorable leasehold interests of $3.3 million with a weighted average amortization period of 4.4 years. The customer relationships are being amortized on a straight-line basis over their expected useful lives. Leasehold interests are being amortized over their remaining lease terms at time of acquisition.

F-22

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Acquisitions (Continued)

        Goodwill of $646.5 million was recognized in the transaction, representing the excess of the purchase price over the value of the tangible and intangible assets acquired and liabilities assumed. The factors considered in determining the goodwill that resulted from the Concentra purchase price included Concentra's future earnings potential and the value of Concentra's assembled workforce. The goodwill is allocated to the Concentra segment and is not deductible for tax purposes. However, prior to its acquisition by MJ Acquisition Corporation, Concentra completed certain acquisitions that resulted in goodwill with an estimated value of $23.9 million that is deductible for tax purposes, which the Company will deduct through 2025.

        For the period of June 1, 2015 through December 31, 2015, Concentra contributed net revenue of $585.2 million and a net loss of approximately $12.2 million which is reflected in the Company's consolidated statement of operations. The Company incurred $4.7 million of acquisition costs in the year ended December 31, 2015. Acquisition costs consisted of legal, advisory, and due diligence fees and expenses.

        The following pro forma unaudited results of operations have been prepared assuming the acquisition of Concentra occurred January 1, 2014. These results are not necessarily indicative of results of future operations nor of the results that would have actually occurred had the acquisition been consummated January 1, 2014.

	December 31,
	2014		2015
	(in thousands, except per share amounts)
Net revenue	$	4,063,218	$	4,154,941
Net income		106,945		129,737
Income per common share:
Basic	$	0.81	$	1.00
Diluted	$	0.80	$	0.99

        The pro forma financial information is based on the allocation of the purchase price and therefore subject to adjustment upon finalizing the purchase price allocation, as described above, during the measurement period. The net income tax impact was calculated at a statutory rate, as if Concentra had been a subsidiary of the Company as of January 1, 2014.

        Pro forma results for the year ended December 31, 2015 were adjusted to include approximately $19.8 million of interest expense, an income tax benefit of approximately $11.4 million, approximately $4.8 million in net income attributable to non-controlling interests, approximately $1.8 million of rent expense, and approximately $1.2 million of depreciation expense. Results for the same period were also adjusted to exclude seller costs of $6.0 million, Concentra acquisition costs of $4.7 million, and amortization expense of approximately $0.8 million.

        Pro forma results for the year ended December 31, 2014 were adjusted to include approximately $48.1 million of interest expense, an income tax benefit of approximately $15.5 million, approximately $8.3 million of net loss attributable to non-controlling interests, $4.7 million of Concentra acquisition costs, approximately $4.0 million of rent expense, and approximately $3.0 million of depreciation expense. Results for the same period were also adjusted to exclude amortization expense of approximately $2.3 million.

F-23

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Acquisitions (Continued)

Other Acquistions

        For the year ended December 31, 2013, the Company provided total consideration of $5.6 million to acquire businesses, consisting of cash amounting to $1.7 million (net of cash acquired) and the issuance of non controlling interests, for identifiable tangible net assets consisting principally of accounts receivable, and property and equipment with an aggregate fair value of $3.5 million and goodwill of $2.1 million.

        For the year ended December 31, 2014, the Company provided total consideration of $3.2 million to acquire businesses, consisting of cash amounting to $1.1 million (net of cash acquired) and non controlling interests, for identifiable tangible net assets consisting principally of accounts receivable, and property and equipment with an aggregate fair value of $1.3 million and goodwill of $1.9 million.

        In addition to the acquisition of Concentra, during the year ended December 31, 2015, the Company acquired interests in several businesses, consisting principally of inpatient and outpatient rehabilitation businesses. The Company provided total consideration of $30.2 million, consisting of cash amounting to $14.4 million (net of cash acquired) and the issuance of non controlling interests in the amount of $14.7 million, for identifiable tangible net assets consisting principally of accounts receivable, and property and equipment with an aggregate fair value of $4.1 million. These acquisitions resulted in recognition of goodwill of $21.9 million and $4.2 million in the specialty hospitals segment and Concentra segment, respectively.

3. Property and Equipment

        Property and equipment consists of the following:

	December 31,
	2014			2015
	(in thousands)
Land	$	71,635		$	76,118
Leasehold improvements		155,648			295,647
Buildings		396,228			411,376
Furniture and equipment		272,919			382,838
Construction-in-progress		41,230			146,868
Total property and equipment		937,660			1,312,847
Accumulated depreciation		(395,350	)		(448,723	)
Property and equipment, net	$	542,310		$	864,124

        Depreciation expense was $63.9 million, $67.9 million, and $96.1 million for the years ended December 31, 2013, 2014 and 2015, respectively.

F-24

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Intangible Assets and Liabilities

        The net carrying value of the Company's goodwill and identifiable intangible assets consist of the following:

	December 31,
	2014		2015
	(in thousands)
Goodwill	$	1,642,083	$	2,314,624
Identifiable intangibles—Indefinite lived assets:
Trademarks		57,709		162,609
Certificates of need		12,727		13,022
Accreditations		2,083		2,045
Identifiable intangibles—Finite lived assets:
Customer relationships		—		132,751
Favorable leasehold interests		—		8,248
Total identifiable intangibles	$	1,714,602	$	2,633,299

        The Company's customer relationship assets amortize over their estimated useful lives. Amortization expense for the Company's customer relationships was $8.5 million for the year ended December 31, 2015. Estimated amortization expense of the Company's customer relationships for each of the five succeeding years is $14.6 million.

        In addition, the Company has recognized unfavorable leasehold interests which are recorded as liabilities. The net carrying value of unfavorable leasehold interests was $3.0 million as of December 31, 2015.

        The Company's favorable leasehold assets and unfavorable leasehold liabilities are amortized to rent expense over the remaining term of their respective leases to reflect a market rent per period based upon the market conditions present at the acquisition date. The effect of this amortization increased rent expense by $0.3 million for the year ended December 31, 2015.

        The Company's accreditations and trademarks have renewal terms. The costs to renew these intangibles are expensed as incurred. At December 31, 2015, the accreditations and trademarks have a weighted average time until next renewal of 1.5 years and 3.8 years, respectively.

        The changes in the carrying amount of goodwill for the Company's reportable segments for the years ended December 31, 2014 and 2015 are as follows:

	Specialty Hospitals			Outpatient Rehabilitation			Concentra			Total
	(in thousands)
Balance as of January 1, 2014	$	1,334,615		$	308,018					$	1,642,633
Goodwill acquired during year		855			1,011						1,866
Goodwill allocated to contributed business		—			(2,406	)					(2,406	)
Purchase accounting adjustment		(10	)		—						(10	)
Balance as of December 31, 2014	$	1,335,460		$	306,623		$	—		$	1,642,083
Goodwill acquired during year		21,972			—			702,023			723,995
Measurement period adjustment		(53	)		—			(51,373	)		(51,426	)
Disposal of business		—			(28	)		—			(28	)
Balance as of December 31, 2015	$	1,357,379		$	306,595		$	650,650		$	2,314,624

        See Note 2 for details of the goodwill acquired during the period.

F-25

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Investments in Unconsolidated Subsidiaries

        During the year ended December 31, 2015, the Company sold an equity investment in an unconsolidated subsidiary of a start-up healthcare company for $33.1 million, which resulted in a gain on the sale of an equity investment of $29.6 million. The gain on sale of the equity investment was classified as non-operating income in the condensed consolidated statements of operations for the year ended December 31, 2015. The proceeds of $33.1 million were classified as cash provided from an investing activity in the condensed consolidated statements of cash flows for the year ended December 31, 2015.

6. Long-Term Debt and Notes Payable

        For purposes of this indebtedness footnote, references to Select exclude Concentra, because the Concentra credit facilities are non-recourse to Holdings and Select.

        The components of long-term debt and notes payable are shown in the following tables:

	December 31,
	2014		2015
	(in thousands)
Select 6.375% senior notes(1)	$	711,465	$	711,235
Select credit facilities:
Select revolving facility		60,000		295,000
Select term loans(2)		775,996		750,485
Other—Select		5,515		11,987
Total Select debt		1,552,976		1,768,707
Less: Select current maturities		10,874		228,316
Select long-term debt maturities	$	1,542,102	$	1,540,391
Concentra credit facilities:
Concentra revolving facility			$	5,000
Concentra term loans(3)				644,865
Other—Concentra				5,312
Total Concentra debt				655,177
Less: Concentra current maturities				5,254
Concentra long-term debt maturities			$	649,923
Total current maturities	$	10,874	$	233,570
Total long-term debt maturities		1,542,102		2,190,314
Total debt	$	1,552,976	$	2,423,884

(1)

Includes unamortized premium of $1.5 million and $1.2 million at December 31, 2014 and 2015, respectively.

(2)

Includes unamortized discounts of $4.2 million and $2.8 million at December 31, 2014 and 2015, respectively.

(3)

Includes unamortized discounts of $2.9 million at December 31, 2015.

F-26

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Long-Term Debt and Notes Payable (Continued)

Select Credit Facilities

        On June 1, 2011, Select entered into its existing senior secured credit agreement that originally provided for $1.15 billion in senior secured credit facilities. The following discussion summarizes amendments and significant transactions affecting the term loan facilities (collectively, the "Select term loans") and the revolving credit facility (the "Select revolving facility" and together with the Select term loans, the "Select credit facilities").

        On August 13, 2012, Select entered into an additional credit extension amendment to the Select credit facilities providing for a $275.0 million series A term loan at the same interest rate and with the same term as the original term loan.

        On February 20, 2013, Select entered into a credit extension amendment to the Select credit facilities providing for a $300.0 million series B term loan. Select used the borrowings under the series B term loan to redeem all of its outstanding 7⁵/8% senior subordinated notes due 2015 on March 22, 2013, to finance Holdings' redemption of all of its senior floating rate notes due 2015 on March 22, 2013 and to repay a portion of the balance outstanding under the Select revolving facility.

        On May 28, 2013, Select issued and sold $600.0 million aggregate principal amount of 6.375% senior notes due June 1, 2021. Select used the proceeds of the 6.375% senior notes to pay a portion of the amounts then outstanding on the original term loan and the series A term loan and to pay related fees and expenses.

        On June 3, 2013, Select amended the Select credit facilities in order to, among other things: (i) extend the maturity date on $293.3 million of its $300.0 million revolving facility from June 1, 2016 to March 1, 2018; (ii) convert the remaining original term loan and series A term loan to a new series C term loan, and lower the interest rate payable on the series C term loan from Adjusted LIBO plus 3.75%, or Alternate Base Rate plus 2.75%, to Adjusted LIBO plus 3.00%, or Alternate Base Rate plus 2.00%, and amend the provision of the series C term loan from providing that Adjusted LIBO will at no time be less than 1.75% to providing that Adjusted LIBO will at no time be less than 1.00%; (iii) lower the interest rate payable on the series B term loan from Adjusted LIBO plus 3.75%, or Alternate Base Rate plus 2.75%, to Adjusted LIBO plus 3.25%, or Alternate Base Rate plus 2.25%; (iv) amend the restrictive covenants governing the Select credit facilities in order to allow for unlimited restricted payments so long as there is no event of default under the credit facilities and the total pro forma ratio of total indebtedness to Consolidated EBITDA (as defined in the credit facilities) is less than or equal to 2.75 to 1.00; and (v) amend the definition of "Available Amount" in a manner the effect of which was to increase the amount available for investments, restricted payments and payment of specified indebtedness.

        On March 4, 2014, Select made a principal prepayment of $34.0 million associated with the Select term loans in accordance with the provision in the Select credit facilities that requires mandatory prepayments of term loans resulting from excess cash flow as defined in the Select credit facilities.

        On March 4, 2014, Select amended the Select credit facilities in order to, among other things: (i) convert the remaining series B term loan to a new series D term loan, and lower the interest rate payable on the series D term loan from Adjusted LIBO plus 3.25%, or Alternate Base Rate plus 2.25%, to Adjusted LIBO plus 2.75%, or Alternate Base Rate plus 1.75%; (ii) set the maturity date of the series D term loan at December 20, 2016; (iii) convert the remaining series C term loan to a new series E term loan, and lower the interest rate payable on the series E term loan from Adjusted LIBO plus 3.00% (subject to an Adjusted LIBO rate floor of 1.00%), or Alternate Base Rate plus 2.00%, to Adjusted LIBO plus 2.75%

F-27

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Long-Term Debt and Notes Payable (Continued)

(subject to an Adjusted LIBO rate floor of 1.00%), or Alternate Base Rate plus 1.75%; (iv) set the maturity date of the series E term loan at June 1, 2018; (v) beginning with the quarter ending March 31, 2014, increase the quarterly compliance threshold set forth in the leverage ratio financial maintenance covenant to a level of 5.00 to 1.00 from 4.50 to 1.00; (vi) provide for a prepayment premium of 1.00% if the Select credit facilities are amended at any time prior to March 4, 2015 in the case of the series E term loans and such amendment reduces the yield applicable to such loans; and (vii) amend the definition of "Available Amount" in a manner the effect of which was to increase the amount available for investments, restricted payments and the payment of specified indebtedness.

        On October 23, 2014, Select entered into two additional credit extension amendments, one of which extended the maturity date on $6.75 million in aggregate principal of revolving commitments from June 1, 2016 to March 1, 2018, the second of which added $50.0 million in incremental revolving commitments that mature on March 1, 2018.

        On March 4, 2015, Select made a principal prepayment of $26.9 million associated with the series D term loan and series E term loan in accordance with the provision in the Select credit facilities that requires mandatory prepayments of term loans as a result of annual excess cash flow as defined in the Select credit facilities.

        On May 20, 2015 Select entered into an additional credit extension amendment of the Select revolving facility to obtain $100.0 million of incremental revolving commitments. The revolving commitments mature on March 1, 2018.

        On December 11, 2015, Select amended the Select credit facilities in order to, among other things: (i) convert $56.2 million of its series D term loan into series E term loan, which have a maturity date of June 1, 2018; (ii) increase the interest rate payable on the series E term loan from Adjusted LIBO plus 2.75% (subject to an Adjusted LIBO rate floor of 1.00%), or Alternative Base Rate plus 1.75%, to Adjusted LIBO plus 4.00% (subject to an Adjusted LIBO rate floor of 1.00%), or Alternative Base Rate plus 3.00%; (iii) beginning with the quarter ending December 31, 2015, increase the quarterly compliance threshold set forth in the leverage ratio financial maintenance covenant to a level of 5.75 to 1.00 from 5.00 to 1.00; (iv) increase the capacity for incremental extensions of credit to $450.0 million; and (v) amend the definition of "Consolidated EBITDA" to add back certain specialty hospital start-up losses.

        At December 31, 2015, Select's credit facilities provided for senior secured financing consisting of a $450.0 million revolving facility which matures on March 1, 2018, including a $75.0 million sublimit for the issuance of standby letters of credit and a $25.0 million sublimit for swingline loans; a $218.6 million series D term loan, maturing on December 20, 2016; and $534.7 million series E term loan, maturing on June 1, 2018.

        The Select term loans amortize quarterly in the amount of 0.25% of the aggregate principal amount, subject to mandatory prepayment provisions.

        All borrowings under Select's credit facilities are subject to the satisfaction of required conditions, including the absence of a default at the time of and after giving effect to such borrowing and the accuracy of the representations and warranties of the borrowers.

        The interest rates per annum applicable to borrowings under Select's credit facilities are, at its option, equal to either an Alternate Base Rate or an Adjusted LIBO rate for a one, two, three or six month interest period, or a nine or twelve month period if available, in each case, plus an applicable margin percentage. The Alternate Base Rate is the greatest of (i) JPMorgan Chase Bank, N.A.'s prime rate,

F-28

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Long-Term Debt and Notes Payable (Continued)

(ii) one-half of 1% over the weighted average of rates on overnight Federal funds as published by the Federal Reserve Bank of New York and (iii) the Adjusted LIBO rate from time to time for an interest period of one month, plus 1.00%. The Adjusted LIBO rate is, with respect to any interest period, the London interbank offered rate for such interest period, adjusted for any applicable statutory reserve requirements.

        Borrowings under the series D term loan bear interest at a rate equal to Adjusted LIBO plus 2.75%, or Alternate Base Rate plus 1.75%. Borrowings under the series E term loan bear interest at a rate equal to Adjusted LIBO plus 4.00%, or Alternate Base Rate plus 3.00%. The Adjusted LIBO for the series E term loan will at no time be less than 1.00%.

        Borrowings under the revolving facility bear interest at a rate equal to Adjusted LIBO plus a percentage ranging from 2.75% to 3.75%, or Alternate Base Rate plus a percentage ranging from 1.75% to 2.75%, in each case based on Select's ratio of total indebtedness to Consolidated EBITDA (as defined in the Select credit facilities).

        On the last day of each calendar quarter Select is required to pay each lender a commitment fee in respect of any unused commitments under the revolving facility, which is currently 0.50% per annum subject to adjustment based upon the ratio of Select's total indebtedness to Consolidated EBITDA (as defined in the Select credit facilities).

        Subject to exceptions, the Select credit facilities require mandatory prepayments of Select term loans in amounts equal to:

•

50% (as may be reduced based on Select's ratio of total indebtedness to Consolidated EBITDA (as defined in the Select credit facilities)) of Select's annual excess cash flow;

•

100% of the net cash proceeds from non-ordinary course asset sales or other dispositions, or as a result of a casualty or condemnation event, subject to reinvestment rights and certain other exceptions; and

•

100% of the net cash proceeds from certain incurrences of debt.

        Select's credit facilities are guaranteed by Holdings, Select and substantially all of its current wholly owned subsidiaries, and will be guaranteed by substantially all of Select's future subsidiaries and secured by substantially all of Select's existing and future property and assets and by a pledge of its capital stock and the capital stock of its subsidiaries.

        Select's credit facilities require that it comply on a quarterly basis with certain financial covenants, including a maximum leverage ratio test.

        In addition, Select's credit facilities include negative covenants, subject to significant exceptions, restricting or limiting its ability and the ability of Holdings and Select's restricted subsidiaries, to, among other things:

•

incur, assume, permit to exist or guarantee additional debt and issue or sell or permit any subsidiary to issue or sell preferred stock;

•

amend, modify or waiver any rights under the certificate of indebtedness, credit agreements, certificate of incorporation, bylaws or other organizational documents which would be materially adverse to the creditors;

•

pay dividends or other distributions on, redeem, repurchase, retire or cancel capital stock;

F-29

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Long-Term Debt and Notes Payable (Continued)

•

purchase or acquire any debt or equity securities of, make any loans or advances to, guarantee any obligation of, or make any other investment in, any other company;

•

incur or permit to exist certain liens on property or assets owned or accrued or assign or sell any income or revenues with respect to such property or assets;

•

sell or otherwise transfer property or assets to, purchase or otherwise receive property or assets from, or otherwise enter into transactions with affiliates;

•

merge, consolidate or amalgamate with another company or permit any subsidiary to merge, consolidate or amalgamate with another company;

•

sell, transfer, lease or otherwise dispose of assets, including any equity interests;

•

repay, redeem, repurchase, retire or cancel any subordinated debt;

•

incur capital expenditures;

•

engage to any material extent in any business other than business of the type currently conducted by Select or reasonably related businesses; and

•

incur obligations that restrict the ability of its subsidiaries to incur or permit to exist any liens on Select's property or assets or to make dividends or other payments to Select.

        The Select credit facilities also contain certain representations and warranties, affirmative covenants and events of default. The events of default include payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain indebtedness, certain events of bankruptcy, certain events under ERISA, material judgments, actual or asserted failure of any guaranty or security document supporting Select's credit facilities to be in full force and effect and any change of control. If such an event of default occurs, the lenders under the Select credit facilities will be entitled to take various actions, including the acceleration of amounts due under the Select credit facilities and all actions permitted to be taken by a secured creditor.

        At December 31, 2015, Select had outstanding borrowings under the Select credit facilities of $753.3 million of the Select term loans (excluding unamortized original issue discounts of $2.8 million) and borrowings of $295.0 million (excluding letters of credit) under the Select revolving facility. Select had $116.1 million of availability under the Select revolving facility (after giving effect to $38.9 million of outstanding letters of credit) at December 31, 2015.

        The applicable margin percentage for borrowings under the Select revolving facility is subject to change based upon the ratio of Select's leverage ratio (as defined in the Select credit facilities). The applicable interest rate for revolving loans as of December 31, 2015 was (1) Alternate Base plus 2.75% for alternate base rate loans and (2) LIBO plus 3.75% for adjusted LIBO rate loans.

        The Select credit facilities require it to maintain certain leverage ratios (as defined in the Select credit facilities). For the three fiscal quarters ended March 31, 2015, June 30, 2015, and September 30, 2015, Select was required to maintain its leverage ratio (its ratio of total indebtedness to consolidated EBITDA) at less than 5.00 to 1.00. For the quarter ended December 31, 2015, Select was required to maintain its leverage ratio at less than 5.75 to 1.00. Select's leverage ratio was 4.78 to 1.00 as of December 31, 2015. Additionally, the Select credit facilities will require a prepayment of borrowings of 50% of excess cash flow, which will result in a prepayment of approximately $10.2 million. Select expects to have the borrowing

F-30

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Long-Term Debt and Notes Payable (Continued)

capacity and intends to use borrowings under its revolving facility to make the required prepayment during the first quarter ended March 31, 2016.

Senior Notes

        On March 11, 2014, Select issued and sold $110.0 million aggregate principal amount of additional 6.375% senior notes due June 1, 2021 (the "Additional Notes"), at 101.50% of the aggregate principal amount resulting in gross proceeds of $111.7 million. The notes were issued as additional notes under the indenture pursuant to which it previously issued $600.0 million of 6.375% senior notes due June 1, 2021 (the "Existing Notes" and, together with the Additional Notes, the "Notes"). The Additional Notes are treated as a single series with the Existing Notes and have the same terms as those of the Existing Notes.

        Interest on the Notes accrues at the rate of 6.375% per annum and is payable semi-annually in cash in arrears on June 1 and December 1 of each year. The Notes are Select's senior unsecured obligations and rank equally in right of payment with all of its other existing and future senior unsecured indebtedness and senior in right of payment to all of its existing and future subordinated indebtedness. The Notes are fully and unconditionally guaranteed by all of Select's wholly owned subsidiaries. The Notes are guaranteed, jointly and severally, by Select's direct or indirect existing and future domestic restricted subsidiaries other than certain non-guarantor subsidiaries.

        Select may redeem some or all of the Notes prior to June 1, 2016 by paying a "make-whole" premium. Select may redeem some or all of the Notes on or after June 1, 2016 at specified redemption prices. In addition, prior to June 1, 2016, Select may redeem up to 35% of the Notes with the net proceeds of certain equity offerings at a price of 106.375% plus accrued and unpaid interest, if any. Select is obligated to offer to repurchase the Notes at a price of 101% of their principal amount plus accrued and unpaid interest, if any, as a result of certain change of control events. These restrictions and prohibitions are subject to certain qualifications and exceptions.

        The indenture relating to the Notes contains covenants that, among other things, limit Select's ability and the ability of certain of its subsidiaries to (i) grant liens on its assets, (ii) make dividend payments, other distributions or other restricted payments, (iii) incur restrictions on the ability of Select's restricted subsidiaries to pay dividends or make other payments, (iv) enter into sale and leaseback transactions, (v) merge, consolidate, transfer or dispose of substantially all of their assets, (vi) incur additional indebtedness, (vii) make investments, (viii) sell assets, including capital stock of subsidiaries, (ix) use the proceeds from sales of assets, including capital stock of restricted subsidiaries, and (x) enter into transactions with affiliates. In addition, the Indenture requires, among other things, Select to provide financial and current reports to holders of the Notes or file such reports electronically with the SEC. These covenants are subject to a number of exceptions, limitations and qualifications set forth in the Indenture.

Concentra credit facilities

Concentra first lien credit agreement

        On June 1, 2015, MJ Acquisition Corporation, as the initial borrower, entered into a first lien credit agreement (the "Concentra first lien credit agreement"). Concentra, as the surviving entity of the merger between MJ Acquisition Corporation and Concentra, became the borrower. The Concentra first lien credit agreement provides for $500.0 million in first lien loans comprised of a $450.0 million, seven-year term loan ("Concentra first lien term loan") and a $50.0 million, five-year revolving credit facility ("Concentra revolving facility"). The borrowings under the Concentra first lien credit agreement are guaranteed, on a

F-31

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Long-Term Debt and Notes Payable (Continued)

first lien basis, by Concentra Holdings, Inc., the direct parent of Concentra. Select and Holdings are not parties to the Concentra first lien credit agreement and are not obligors with respect to Concentra's debt under such agreement.

        Borrowings under the Concentra first lien credit agreement bear interest at a rate equal to: (i) in the case of the Concentra first lien term loan, Adjusted LIBO (as defined in the Concentra first lien credit agreement) plus 3.00% (subject to an Adjusted LIBO floor of 1.00%), or Alternate Base Rate (as defined in the Concentra first lien credit agreement) plus 2.00% (subject to an Alternate Base Rate floor of 2.00%); and (ii) in the case of the Concentra revolving facility, Adjusted LIBO plus a percentage ranging from 2.75% to 3.00%, or Alternate Base Rate plus a percentage ranging from 1.75% to 2.00%, in each case based on Concentra's leverage ratio.

        The Concentra first lien term loan amortizes in equal quarterly installments, in aggregate annual amounts equal to 0.25% of the original principal amount of the first lien term loan commencing on September 30, 2015. The balance of the Concentra first lien term loan will be payable on June 1, 2022. The Concentra revolving facility matures on June 1, 2020.

Concentra second lien credit agreement

        On June 1, 2015, MJ Acquisition Corporation, as the initial borrower, entered into a second lien credit agreement (the "Concentra second lien credit agreement" and, together with the Concentra first lien credit agreement, the "Concentra credit facilities"). Concentra, as the surviving entity of the merger between MJ Acquisition Corporation and Concentra, became the borrower. The Concentra second lien credit agreement provides for a $200.0 million eight-year second lien term loan ("Concentra second lien term loan" and, together with the Concentra first lien term loans, the "Concentra term loans"). The borrowings under the Concentra second lien credit agreement are guaranteed, on a second lien basis, by Concentra Holdings, Inc., the direct parent of Concentra. Select and Holdings are not parties to the Concentra second lien credit agreement and are not obligors with respect to Concentra's debt under such agreement.

        Borrowings under the Concentra second lien term loan bear interest at a rate equal to Adjusted LIBO Rate (as defined in the Concentra second lien credit agreement) plus 8.00% (subject to an Adjusted LIBO floor of 1.00%), or Alternate Base Rate (as defined in the Concentra second lien credit agreement) plus 7.00% (subject to an Alternate Base Rate floor of 2.00%).

        In the event that, on or prior to June 1, 2016, Concentra prepays any of the Concentra second lien term loan, Concentra shall pay a premium of 2.00% of the aggregate principal amount of the Concentra second lien term loan prepaid and if Concentra prepays any of the Concentra second lien term loan on or prior to June 1, 2017, Concentra shall pay a premium of 1.00% of the aggregate principal amount of the Concentra second lien term loan prepaid. The Concentra second lien term loan will be payable on June 1, 2023.

F-32

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Long-Term Debt and Notes Payable (Continued)

Maturities of Long-Term Debt and Notes Payable

        Maturities of the Company's long-term debt for the years after 2015 are approximately as follows and are presented including the discounts on Select term loans and premium on Select's senior notes, and including the discounts on Concentra credit facilities:

	Select		Concentra		Total
	(in thousands)
2016	$	228,316	$	5,254	$	233,570
2017		6,952		4,168		11,120
2018		820,651		4,186		824,837
2019		2,465		4,206		6,671
2020		228		9,227		9,455
2021 and beyond		710,095		628,136		1,338,231
Total	$	1,768,707	$	655,177	$	2,423,884

Loss on Early Retirement of Debt

        On February 20, 2013, Select entered into a credit extension amendment, the proceeds of which were used to redeem all of its outstanding 7⁵/8% senior subordinated notes, to finance Holdings' redemption of all of its 10% senior floating rate, and to repay a portion of the balance outstanding under Select's revolving facility. Additionally, on May 28, 2013, Select issued and sold $600.0 million aggregate principal amount of its 6.375% senior notes due 2021, the proceeds of which were used to pay a portion of Select term loans then outstanding and to pay related fees and expenses. A loss on early retirement of debt of $18.7 million and $17.8 million for Holdings and Select, respectively, was recognized for the year ended December 31, 2013, which included the write off of unamortized debt issuance costs.

        During the year ended December 31, 2014, Select amended the Select term loans under the Select credit facilities and recognized a loss $2.3 million for unamortized debt issuance costs, unamortized original issue discount, and certain fees incurred related to term loan modifications.

7. Stockholders' Equity

Common Stock

        Holdings' board of directors has authorized a common stock repurchase program to repurchase up to $500.0 million worth of shares of its common stock. The program will remain in effect until December 31, 2016, unless extended or earlier terminated by the board of directors. Stock repurchases under this program may be made in the open market or through privately negotiated transactions, and at times and in such amounts as Holdings deems appropriate. Holdings is funding this program with cash on hand and borrowings under the Select revolving facility. For the years ended December 31, 2013, 2014 and 2015, respectively, Holdings repurchased 1,115,691 shares at a cost of $10.0 million, 11,285,714 shares at a cost of $127.5 million, and 1,032,334 shares at a cost of $13.6 million, which includes transaction costs. During the year ended December 31, 2014, the shares were repurchased from Welsh, Carson, Anderson & Stowe IX, L.P. and WCAS Capital Partners IV, L.P. pursuant to stock purchase agreements dated February 26, 2014 and May 5, 2014. Two of the Company's directors are affiliated with these entities. The common stock repurchase program has available capacity of $185.2 million as of December 31, 2015.

F-33

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Stockholders' Equity (Continued)

        Holdings granted 952,500 shares, 1,585,775 shares, and 1,384,954 shares of restricted stock for the years ended December 31, 2013, 2014 and 2015, respectively and issued 166,600 shares, 974,969 shares, and 183,450 shares of common stock related to the exercise of stock options and for the years ended December 31, 2013, 2014 and 2015, respectively. Also, 331,697 shares, 302,690 shares, and 486,580 shares of stock were forfeited for the years ended December 31, 2013, 2014 and 2015, respectively.

8. Stock-based Compensation

        On February 25, 2005, Holdings adopted the Select Medical Holdings Corporation 2005 Equity Incentive Plan. On May 13, 2011, the Select Medical Holdings Corporation 2005 Equity Incentive Plan was frozen and Holdings adopted the 2011 Select Medical Holdings Corporation 2011 Equity Incentive Plan. The Select Medical Holdings Corporation 2005 Equity Incentive Plan and the Select Medical Holdings Corporation 2011 Equity Incentive Plan are referred to as the "Plans." The Plans provide for grants of restricted stock and stock options of Holdings. On November 8, 2005 the board of directors of Holdings adopted a director equity incentive plan ("Director Plan") and on August 12, 2009, the board of directors and stockholders of Holdings approved an amendment and restatement of the Director Plan. This amendment authorized Holdings to issue under the Director Plan options to purchase up to 75,000 shares of its common stock and restricted stock awards covering up to 150,000 shares of its common stock. All of the aforementioned equity plans allow for the use of unissued shares or treasury shares to be used to satisfy share-based awards.

        The options under the Plans and Director Plan generally vest over five years and have an option term not to exceed ten years. The fair value of the options granted was estimated using the Black-Scholes option pricing model. There were no options granted under the Plans or Director Plan during the year ended December 31, 2015.

        Transactions and other information related to restricted stock awards are as follows:

	Shares			Weighted Average Grant Date Fair Value
	(share amounts in thousands)
Unvested Balance, January 1, 2015		3,728		$	10.82
Granted		1,385			13.94
Vested		(992	)		9.07
Forfeited		(304	)		12.28
Unvested Balance, December 31, 2015		3,817		$	12.29

        The weighted average grant date fair value of restricted stock awards granted for the years ended December 31, 2013, 2014, and 2015 was $8.48, $13.61, and $13.94, respectively. The total weighted average grant date fair value of restricted stock awards vested for the years ended December 31, 2013, 2014, and 2015 was $4.6 million, $7.4 million, and $9.0 million, respectively.

        As of December 31, 2015 there were 743,000 stock options outstanding and 728,000 stock options exercisable under the Plans and Director Plans. The outstanding and exercisable shares have a weighted average exercise price of $8.85 and a weighted average remaining contractual life of 2.87 years.

F-34

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. Stock-based Compensation (Continued)

        The total intrinsic value of options exercised under the Plans and Director Plans for the years ended December 31, 2013, 2014, and 2015 was $0.2 million, $6.0 million, and $1.0 million, respectively. The aggregate intrinsic value of options outstanding and options exercisable under the Plans and Director Plans at December 31, 2015 was $2.3 million.

        Stock compensation expense recognized by the Company was as follows:

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
Stock compensation expense:
Included in general and administrative	$	5,276	$	9,027	$	11,633
Included in cost of services		1,757		2,015		3,046
Total	$	7,033	$	11,042	$	14,679

        Stock compensation expense based on current share-based awards for each of the next five years is estimated to be as follows:

	2016		2017		2018		2019		2020
	(in thousands)
Stock compensation expense	$	15,532	$	10,610	$	5,204	$	1,406	$	324

9. Income Taxes

        Significant components of the Company's tax provision for the years ended December 31, 2013, 2014, and 2015 are as follows:

	Holdings							Select
	For the Year Ended December 31,							For the Year Ended December 31,
	2013		2014		2015			2013		2014		2015
	(in thousands)							(in thousands)
Current:
Federal	$	55,847	$	52,063	$	63,626		$	57,026	$	52,063	$	63,626
State and local		11,913		9,248		10,868			11,913		9,248		10,868
Total current		67,760		61,311		74,494			68,939		61,311		74,494
Deferred		7,032		14,311		(2,058	)		7,032		14,311		(2,058	)
Total income tax provision	$	74,792	$	75,622	$	72,436		$	75,971	$	75,622	$	72,436

F-35

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. Income Taxes (Continued)

        The differences between the expected income tax provision and income taxes computed at the federal statutory rate of 35% were as follows:

	Holdings									Select
	For the Year Ended December 31,									For the Year Ended December 31,
	2013			2014			2015			2013			2014			2015
Expected federal tax rate		35.0	%		35.0	%		35.0	%		35.0	%		35.0	%		35.0	%
State and local taxes, net of federal benefit		4.6			4.2			4.0			4.5			4.2			4.0
Other permanent differences		1.1			0.8			1.4			1.1			0.8			1.4
Valuation allowance		(0.7	)		(0.4	)		(0.9	)		(0.6	)		(0.4	)		(0.9	)
Uncertain tax positions		(0.6	)		(0.3	)		(2.3	)		(0.6	)		(0.3	)		(2.3	)
IRS audit settlements		—			(0.4	)		(0.1	)		—			(0.4	)		(0.1	)
Non-controlling interest		(1.7	)		(1.5	)		(2.0	)		(1.7	)		(1.5	)		(2.0	)
Other		0.1			(0.3	)		(0.3	)		0.1			(0.3	)		(0.3	)
Total		37.8	%		37.1	%		34.8	%		37.8	%		37.1	%		34.8	%

        During 2015, the Company settled with the Internal Revenue Service a tax liability relating to the 2011 settlement of a lawsuit under the qui tam provisions of the federal False Claims Act and reversed through the income tax provision the remaining excess tax reserves.

        During 2009, the Company settled with the Internal Revenue Service a refund of previously paid federal income taxes that resulted from the acceleration of tax amortization in years prior to the Merger. Tax reserves related to this dispute were released in 2014 resulting in the abatement of penalties and interest.

F-36

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. Income Taxes (Continued)

        A summary of the components of deferred tax assets and liabilities is as follows:

	December 31, 2014									December 31, 2015
	Total			Current			Non-Current			Total			Current			Non-Current
	(in thousands)
Deferred tax assets
Allowance for doubtful accounts	$	701		$	701		$	—		$	9,153		$	9,153		$	—
Compensation and benefit related accruals		49,373			38,722			10,651			61,111			50,303			10,808
Professional malpractice liability insurance		17,934			4,732			13,202			19,654			4,642			15,012
Restructuring reserve		333			333			—			—			—			—
Deferred revenue		(829	)		(829	)		—			(1,009	)		(1,009	)		—
State net operating loss carryforwards		21,555			436			21,119			21,591			445			21,146
Other		552			552			—			1,273			357			916
Stock options		5,336			—			5,336			6,061			—			6,061
Equity investments		3,475			—			3,475			3,939			—			3,939
Uncertain tax positions		1,632			—			1,632			641			—			641
Total deferred tax assets		100,062			44,647			55,415			122,414			63,891			58,523
Deferred tax liabilities
Deferred income		(31,190	)		(25,651	)		(5,539	)		(31,375	)		(27,221	)		(4,154	)
Investment in unconsolidated affiliates		(3,659	)		—			(3,659	)		(4,302	)		—			(4,302	)
Other		(1,587	)		(1,093	)		(494	)		(8,444	)		(6,072	)		(2,372	)
Depreciation and amortization		(147,197	)		—			(147,197	)		(260,724	)		—			(260,724	)
Total deferred tax liabilities		(183,633	)		(26,744	)		(156,889	)		(304,845	)		(33,293	)		(271,552	)
Net deferred taxes before valuation allowance		(83,571	)		17,903			(101,474	)		(182,431	)		30,598			(213,029	)
Valuation allowance		(9,641	)		(1,912	)		(7,729	)		(7,586	)		(1,910	)		(5,676	)
Net deferred taxes	$	(93,212	)	$	15,991		$	(109,203	)	$	(190,017	)	$	28,688		$	(218,705	)

        The valuation allowance as of December 31, 2015 is primarily attributable to the uncertainty regarding the realization of state net operating losses and other net deferred tax assets of loss entities. The state net deferred tax assets have a full valuation allowance recorded for entities that have a cumulative history of pre-tax losses (current year in addition to the two prior years). The net deferred tax liabilities at December 31, 2014 and 2015 of approximately $93.2 million and $190.0 million, respectively, consist of items which have been recognized for tax reporting purposes, but which will increase tax on returns to be filed in the future, and include the use of net operating loss carryforwards. The Company has performed the required assessment of positive and negative evidence regarding the realization of the net deferred tax assets. This assessment included a review of legal entities with three years of cumulative losses, estimates of projected future taxable income, generation of income from the turning of existing deferred tax liabilities and the impact of tax planning strategies that management would and could implement in order to keep deferred tax assets from expiring unused. Although realization is not assured, based on the

F-37

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. Income Taxes (Continued)

Company's assessment, it has concluded that it is more likely than not that such assets, net of the determined valuation allowance, will be realized.

        The total state net operating losses are approximately $465.6 million. State net operating loss carry forwards expire and are subject to valuation allowances as follows:

	State Net Operating Losses		Gross Valuation Allowance
	(in thousands)
2016	$	6,479	$	5,891
2017		10,818		9,828
2018		7,319		4,574
2019		7,948		7,927
Thereafter through 2035		433,068		333,817

Reserves for Uncertain Tax Positions:

        The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. Significant judgment is required in evaluating the Company's tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. The Company establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when it is believed that certain positions might be challenged despite the Company's belief that its tax return positions are fully supportable. The Company adjusts these reserves in light of changing facts and circumstances, such as the outcome of a tax audit. The provision for income taxes includes the impact of reserve provisions and changes to reserves that have resulted from resolution of the tax position or expirations of statutes of limitations.

        The reconciliation of the Company's unrecognized tax benefits is as follows (in thousands):

Gross tax contingencies—January 1, 2013	$	13,890
Reductions for tax positions taken in prior periods due primarily to statute expiration		(2,299	)
Additions for existing tax positions taken		435
Gross tax contingencies—December 31, 2013		12,026
Reductions for tax positions taken in prior periods due primarily to statute expiration		(1,632	)
Additions for existing tax positions taken		273
Gross tax contingencies—December 31, 2014		10,667
Reductions for tax positions taken in prior periods due primarily to statute expiration		(3,309	)
Reductions for settlements with taxing authorities		(770	)
Additions for existing tax positions taken		373
Reductions for existing tax positions taken		(1,395	)
Gross tax contingencies—December 31, 2015	$	5,566

F-38

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. Income Taxes (Continued)

        As of December 31, 2014 and 2015, the Company had $10.7 million and $5.6 million of unrecognized tax benefits, respectively, all of which, if fully recognized, would affect the Company's effective income tax rate.

        As of December 31, 2015, approximately $2.6 million of gross unrecognized tax benefits, including interest, will be eligible for release in the next 12 months due to the expiration of statutes of limitations. The Company's policy is to include interest related to income taxes in income tax expense. As of December 31, 2014 and December 31, 2015, the Company has accrued interest related to income taxes of $1.9 million and $0.6 million, net of federal income taxes, respectively. Interest recognized for each of the years ended December 31, 2013, 2014 and 2015 was $0.5 million, $0.5 million, and $0.3 million, net of federal income tax benefits, respectively.

        The federal statute of limitations remains open for tax years 2013 through 2015.

        State jurisdictions generally have statutes of limitations for tax returns ranging from three to five years. The state impact of any federal income tax changes remains subject to examination for a period of up to one year after formal notification to the states. Currently, the Company has one state income tax return under examination.

10. Retirement Savings Plan

        Select sponsors a defined contribution retirement savings plan for substantially all of its employees. Employees who are not classified as HCE's (highly compensated employees) may contribute up to 30% of their salary; HCE's may contribute up to 7% of their salary. The plan provides a discretionary company match which is determined annually. Currently, Select matches 25% of the first 6% of compensation employees contribute to the plan. The employees vest in the employer contributions over a three-year period beginning on the employee's hire date. The expense incurred by Select related to this plan was $8.7 million, $9.3 million and $10.0 million during the years ended December 31, 2013, 2014 and 2015, respectively.

        Concentra sponsored a separate defined contribution retirement savings plan and incurred expenses related to this plan of $8.8 million for the period June 1, 2015 through December 31, 2015. Beginning in January 2016, Concentra's employees will participate in the defined contribution retirement savings plan sponsored by Select.

11. Segment Information

        The Company's reportable segments consist of: (i) specialty hospitals, (ii) outpatient rehabilitation, and (iii) Concentra. Other activities include the Company's corporate services and certain other non-consolidating joint ventures and minority investments in other healthcare related businesses. The outpatient rehabilitation reportable segment has two operating segments: outpatient rehabilitation clinics and contract therapy. These operating segments are aggregated for reporting purposes as they have common economic characteristics and provide a similar service to a similar patient base. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance of the segments based on Adjusted EBITDA. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, Concentra acquisition costs, equity in earnings (losses) of unconsolidated subsidiaries, and gain on sale of equity investment.

F-39

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Segment Information (Continued)

        The following tables summarize selected financial data for the Company's reportable segments. The segment results of Holdings are identical to those of Select.

	Year Ended December 31, 2013
	Specialty Hospitals		Outpatient Rehabilitation		Concentra(2)	Other			Total
	(in thousands)
Net revenue	$	2,198,121	$	777,177		$	350		$	2,975,648
Adjusted EBITDA		353,843		90,313			(71,295	)		372,861
Total assets(1):		2,205,921		512,539			99,162			2,817,622
Capital expenditures		56,523		14,113			3,024			73,660

	Year Ended December 31, 2014
	Specialty Hospitals		Outpatient Rehabilitation		Concentra(2)	Other			Total
	(in thousands)
Net revenue	$	2,244,899	$	819,397		$	721		$	3,065,017
Adjusted EBITDA		341,787		97,584			(75,499	)		363,872
Total assets(1):		2,279,665		532,685			112,459			2,924,809
Capital expenditures		77,742		12,506			4,998			95,246

	Year Ended December 31, 2015
	Specialty Hospitals		Outpatient Rehabilitation		Concentra(2)		Other			Total
	(in thousands)
Net revenue	$	2,346,781	$	810,009	$	585,222	$	724		$	3,742,736
Adjusted EBITDA		327,623		98,220		48,301		(74,979	)		399,165
Total assets(1):		2,425,113		548,242		1,331,837		121,474			4,426,666
Capital expenditures		126,014		17,768		26,771		12,089			182,642

        A reconciliation of Adjusted EBITDA to income before income taxes is as follows:

	Year Ended December 31, 2013
	Specialty Hospitals			Outpatient Rehabilitation			Concentra	Other
	(in thousands)
Adjusted EBITDA	$	353,843		$	90,313			$	(71,295	)
Depreciation and amortization		(48,621	)		(12,024	)			(3,747	)
Stock compensation expense		—			—				(7,033	)

								Holdings			Select
Income (loss) from operations	$	305,222	$	78,289	$	(82,075	)	$	301,436		$	301,436
Loss on early retirement of debt									(18,747	)		(17,788	)
Equity in earnings of unconsolidated subsidiaries									2,476			2,476
Interest expense									(87,364	)		(84,954	)
Income before income taxes								$	197,801		$	201,170

F-40

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Segment Information (Continued)

	Year Ended December 31, 2014
	Specialty Hospitals			Outpatient Rehabilitation			Concentra	Other
	(in thousands)
Adjusted EBITDA	$	341,787		$	97,584			$	(75,499	)
Depreciation and amortization		(51,786	)		(12,845	)			(3,723	)
Stock compensation expense		—			—				(11,042	)

								Holdings			Select
Income (loss) from operations	$	290,001	$	84,739	$	(90,264	)	$	284,476		$	284,476
Loss on early retirement of debt									(2,277	)		(2,277	)
Equity in earnings of unconsolidated subsidiaries									7,044			7,044
Interest expense									(85,446	)		(85,446	)
Income before income taxes								$	203,797		$	203,797

	Year Ended December 31, 2015
	Specialty Hospitals			Outpatient Rehabilitation			Concentra(2)			Other
	(in thousands)
Adjusted EBITDA	$	327,623		$	98,220		$	48,301		$	(74,979	)
Depreciation and amortization		(53,992	)		(13,053	)		(33,644	)		(4,292	)
Stock compensation expense		—			—			(1,016	)		(13,663	)
Concentra acquisition costs		—			—			(4,715	)		—

										Holdings			Select
Income (loss) from operations	$	273,631	$	85,167	$	8,926	$	(92,934	)	$	274,790		$	274,790
Gain on sale of equity investment											29,647			29,647
Equity in earnings of unconsolidated subsidiaries											16,811			16,811
Interest expense											(112,816	)		(112,816	)
Income before income taxes										$	208,432		$	208,432

(1)

The specialty hospitals segment includes $2.7 million in real estate assets held for sale on December 31, 2013, 2014 and 2015.

(2)

The selected financial data for the Company's Concentra segment for the periods presented begins as of June 1, 2015, which is the date the Concentra acquisition was consummated.

F-41

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Income per Share

        The Company applies the two-class method for calculating and presenting income per common share. The two-class method is an earnings allocation formula that determines earnings per share for each class of stock participation rights in undistributed earnings. Under the two class method:

(a)

Net income attributable to Select Medical Holdings Corporation is reduced by any contractual amount of dividends in the current period for each class of stock. There were no contractual dividends for the years ended December 31, 2013, 2014 and 2015.



(b)

The remaining income is allocated to common stock and unvested restricted stock to the extent that each security may share in income, as if all of the earnings for the period had been distributed. The total income allocated to each security is determined by adding together the amount allocated for dividends in (a) above and the amount allocated for participation features.



(c)

The income allocated to common stock is then divided by the weighted average number of outstanding shares to which the earnings are allocated to determine the income per share for common stock.

        In applying the two-class method, the Company determined that undistributed earnings should be allocated equally on a per share basis between the common stock and unvested restricted stock due to the equal participation rights of the common stock and unvested restricted stock (i.e., the voting conversion rights).

        The following table sets forth for the periods indicated the calculation of income per share in the Company's consolidated statement of operations and the differences between basic weighted average shares outstanding and diluted weighted average shares outstanding used to compute basic and diluted earnings per share, respectively:

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands, except per share amounts)
Numerator:
Net income attributable to Select Medical Holdings Corporation	$	114,390	$	120,627	$	130,736
Less: Earnings allocated to unvested restricted stockholders		2,450		3,337		3,830
Net income available to common stockholders	$	111,940	$	117,290	$	126,906
Denominator:
Weighted average shares—basic		136,879		129,026		127,478
Effect of dilutive securities:
Stock options		168		439		274
Weighted average shares—diluted		137,047		129,465		127,752
Basic income per common share:	$	0.82	$	0.91	$	1.00
Diluted income per common share:	$	0.82	$	0.91	$	0.99

F-42

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Income per Share (Continued)

        The following amounts are shown here for informational and comparative purposes only since their inclusion would be anti-dilutive:

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
Stock options		1,474		6		—

13. Fair Value

        Financial instruments include cash and cash equivalents, notes payable and long-term debt. The carrying amount of cash and cash equivalents approximates fair value because of the short-term maturity of these instruments.

        The carrying value of the Select credit facilities was $836.0 million and $1,045.5 million at December 31, 2014 and 2015, respectively. The fair value of the Select credit facilities was $816.6 million and $1,023.6 million at December 31, 2014 and 2015, respectively. The fair value of the Select credit facilities was based on quoted market prices for this debt in the syndicated loan market.

        The carrying value of Select's 6.375% senior notes was $711.5 million and $711.2 million at December 31, 2014 and 2015, respectively. The fair value of Select's 6.375% senior notes was $722.4 million and $623.9 million at December 31, 2014 and 2015, respectively. The fair value of this debt was based on quoted market prices.

        The carrying value of the Concentra credit facilities was $649.9 million at December 31, 2015. The fair value of the Concentra credit facilities was $645.4 million at December 31, 2015. The fair value of the Concentra credit facilities was based on quoted market prices for this debt in the syndicated loan market.

        The Company considers the inputs in the valuation process to be Level 2 in the fair value hierarchy. Level 2 in the fair value hierarchy is defined as inputs that are observable for the asset or liability, either directly or indirectly, which includes quoted prices for identical assets or liabilities in markets that are not active.

14. Related Party Transactions

        The Company rents its corporate office space from related parties affiliated through common ownership or management. The Company made payments for office rent, leasehold improvements and miscellaneous expenses aggregating $4.2 million, $4.4 million and $4.7 million for the years ended December 31, 2013, 2014 and 2015, respectively, to the affiliated companies.

F-43

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Related Party Transactions (Continued)

        As of December 31, 2015, future rental commitments under outstanding agreements with the affiliated companies are approximately as follows (in thousands):

2016	$	4,174
2017		4,221
2018		4,318
2019		4,421
2020		4,526
Thereafter		9,385
	$	31,045

        During the year ended December 31, 2014, common shares were repurchased from Welsh, Carson, Anderson & Stowe IX, L.P. and WCAS Capital Partners IV, L.P. pursuant to stock purchase agreements dated February 26, 2014 and May 5, 2014. Two of the Company's directors are affiliated with these entities (Note 7).

        The Company provides contracted services, principally employee leasing services and charges management fees to related parties affiliated through its equity investments. Net operating revenues generated from the provision of contracted services and management fees to related parties through equity investments are as follows:

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
BIR JV, LLP	$	96,465	$	101,385	$	112,273
Rehabilitation Institute of Denton, LLC		7,163		8,337		9,560
OHRH, LLC		2,069		8,280		10,010
Global Rehab—Scottsdale, LLC		4,129		10,747		12,155
Other		310		518		2,035
Total	$	110,136	$	129,267	$	146,033

F-44

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. Commitments and Contingencies

Leases

        The Company leases facilities and equipment from unrelated parties under operating leases. Minimum future lease obligations on long-term non-cancelable operating leases in effect at December 31, 2015 are approximately as follows (in thousands):

	Select		Concentra		Total
	(in thousands)
2016	$	145,185	$	59,845	$	205,030
2017		122,606		53,518		176,124
2018		99,873		44,688		144,561
2019		79,002		36,485		115,487
2020		61,462		30,098		91,560
Thereafter		348,222		61,501		409,723
	$	856,350	$	286,135	$	1,142,485

        Total rent expense for operating leases, including cancelable leases, for the years ended December 31, 2013, 2014 and 2015 was $164.6 million, $169.1 million, and $212.9 million (including $34. 9 million for Concentra), respectively.

        Property rent expense to unrelated parties for the years ended December 31, 2013, 2014 and 2015 was $119.5 million, $124.4 million, and $163.4 million (including $32.9 million for Concentra), respectively.

Construction Commitments

        At December 31, 2015, the Company had outstanding commitments under construction contracts related to new construction, improvements and renovations at the Company's long term acute care properties and inpatient rehabilitation facilities, and Concentra facilities totaling approximately $15.7 million.

Other

        A subsidiary of the Company has entered into a naming, promotional and sponsorship agreement with an NFL team for the team's headquarters complex that requires a payment of $3.1 million in 2016. Each successive annual payment increases by 2.3% through 2025. The naming, promotional and sponsorship agreement is in effect until 2025.

Litigation

        The Company is a party to various legal actions, proceedings and claims (some of which are not insured), and regulatory and other governmental audits and investigations in the ordinary course of its business. The Company cannot predict the ultimate outcome of pending litigation, proceedings and regulatory and other governmental audits and investigations. These matters could potentially subject the Company to sanctions, damages, recoupments, fines and other penalties. CMS or other federal and state enforcement and regulatory agencies may conduct additional investigations related to the Company's businesses in the future that may, either individually or in the aggregate, have a material adverse effect on the Company's business, financial position, results of operations and liquidity.

F-45

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. Commitments and Contingencies (Continued)

        To address claims arising out of the Company's operations, the Company maintains professional malpractice liability insurance and general liability insurance, subject to self-insured retention of $2.0 million per medical incident for professional liability claims and $2.0 million per occurrence for general liability claims. The Company also maintains umbrella liability insurance covering claims which, due to their nature or amount, are not covered by or not fully covered by the Company's other insurance policies. These insurance policies also do not generally cover punitive damages and are subject to various deductibles and policy limits. Significant legal actions, as well as the cost and possible lack of available insurance, could subject the Company to substantial uninsured liabilities. In the Company's opinion, the outcome of these actions, individually or in the aggregate, will not have a material adverse effect on its financial position, results of operations, or cash flows.

        Healthcare providers are subject to lawsuits under the qui tam provisions of the federal False Claims Act. Qui tam lawsuits typically remain under seal (hence, usually unknown to the defendant) for some time while the government decides whether or not to intervene on behalf of a private qui tam plaintiff (known as a relator) and take the lead in the litigation. These lawsuits can involve significant monetary damages and penalties and award bounties to private plaintiffs who successfully bring the suits. The Company is and has been a defendant in these cases in the past, and may be named as a defendant in similar cases from time to time in the future.

        On October 19, 2015, the plaintiff-relators filed a Second Amended Complaint in United States of America, ex rel. Tracy Conroy, Pamela Schenk and Lisa Wilson v. Select Medical Corporation, Select Specialty Hospital—Evansville, LLC ("SSH-Evansville"), Select Employment Services, Inc., and Dr. Richard Sloan. The case is a civil action filed in the United States District Court for the Southern District of Indiana by private plaintiff-relators on behalf of the United States under the federal False Claims Act. The plaintiff-relators are the former CEO and two former case managers at SSH-Evansville, and the defendants currently include the Company, SSH-Evansville, a subsidiary of the Company serving as common paymaster for its employees, and a physician who practices at SSH-Evansville. The plaintiff-relators allege that that SSH-Evansville discharged patients too early or held patients too long, improperly discharged patients to and readmitted them from short stay hospitals, up-coded diagnoses at admission, and admitted patients for whom long-term acute care was not medically necessary. They also allege that the defendants engaged in retaliation in violation of federal and state law. The Second Amended Complaint replaces a prior complaint that was filed under seal on September 28, 2012 and served on the Company on February 15, 2013, after a federal magistrate judge unsealed it on January 8, 2013. All deadlines in the case had been stayed after the seal was lifted in order to allow the government time to complete its investigation and to decide whether or not to intervene. On June 19, 2015, the U.S. Department of Justice notified the court of its decision not to intervene in the case, and the court thereafter approved a case management plan imposing certain deadlines. The plaintiff-relators filed a Second Amended Complaint in October 2015, and defendants filed a Motion to Dismiss such Complaint in December 2015. The Company intends to vigorously defend this action, but at this time the Company is unable to predict the timing and outcome of this matter.

        On July 13, 2015, the federal District Court for the Eastern District of Tennessee unsealed a qui tam Complaint in Armes v. Garman, et al, No. 3:14-cv-00172-TAV-CCS, which named as defendants Select, Select Specialty Hospital—Knoxville, Inc. ("SSH-Knoxville"), Select Specialty Hospital—North Knoxville, Inc. and ten current or former employees of these facilities. The Complaint was unsealed after the United States and the State of Tennessee notified the Court on July 13, 2015 that each had decided not to intervene in the case. The Complaint is a civil action that was filed under seal on April 29, 2014 by a

F-46

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. Commitments and Contingencies (Continued)

respiratory therapist formerly employed at SSH-Knoxville. The Complaint alleges violations of the federal False Claims Act and the Tennessee Medicaid False Claims Act based on extending patient stays to increase reimbursement and to increase average length of stay; artificially prolonging the lives of patients to increase Medicare reimbursements and decrease inspections; admitting patients who do not require medically necessary care; performing unnecessary procedures and services; and delaying performance of procedures to increase billing. The Complaint was served on some of the defendants during October 2015. The defendants filed a Motion to Dismiss such Complaint in November 2015. The Company intends to vigorously defend this action if the relators pursue it, but at this time the Company is unable to predict the timing and outcome of this matter.

16. Supplemental Disclosures of Cash Flow Information

        The following table summarizes non cash investing and financing activities for both Holdings and Select at December 31, 2013, 2014, and 2015:

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
Notes issued with acquisitions	$	3,283	$	327	$	12
Liabilities assumed with acquisitions		885		122		298
Contingent consideration related to acquisitions		100		—		—
Liability for property and equipment		—		14,230		36,744
Notes issued to acquire non-consolidating interest		3,399		—		—

17. Subsequent Events

        On January 25, 2016, Select announced that it has entered into an Agreement and Plan of Merger, dated as of January 22, 2016 with Grip Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Select, Physiotherapy Associates Holdings, Inc., a Delaware corporation ("Physiotherapy"), and KHR Physio, LLC, a Delaware limited liability company, solely in its capacity as the Holder Representative (as defined in the merger agreement). Pursuant to the terms of the merger agreement, Select will acquire Physiotherapy for $400.0 million in cash, subject to certain adjustments in accordance with the terms set forth in the merger agreement, through the merger of Grip Merger Sub, Inc. with and into Physiotherapy, with Physiotherapy continuing as the surviving corporation under its present name as a wholly owned subsidiary of Select.

        Select expects to finance the transaction and related expenses using a combination of cash on hand and the proceeds from a proposed $400.0 million senior secured incremental term facility under its existing credit facility, for which JP Morgan Chase, N.A. has provided Select with a debt commitment letter. Should the merger agreement be terminated by Physiotherapy under specified conditions, including circumstances where Select is required to close the transaction under the merger agreement and there is a failure of the debt financing to be funded in accordance with its terms, a reverse termination fee of $24.0 million would be payable by Select to Physiotherapy. The transaction, which is expected to close in the first half of 2016, is subject to a number of closing conditions.

F-47

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes

        Select's 6.375% senior notes are fully and unconditionally guaranteed, except for customary limitations, on a senior basis by all of Select's wholly owned subsidiaries (the "Subsidiary Guarantors") which is defined as a subsidiary where Select or a subsidiary of Select holds all of the outstanding ownership interests. Certain of Select's subsidiaries did not guarantee the 6.375% senior notes (the "Non-Guarantor Subsidiaries," including Group Holdings and its subsidiaries, which were designated as Non-Guarantor subsidiaries by Select's board of directors at the closing of the Concentra acquisition, the "Non-Guarantor Concentra").

        Select conducts a significant portion of its business through its subsidiaries. Presented below is condensed consolidating financial information for Select, the Subsidiary Guarantors, the Non-Guarantor Subsidiaries, and Non-Guarantor Concentra at December 31, 2014 and 2015 and for the years ended December 31, 2013, 2014 and 2015.

        Select conducts a significant portion of its business through its subsidiaries. Presented below is condensed consolidating financial information for Select, the Subsidiary Guarantors, the Non-Guarantor Subsidiaries, and Non-Guarantor Concentra

        During the year ended December 31, 2014, the Company purchased the remaining outstanding non-controlling interest in a specialty hospital business changing the entity from a non-guarantor subsidiary to a guarantor subsidiary. The year ended and as of December 31, 2013 has been retrospectively revised based on the guarantor structure that existed at December 31, 2014.

F-48

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes (Continued)

Select Medical Corporation
Condensed Consolidating Balance Sheet
December 31, 2015

	Select (Parent Company Only)			Subsidiary Guarantors		Non-Guarantor Subsidiaries			Non-Guarantor Concentra			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Assets
Current Assets:
Cash and cash equivalents	$	4,070		$	3,706	$	625		$	6,034		$	—		$	14,435
Accounts receivable, net		—			419,382		68,504			115,672			—			603,558
Current deferred tax asset		11,556			6,708		4,786			5,638			—			28,688
Intercompany receivables		—			1,970,477		137,512			—			(2,107,989)	(a)		—
Prepaid income taxes		7,979			—		—			8,715			—			16,694
Other current assets		10,521			34,859		5,759			34,640			—			85,779
Total Current Assets		34,126			2,435,132		217,186			170,699			(2,107,989	)		749,154
Property and equipment, net		38,872			548,809		61,137			215,306			—			864,124
Investment in affiliates		4,107,930			75,027		—			—			(4,182,957)	(b)(c)		—
Goodwill		—			1,663,974		—			650,650			—			2,314,624
Non-current deferred tax asset		12,297			—		—			—			(12,297)	(d)		—
Other identifiable intangibles		—			72,776		—			245,899			—			318,675
Other assets		21,623			108,524		659			49,283			—			180,089
Total Assets	$	4,214,848		$	4,904,242	$	278,982		$	1,331,837		$	(6,303,243	)	$	4,426,666
Liabilities and Equity
Current Liabilities:
Bank overdrafts	$	28,615		$	—	$	—		$	—		$	—		$	28,615
Current portion of long-term debt and notes payable		227,180			197		939			5,254			—			233,570
Accounts payable		10,445			101,156		16,997			8,811			—			137,409
Intercompany payables		1,970,477			137,512		—			—			(2,107,989)	(a)		—
Accrued payroll		22,970			66,892		3,932			27,195			—			120,989
Accrued vacation		6,406			50,194		9,423			7,954			—			73,977
Accrued interest		6,315			3		—			3,083			—			9,401
Accrued other		38,883			42,939		9,866			42,040			—			133,728
Total Current Liabilities		2,311,291			398,893		41,157			94,337			(2,107,989	)		737,689
Long-term debt, net of current portion		997,114			452,417		90,860			649,923			—			2,190,314
Non-current deferred tax liability		—			113,977		9,656			107,369			(12,297)	(d)		218,705
Other non-current liabilities		47,190			41,904		4,798			39,328			—			133,220
Total Liabilities		3,355,595			1,007,191		146,471			890,957			(2,120,286	)		3,279,928
Redeemable non-controlling interests		—			—		12,094			226,127			—			238,221
Stockholder's Equity:
Common stock		0			—		—			—			—			0
Capital in excess of par		904,375			—		—			—			—			904,375
Retained earnings (accumulated deficit)		(45,122	)		1,187,022		(1,006	)		(6,120	)		(1,179,896)	(c)		(45,122	)
Subsidiary investment		—			2,710,029		75,097			217,935			(3,003,061)	(b)		—
Total Select Medical Corporation Stockholder's Equity		859,253			3,897,051		74,091			211,815			(4,182,957	)		859,253
Non-controlling interests		—			—		46,326			2,938			—			49,264
Total Equity		859,253			3,897,051		120,417			214,753			(4,182,957	)		908,517
Total Liabilities and Equity	$	4,214,848		$	4,904,242	$	278,982		$	1,331,837		$	(6,303,243	)	$	4,426,666

(a)

Elimination of intercompany.

(b)

Elimination of investments in consolidated subsidiaries.

(c)

Elimination of investments in consolidated subsidiaries' earnings.

(d)

Reclass of non-current deferred tax asset to report net non-current deferred tax liability in consolidation.

F-49

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes (Continued)

Select Medical Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2015

	Select (Parent Company Only)			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Non-Guarantor Concentra			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Net operating revenues	$	724		$	2,673,987		$	482,803		$	585,222		$	—		$	3,742,736
Costs and expenses:
Cost of services		2,029			2,266,647			414,518			528,347			—			3,211,541
General and administrative		88,227			(890	)		—			4,715			—			92,052
Bad debt expense		—			40,541			9,240			9,591			—			59,372
Depreciation and amortization		4,292			56,447			10,598			33,644			—			104,981
Total costs and expenses		94,548			2,362,745			434,356			576,297			—			3,467,946
Income (loss) from operations		(93,824	)		311,242			48,447			8,925			—			274,790
Other income and expense:
Intercompany interest and royalty fees		(1,417	)		1,387			30			—			—			—
Intercompany management fees		143,939			(119,388	)		(24,551	)		—			—			—
Gain on sale of equity investment		—			29,647			—			—			—			29,647
Equity in earnings of unconsolidated subsidiaries		—			16,719			92			—			—			16,811
Interest expense		(58,350	)		(24,250	)		(6,154	)		(24,062	)		—			(112,816	)
Income (loss) from operations before income taxes		(9,652	)		215,357			17,864			(15,137	)		—			208,432
Income tax expense (benefit)		(7,869	)		85,907			(470	)		(5,132	)		—			72,436
Equity in earnings of subsidiaries		132,520			9,117			—			—			(141,637)	(a)		—
Net income		130,737			138,567			18,334			(10,005	)		(141,637	)		135,996
Less: Net income attributable to non-controlling interests		—			—			9,144			(3,884	)		—			5,260
Net income (loss) attributable to Select Medical Corporation	$	130,737		$	138,567		$	9,190		$	(6,121	)	$	(141,637	)	$	130,736

(a)

Elimination of equity in earnings of subsidiaries.

F-50

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes (Continued)

Select Medical Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2015

	Select (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Non- Guarantor Concentra			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Operating activities
Net income	$	130,737		$	138,567		$	18,334		$	(10,005	)	$	(141,637)	(a)	$	135,996
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions from unconsolidated subsidiaries		—			13,870			99			—			—			13,969
Depreciation and amortization		4,292			56,447			10,598			33,644			—			104,981
Provision for bad debts		—			40,541			9,240			9,591			—			59,372
Equity in earnings of unconsolidated subsidiaries		—			(16,719	)		(92	)		—			—			(16,811	)
Loss (gain) on sale of assets and businesses		—			(1,128	)		16			14			—			(1,098	)
Gain on sale of equity investment		—			(29,647	)		—			—			—			(29,647	)
Stock compensation expense		13,969			—			—			1,016			—			14,985
Amortization of debt discount and issuance costs		7,404			—			—			2,139			—			9,543
Deferred income taxes		(3,484	)		—			—			1,426			—			(2,058	)
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries		(132,520	)		(9,117	)		—			—			141,637	(a)		—
Accounts receivable		—			(83,142	)		(10,255	)		825			—			(92,572	)
Other current assets		(2,661	)		(2,236	)		(396	)		2,790			—			(2,503	)
Other assets		10,840			(6,415	)		288			—			—			4,713
Accounts payable		560			8,569			2,654			(9,438	)		—			2,345
Accrued expenses		(1,508	)		9,569			5,696			(6,557	)		—			7,200
Net cash provided by operating activities		27,629			119,159			36,182			25,445			—			208,415
Investing activities
Purchases of property and equipment		(10,890	)		(134,002	)		(10,979	)		(26,771	)		—			(182,642	)
Proceeds from sale of assets		—			1,742			24			1			—			1,767
Investment in businesses		—			(2,347	)		—			—			—			(2,347	)
Proceeds from sale of equity method investment		—			33,096			—			—			—			33,096
Acquisition of businesses, net of cash acquired		—			—			(8,832	)		(1,052,796	)		—			(1,061,628	)
Net cash used in investing activities		(10,890	)		(101,511	)		(19,787	)		(1,079,566	)		—			(1,211,754	)
Financing activities
Borrowings on revolving facilities		1,115,000			—			—			20,000			—			1,135,000
Payments on revolving facilities		(880,000	)		—			—			(15,000	)		—			(895,000	)
Proceeds from term loans, net of discounts		—			—			—			646,875			—			646,875
Payments on term loans		(26,884	)		—			—			(2,250	)		—			(29,134	)
Borrowings of other debt		8,684			—			1,681			3,009			—			13,374
Principal payments on other debt		(11,923	)		(2,736	)		(1,513	)		(1,964	)		—			(18,136	)
Debt issuance costs		—			—			—			(23,300	)		—			(23,300	)
Proceeds from bank overdrafts		6,869			—			—			—			—			6,869
Equity investment by Holdings		1,649			—			—			—			—			1,649
Dividends paid to Holdings		(28,956	)		—			—			—			—			(28,956	)
Intercompany		(199,024	)		(13,660	)		(5,251	)		217,935			—			—
Purchase of non-controlling interests		—			—			(1,095	)		—			—			(1,095	)
Proceeds from issuance of non-controlling interests		—			—			—			217,065			—			217,065
Tax benefit from stock based awards		1,846			—			—			—			—			1,846
Distributions to non-controlling interests		—			—			(10,422	)		(2,215	)		—			(12,637	)
Net cash provided by (used in) financing activities		(12,739	)		(16,396	)		(16,600	)		1,060,155			—			1,014,420
Net increase (decrease) in cash and cash equivalents		4,000			1,252			(205	)		6,034			—			11,081
Cash and cash equivalents at beginning of period		70			2,454			830			—			—			3,354
Cash and cash equivalents at end of period	$	4,070		$	3,706		$	625		$	6,034		$	—		$	14,435

(a)

Elimination of equity in earnings of consolidated subsidiaries.

F-51

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes (Continued)

Select Medical Corporation
Condensed Consolidating Balance Sheet
December 31, 2014

	Select (Parent Company Only)			Subsidiary Guarantors		Non- Guarantor Subsidiaries		Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Assets
Current Assets:
Cash and cash equivalents	$	70		$	2,454	$	830	$	—		$	3,354
Accounts receivable, net		—			376,780		67,489		—			444,269
Current deferred tax asset		10,186			2,458		3,347		—			15,991
Prepaid income taxes		17,888			—		—		—			17,888
Intercompany receivables		—			1,728,708		106,509		(1,835,217	)(a)		—
Other current assets		7,860			32,919		5,363		—			46,142
Total Current Assets		36,004			2,143,319		183,538		(1,835,217	)		527,644
Property and equipment, net		17,521			468,138		56,651		—			542,310
Investment in affiliates		3,741,085			67,575		—		(3,808,660)	(b)(c)		—
Goodwill		—			1,642,083		—		—			1,642,083
Non-current deferred tax asset		11,230			—		—		(11,230)	(d)		—
Other identifiable intangibles		—			72,519		—		—			72,519
Other assets		32,463			106,843		947		—			140,253
Total Assets	$	3,838,303		$	4,500,477	$	241,136	$	(5,655,107	)	$	2,924,809
Liabilities and Equity
Current Liabilities:
Bank overdrafts	$	21,746		$	—	$	—	$	—		$	21,746
Current portion of long-term debt and notes payable		8,496			1,844		534		—			10,874
Accounts payable		9,885			84,304		14,343		—			108,532
Intercompany payables		1,835,217			—		—		(1,835,217	)(a)		—
Accrued payroll		17,410			76,670		3,010		—			97,090
Accrued vacation		5,070			49,315		8,747		—			63,132
Accrued interest		10,596			76		2		—			10,674
Accrued other		39,801			36,874		5,701		—			82,376
Total Current Liabilities		1,948,221			249,083		32,337		(1,835,217	)		394,424
Long-term debt, net of current portion		1,098,151			364,794		79,157		—			1,542,102
Non-current deferred tax liability		—			112,013		8,420		(11,230)	(d)		109,203
Other non-current liabilities		52,416			35,576		4,863		—			92,855
Total Liabilities		3,098,788			761,466		124,777		(1,846,447	)		2,138,584
Redeemable non-controlling interests		—			—		10,985		—			10,985
Stockholder's Equity:
Common stock		0			—		—		—			0
Capital in excess of par		885,407			—		—		—			885,407
Retained earnings (accumulated deficit)		(145,892	)		1,048,455		8,366		(1,056,821)	(c)		(145,892	)
Subsidiary investment		—			2,690,556		61,283		(2,751,839)	(b)		—
Total Select Medical Corporation Stockholder's Equity		739,515			3,739,011		69,649		(3,808,660	)		739,515
Non-controlling interests		—			—		35,725		—			35,725
Total Equity		739,515			3,739,011		105,374		(3,808,660	)		775,240
Total Liabilities and Equity	$	3,838,303		$	4,500,477	$	241,136	$	(5,655,107	)	$	2,924,809

(a)

Elimination of intercompany.

(b)

Elimination of investments in consolidated subsidiaries.

(c)

Elimination of investments in consolidated subsidiaries' earnings.

(d)

Reclass of non-current deferred tax asset to report net non-current deferred tax liability in consolidation.

F-52

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes (Continued)

Select Medical Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2014

	Select (Parent Company Only)			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Net operating revenues	$	721		$	2,634,480		$	429,816		$	—		$	3,065,017
Costs and expenses:
Cost of services		2,015			2,209,724			370,601			—			2,582,340
General and administrative		86,311			(1,064	)		—			—			85,247
Bad debt expense		—			38,052			6,548			—			44,600
Depreciation and amortization		3,723			54,876			9,755			—			68,354
Total costs and expenses		92,049			2,301,588			386,904			—			2,780,541
Income (loss) from operations		(91,328	)		332,892			42,912			—			284,476
Other income and expense:
Intercompany interest and royalty fees		(1,142	)		1,131			11			—			—
Intercompany management fees		142,273			(120,528	)		(21,745	)		—			—
Equity in earnings of unconsolidated subsidiaries		—			6,958			86			—			7,044
Loss on early retirement of debt		(2,277	)		—			—			—			(2,277	)
Interest expense		(57,651	)		(23,367	)		(4,428	)		—			(85,446	)
Income (loss) from operations before income taxes		(10,125	)		197,086			16,836			—			203,797
Income tax expense (benefit)		(4,333	)		78,748			1,207			—			75,622
Equity in earnings of subsidiaries		126,419			8,995			—			(135,414	)(a)		—
Net income		120,627			127,333			15,629			(135,414	)		128,175
Less: Net income attributable to non-controlling interests		—			623			6,925			—			7,548
Net income attributable to Select Medical Corporation	$	120,627		$	126,710		$	8,704		$	(135,414	)	$	120,627

(a)

Elimination of equity in earnings of subsidiaries.

F-53

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes (Continued)

Select Medical Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2014

	Select (Parent Company Only)			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Operating activities
Net income	$	120,627		$	127,333		$	15,629		$	(135,414	)(a)	$	128,175
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions from unconsolidated subsidiaries		—			11,889			65						11,954
Depreciation and amortization		3,723			54,876			9,755			—			68,354
Provision for bad debts		—			38,052			6,548			—			44,600
Equity in earnings of unconsolidated subsidiaries		—			(6,958	)		(86	)		—			(7,044	)
Loss on early retirement of debt		2,277			—			—			—			2,277
Gain on disposal or sale of assets		—			(1,168	)		120			—			(1,048	)
Stock compensation expense		11,186			—			—			—			11,186
Amortization of debt discount and issuance costs		7,553			—			—			—			7,553
Deferred income taxes		14,311			—			—			—			14,311
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries		(126,419	)		(8,995	)		—			135,414	(a)		—
Accounts receivable		—			(80,394	)		(17,408	)		—			(97,802	)
Other current assets		1,885			(4,004	)		390			—			(1,729	)
Other assets		2,811			(2,566	)		(348	)		—			(103	)
Accounts payable		3,136			2,440			421			—			5,997
Accrued expenses		(6,353	)		(9,407	)		(279	)		—			(16,039	)
Net cash provided by operating activities		34,737			121,098			14,807			—			170,642
Investing activities
Purchases of property and equipment		(4,674	)		(79,600	)		(10,972	)		—			(95,246	)
Investment in businesses		—			(4,634	)		—			—			(4,634	)
Acquisition of businesses, net of cash acquired		—			(397	)		(814	)		—			(1,211	)
Net cash used in investing activities		(4,674	)		(84,631	)		(11,786	)		—			(101,091	)
Financing activities
Borrowings on revolving facilities		910,000			—			—			—			910,000
Payments on revolving facilities		(870,000	)		—			—			—			(870,000	)
Payments on term loans		(33,994	)		—			—			—			(33,994	)
Issuance of 6.375% senior notes		111,650			—			—			—			111,650
Borrowings of other debt		8,151			—			925			—			9,076
Principal payments on other debt		(9,213	)		(2,058	)		(3,402	)		—			(14,673	)
Debt issuance costs		(4,434	)		—			—			—			(4,434	)
Proceeds from bank overdrafts		9,240			—			—			—			9,240
Purchase of non-controlling interests		—			(9,961	)		—			—			(9,961	)
Equity investment by Holdings		7,355			—			—			—			7,355
Dividends paid to Holdings		(184,100	)		—			—			—			(184,100	)
Intercompany		22,162			(25,092	)		2,930			—			—
Proceeds from issuance of non-controlling interests		—			—			185			—			185
Tax benefit from stock based awards		3,119			—			—			—			3,119
Distributions to non-controlling interests		—			—			(3,979	)		—			(3,979	)
Net cash used in financing activities		(30,064	)		(37,111	)		(3,341	)		—			(70,516	)
Net decrease in cash and cash equivalents		(1	)		(644	)		(320	)		—			(965	)
Cash and cash equivalents at beginning of period		71			3,098			1,150			—			4,319
Cash and cash equivalents at end of period	$	70		$	2,454		$	830		$	—		$	3,354

(a)

Elimination of equity in earnings of consolidated subsidiaries.

F-54

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes (Continued)

Select Medical Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2013

	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net operating revenues	$	350		$	2,576,906		$	398,392		$	—		$	2,975,648
Costs and expenses:
Cost of services		1,757			2,155,370			338,349			—			2,495,476
General and administrative		76,709			212			—			—			76,921
Bad debt expense		—			31,173			6,250			—			37,423
Depreciation and amortization		3,746			51,825			8,821			—			64,392
Total costs and expenses		82,212			2,238,580			353,420			—			2,674,212
Income (loss) from operations		(81,862	)		338,326			44,972			—			301,436
Other income and expense:
Intercompany interest and royalty fees		(1,326	)		836			490			—			—
Intercompany management fees		144,447			(125,357	)		(19,090	)		—			—
Equity in earnings of unconsolidated subsidiaries		—			2,384			92			—			2,476
Loss on early retirement of debt		(17,788	)		—			—			—			(17,788	)
Interest expense		(58,100	)		(22,916	)		(3,938	)		—			(84,954	)
Income (loss) from operations before income taxes		(14,629	)		193,273			22,526			—			201,170
Income tax expense (benefit)		(1,238	)		76,837			372			—			75,971
Equity in earnings of subsidiaries		129,971			14,561			—			(144,532)	(a)		—
Net income		116,580			130,997			22,154			(144,532	)		125,199
Less: Net income attributable to non-controlling interests		—			995			7,624			—			8,619
Net income attributable to Select Medical Corporation	$	116,580		$	130,002		$	14,530		$	(144,532	)	$	116,580

(a)

Elimination of equity in earnings of subsidiaries.

F-55

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes (Continued)

Select Medical Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2013

	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Operating activities
Net income	$	116,580		$	130,997		$	22,154		$	(144,532)	(a)	$	125,199
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,746			51,825			8,821			—			64,392
Provision for bad debts		—			31,173			6,250			—			37,423
Equity in earnings of unconsolidated subsidiaires		—			(2,384	)		(92	)		—			(2,476	)
Loss on early retirement of debt		17,788			—			—			—			17,788
Gain on disposal or sale of assets		—			(463	)		(118	)		—			(581	)
Stock compensation expense		7,033			—			—			—			7,033
Amortization of debt discount and issuance costs		8,344			—			—			—			8,344
Deferred income taxes		7,032			—			—			—			7,032
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries		(129,971	)		(14,561	)		—			144,532	(a)		—
Accounts receivable		—			(60,460	)		(6,685	)		—			(67,145	)
Other current assets		(4,145	)		(5,849	)		1,827			—			(8,167	)
Other assets		(6,594	)		3,026			84			—			(3,484	)
Accounts payable		2,075			(3,746	)		388			—			(1,283	)
Due to third-party payors		—			3,067			(4,108	)		—			(1,041	)
Accrued expenses		(4,929	)		20,843			(846	)		—			15,068
Net cash provided by operating activities		16,959			153,468			27,675			—			198,102
Investing activities
Purchases of property and equipment		(3,024	)		(60,532	)		(10,104	)		—			(73,660	)
Investment in businesses, net of distributions		—			(34,893	)		—			—			(34,893	)
Acquisition of businesses, net of cash acquired		—			(1,665	)		—			—			(1,665	)
Proceeds from sale of assets		—			2,456			456			—			2,912
Net cash used in investing activities		(3,024	)		(94,634	)		(9,648	)		—			(107,306	)

F-56

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes (Continued)

Select Medical Corporation
Condensed Consolidating Statement of Cash Flows (Continued)
For the Year Ended December 31, 2013

	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations		Consolidated
	(in thousands)
Financing activities
Borrowings on revolving facilities		690,000			—			—			—		690,000
Payments on revolving facilities		(800,000	)		—			—			—		(800,000	)
Borrowings on term loans, net of discount		298,500			—			—			—		298,500
Payments on term loans		(596,720	)		—			—			—		(596,720	)
Issuance of 6.375% senior notes		600,000			—			—			—		600,000
Repurchase of 75/8% senior subordinated notes, net of premiums		(70,000	)		—			—			—		(70,000	)
Borrowings of other debt		8,923			5,303			1,084			—		15,310
Principal payments on other debt		(7,752	)		(873	)		(2,209	)		—		(10,834	)
Debt issuance costs		(18,914	)		—			—			—		(18,914	)
Repayments of bank overdrafts		(5,330	)		—			—			—		(5,330	)
Equity investment by Holdings		1,525			—			—			—		1,525
Dividends paid to Holdings		(226,621	)		—			—			—		(226,621	)
Intercompany		77,455			(63,900	)		(13,555	)		—		—
Distributions to non-controlling interests		—			—			(3,537	)		—		(3,537	)
Net cash used in financing activities		(48,934	)		(59,470	)		(18,217	)		—		(126,621	)
Net decrease in cash and cash equivalents		(34,999	)		(636	)		(190	)		—		(35,825	)
Cash and cash equivalents at beginning of period		35,070			3,734			1,340			—		40,144
Cash and cash equivalents at end of period	$	71		$	3,098		$	1,150		$	—	$	4,319

(a)

Elimination of equity in earnings of consolidated subsidiaries.

F-57

SELECT MEDICAL HOLDINGS CORPORATION AND SELECT MEDICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. Selected Quarterly Financial Data (Unaudited)

        The table below sets forth selected unaudited financial data for each quarter of the last two years.

	Holdings
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands, except per share amounts)
Year ended December 31, 2014
Net operating revenues	$	762,578	$	772,762	$	758,069	$	771,608
Income from operations		78,444		82,193		66,017		57,822
Net income attributable to Select Medical Holdings Corporation	$	33,044	$	35,341	$	26,530	$	25,712
Income per common share(1):
Basic	$	0.24	$	0.27	$	0.20	$	0.20
Diluted	$	0.24	$	0.27	$	0.20	$	0.20

	Select
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands)
Year ended December 31, 2014
Net operating revenues	$	762,578	$	772,762	$	758,069	$	771,608
Income from operations		78,444		82,193		66,017		57,822
Net income attributable to Select Medical Corporation	$	33,044	$	35,341	$	26,530	$	25,712

	Holdings
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands, except per share amounts)
Year ended December 31, 2015
Net operating revenues	$	795,343	$	887,065	$	1,021,123	$	1,039,205
Income from operations		79,265		85,011		48,214		62,300
Net income attributable to Select Medical Holdings Corporation	$	35,063	$	36,940	$	29,406	$	29,327
Income per common share(1):
Basic	$	0.27	$	0.28	$	0.22	$	0.22
Diluted	$	0.27	$	0.28	$	0.22	$	0.22

	Select
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands)
Year ended December 31, 2015
Net operating revenues	$	795,343	$	887,065	$	1,021,123	$	1,039,205
Income from operations		79,265		85,011		48,214		62,300
Net income attributable to Select Medical Corporation	$	35,063	$	36,940	$	29,406	$	29,327

(1)

Due to rounding, the summation of quarterly Income per share balances may not equal year to date equivalents.

F-58

        The following Financial Statement Schedule along with the report thereon of PricewaterhouseCoopers LLP dated February 26, 2016, should be read in conjunction with the consolidated financial statements. Financial Statement Schedules not included in this filing have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

Select Medical Holdings Corporation
Select Medical Corporation

Schedule II—Valuation and Qualifying Accounts

Description	Balance at Beginning of Year		Charged to Cost and Expenses			Deductions(1)			Balance at End of Year
Allowance for Doubtful Accounts
Year ended December 31, 2015	$	46,425	$	59,372		$	(44,664	)	$	61,133
Year ended December 31, 2014	$	40,815	$	44,600		$	(38,990	)	$	46,425
Year ended December 31, 2013	$	41,854	$	37,423		$	(38,462	)	$	40,815
Income Tax Valuation Allowance
Year ended December 31, 2015	$	9,641	$	(2,055	)	$	—		$	7,586
Year ended December 31, 2014	$	10,547	$	(906	)	$	—		$	9,641
Year ended December 31, 2013	$	13,341	$	(2,794	)	$	—		$	10,547

(1)

Allowance for doubtful accounts deductions represent write-offs against the reserve for 2013, 2014 and 2015.

F-59

EX-3.4

Exhibit 3.4

SELECT MEDICAL HOLDINGS CORPORATION

AMENDED AND RESTATED BYLAWS

Table of Contents

ARTICLE I	STOCKHOLDERS		1
Section 1.1		Annual Meetings	1
Section 1.2		Special Meetings	1
Section 1.3		Notice of Meetings; Waiver	1
Section 1.4		Quorum	1
Section 1.5		Voting	2
Section 1.6		Voting by Ballot	2
Section 1.7		Adjournment	2
Section 1.8		Proxies	2
Section 1.9		Notice of Stockholder Business and Nominations	3
Section 1.10		Organization; Procedure	5
Section 1.11		Inspectors of Elections	5
Section 1.12		Opening and Closing of Polls	6
Section 1.13		No Stockholder Action by Written Consent or Telephone Conference	6
ARTICLE II	BOARD OF DIRECTORS		6
Section 2.1		General Powers	6
Section 2.2		Number and Term of Office	7
Section 2.3		Election of Directors	7
Section 2.4		Annual and Regular Meetings	7
Section 2.5		Special Meetings; Notice	8
Section 2.6		Quorum; Voting	8
Section 2.7		Adjournment	8
Section 2.8		Action Without a Meeting	8
Section 2.9		Regulations; Manner of Acting	9
Section 2.10		Resignations	9
Section 2.11		Removal of Directors	9
Section 2.12		Vacancies and Newly Created Directorships	9
Section 2.13		Reliance on Accounts and Reports, etc.	10
ARTICLE III	COMMITTEES OF DIRECTORS AND ADVISORY BOARD		10

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Section 3.1		Committees of Directors	10
Section 3.2		Proceedings	10
Section 3.3		Quorum and Manner of Acting	10
Section 3.4		Action by Telephonic Communications	11
Section 3.5		Absent or Disqualified Members	11
Section 3.6		Resignations	11
Section 3.7		Removal	11
Section 3.8		Vacancies	11
ARTICLE IV	OFFICERS		11
Section 4.1		Number	11
Section 4.2		Election	12
Section 4.3		Compensation	12
Section 4.4		Removal and Resignation; Vacancies	12
Section 4.5		Authority and Duties of Officers	12
Section 4.6		Chairman of the Board	12
Section 4.7		Lead Director of the Board	13
Section 4.8		Chief Executive Officer	13
Section 4.9		President	13
Section 4.10		Vice Presidents	13
Section 4.11		Secretary	13
Section 4.12		Assistant Secretary	14
Section 4.13		Treasurer	14
Section 4.14		Additional Officers	14
Section 4.15		Security	14
ARTICLE V	CAPITAL STOCK		15
Section 5.1		Uncertificated Shares	15
Section 5.2		Signatures; Facsimile	15
Section 5.3		Lost, Stolen or Destroyed Certificates	15
Section 5.4		Transfer of Stock	15
Section 5.5		Record Date	16
Section 5.6		Registered Stockholders	16

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Section 5.7		Transfer Agent and Registrar	16
ARTICLE VI	INDEMNIFICATION		16
Section 6.1		Nature of Indemnity	16
Section 6.2		Successful Defense	17
Section 6.3		Determination that Indemnification is Proper	17
Section 6.4		Advance Payment of Expenses	18
Section 6.5		Procedure for Indemnification of Directors and Officers	18
Section 6.6		Survival; Preservation of Other Rights	19
Section 6.7		Insurance	19
Section 6.8		Severability	19
Section 6.9		Limitation on Liability	19
Section 6.10		Appearance as a Witness	20
Section 6.11		Indemnification of Employees and Agents	20
ARTICLE VII	OFFICES		20
Section 7.1		Registered Office and Agent	20
Section 7.2		Other Offices	20
ARTICLE VIII	GENERAL PROVISIONS		20
Section 8.1		Dividends	20
Section 8.2		Reserves	21
Section 8.3		Execution of Instruments	21
Section 8.4		Deposits	21
Section 8.5		Checks	21
Section 8.6		Sale, Transfer, etc. of Securities	21
Section 8.7		Voting as Stockholder	21
Section 8.8		Fiscal Year	22
Section 8.9		Seal	22
Section 8.10		Books and Records; Inspection	22
Section 8.11		Venue	22
ARTICLE IX	AMENDMENT OF BYLAWS		22
Section 9.1		Amendment	22
ARTICLE X	CONSTRUCTION		23

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Section 10.1 Construction 23

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ARTICLE I

STOCKHOLDERS

Section 1.1Annual Meetings.  The annual meeting of the stockholders of the Corporation for the election of Directors and for the transaction of such other business as properly may come before such meeting, including, without limitation, for the purpose of the delivery of an annual report of the Board of Directors, shall be held at such place, within or without the State of Delaware, such date, and such time as designated by the Board of Directors and set forth in the notice or waiver of notice of the meeting.

Section 1.2Special Meetings.  Special meetings of the stockholders for any proper purpose or purposes may be called at any time by the Chief Executive Officer, or pursuant to a resolution approved by a majority of the entire Board of Directors.  Such special meetings of the stockholders shall be held at such places, within or without the State of Delaware, as shall be specified in the respective notices or waivers of notice thereof.  Only business within the purpose or purposes described in the notice or waiver thereof required by these Bylaws may be conducted at a special meeting of the stockholders.  No stockholder shall have the power to require that a meeting of the stockholders be held or that any matter be voted on by the stockholders at any special meeting, except as required by law.

Section 1.3Notice of Meetings; Waiver.

(a)Written or printed notice of the place, date and hour of the meeting of the stockholders, and, in the case of a special meeting, the purpose or purposes for which such meeting is called, shall be delivered not less than ten nor more than sixty days prior to the meeting, either personally or by mail, by or at the direction of the Board of Directors or person calling the meeting, to each stockholder of record entitled to vote at such meeting.  If such notice is mailed, it shall be deemed to have been delivered to a stockholder on the third day after it is deposited in the United States mail, postage prepaid, addressed to the stockholder at his or her address as it appears on the record of stockholders of the Corporation, or, if he or she shall have filed with the Secretary of the Corporation a written request that notices to him or her be mailed to some other address, then directed to him or her at such other address.  Such further notice shall be given as may be required by law or otherwise by these Bylaws.

(b)No notice of any meeting of stockholders need be given to any stockholder who submits a signed waiver of notice, whether before or after the meeting.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in a written waiver of notice.  The attendance of any stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened.

Section 1.4Quorum.  Except as otherwise required by law or by the Restated Certificate of Incorporation, a quorum shall be present at a meeting of stockholders if the holders

of record of more than 50% of the then outstanding shares entitled to vote at a meeting of the stockholders are represented at the meeting in person or by proxy.

Section 1.5Voting.  If, pursuant to Section 5.5 of these Bylaws, a record date has been fixed, every holder of record of shares entitled to vote at a meeting of stockholders shall be entitled to one vote, or such other number of votes as may be prescribed in a Preferred Stock Certificate of Designation (as such term is defined in the Restated Certificate of Incorporation), for each share outstanding in his or her name on the books of the Corporation at the close of business on such record date.  If no record date has been fixed, then every holder of record of shares entitled to vote at a meeting of stockholders shall be entitled to one vote, or such other number of votes as may be prescribed in a Preferred Stock Certificate of Designation, for each share of stock standing in his or her name on the books of the Corporation at the close of business on the business day next preceding the day on which notice of the meeting is given, or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.  Except as otherwise required by law or by the Restated Certificate of Incorporation or by these Bylaws, the vote of a majority of the shares represented in person or by proxy at any meeting at which a quorum is present shall be sufficient for the transaction of any business at such meeting.

Section 1.6Voting by Ballot.  No vote of the stockholders need be taken by written ballot unless otherwise required by law.  Any vote which need not be taken by ballot may be conducted in any manner approved by the chairman of the meeting.

Section 1.7Adjournment.  The chairman of the meeting or the holders of record of more than 50% of the then outstanding shares entitled to vote at a meeting of the stockholders shall have the power to adjourn such meeting from time to time, without any notice other than announcement at the meeting of the time and place of the holding of the adjourned meeting, provided that if the adjournment is for more than thirty days, or if after the adjournment a new record date for the adjourned meeting is fixed pursuant to Section 5.5 of these Bylaws, a notice of the adjourned meeting, conforming to the requirements of Section 1.3 of these Bylaws, shall be given to each stockholder of record entitled to vote at such meeting.  If such meeting is adjourned by the stockholders, the resumption of such meeting shall occur at such time and place as shall be determined by a vote of the holders of record of more than 50% of the then outstanding shares entitled to vote at such meeting of the stockholders.  Upon the resumption of such adjourned meeting, any business may be transacted that might have been transacted at the meeting as originally called.

Section 1.8Proxies.  Any stockholder entitled to vote at any meeting of the stockholders or to express consent to or dissent from corporate action in writing without a meeting may vote in person or may authorize another person or persons to vote at any such meeting and express such consent or dissent for him or her by proxy executed in writing by the stockholder.  A stockholder may authorize a valid proxy by executing a written instrument signed by such stockholder, or by causing his or her signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature or photographic,

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photostatic, or similar reproduction or by transmitting or authorizing the transmission of a telegram or any other means of electronic communication that results in a writing to the person designated as the holder of the proxy, a proxy solicitation firm or a like authorized agent.  No such proxy shall be voted or acted upon after the expiration of three years from the date of such proxy unless such proxy provides for a longer period.  A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by filing another duly executed proxy bearing a later date with the Secretary.  Proxies by telegram or other electronic communication must either set forth or be submitted with information from which it can be determined that the telegram or other electronic communication was authorized by the stockholder.  Any copy, facsimile telecommunication or other reliable reproduction of a writing or transmission created pursuant to this section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

Section 1.9Notice of Stockholder Business and Nominations.

(a)Annual Meetings of Stockholders.

(1)Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (i) by or at the direction of the Board of Directors or the Chairman of the Board or (ii) by any stockholder of the Corporation who is entitled to vote at the meeting, who complies with the notice procedures set forth in clauses (2) and (3) of this paragraph and who was a stockholder of record at the time such notice is delivered to the Secretary or any Assistant Secretary of the Corporation.

(2)For nominations or other business to be properly brought before an annual meeting by a stockholder, pursuant to clause (ii) of paragraph (A)(1) of this Bylaw, the stockholder must have given timely notice thereof in writing to the Secretary or any Assistant Secretary of the Corporation.  To be timely, a stockholder’s notice shall be delivered to the Secretary or any Assistant Secretary at the principal executive offices of the Corporation not less than ninety days nor more than one hundred and twenty days prior to the first anniversary of the preceding year’s annual meeting; provided, that if the date of the annual meeting is advanced by more than twenty days or delayed by more than seventy days from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than one hundred and twenty days prior to such annual meeting and not later than the close of business on the later of the ninetieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made.  In no event shall the adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above.  Such stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a Director all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors,

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or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14a-3 thereunder, in each case including any successor Rule or Regulation thereto, including such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and of any beneficial owner on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and any beneficial owner on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner and (ii) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner.

(3)Notwithstanding anything in the second sentence of paragraph (A)(2) of this Bylaw to the contrary, in the event that the number of Directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for Director or specifying the size of the increased Board of Directors made by the Corporation at least one hundred days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice under this paragraph shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation.

(b)Special Meetings of Stockholders.  Only such business as shall have been brought before the special meeting of the stockholders pursuant to the Corporation’s notice of meeting pursuant to Section 1.3 of these Bylaws shall be conducted at such meeting.  Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which Directors are to be elected pursuant to the Corporation’s notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation who is entitled to vote at the meeting, who complies with the notice procedures set forth in this Bylaw and who is a stockholder of record at the time such notice is delivered to the Secretary of the Corporation.  Nominations by stockholders of persons for election to the Board of Directors may be made at such special meeting of stockholders if the stockholder’s notice as required by paragraph (A)(2) of this Bylaw shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the one hundred and twentieth day prior to such special meeting and not later than the close of business on the later of the ninetieth day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting.  In no event shall the adjournment of a special meeting commence a new time period for the giving of a stockholder’s notice as described above.

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(c)General.

(1)Only persons who are nominated in accordance with the procedures set forth in this Bylaw shall be eligible to serve as Directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Bylaw.  Except as otherwise provided by law, the Restated Certificate of Incorporation or these Bylaws, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Bylaw and, if any proposed nomination or business is not in compliance with this Bylaw, to declare that such defective proposal or nomination shall be disregarded.

(2)For purposes of this Bylaw, “public announcement” shall mean disclosure in a press release reported by PR Newswire, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(3)Notwithstanding the foregoing provisions of this Bylaw, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Bylaw.  Nothing in this Bylaw shall be deemed to affect any right of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Section 1.10Organization; Procedure.  At every meeting of stockholders the presiding officer shall be the chairman of the meeting, who shall be a Director (or representative thereof) designated by a majority of the Board of Directors.  The order of business and all other matters of procedure at every meeting of stockholders, including the regulation of the manner of voting and the conduct of discussion as seem to him or her in order, shall be determined by such presiding officer.  All meetings of the stockholders shall be held at the principal place of business of the Corporation or at such other place within or without the State of Delaware as shall be specified or fixed in the notices or waivers of notice thereof.

Section 1.11Inspectors of Elections.  Preceding any meeting of the stockholders, the Board of Directors shall appoint one or more persons to act as inspectors of elections, and may designate one or more alternate inspectors.  In the event no inspector or alternate is able to act, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting.  Each inspector, before entering upon the discharge of the duties of an inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability.  The inspector shall:

(a)ascertain the number of shares outstanding and the voting power of each,

(b)determine the shares represented at a meeting and the validity of proxies and ballots, count all votes and ballots,

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(c)determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and

(d)certify his or her determination of the number of shares represented at the meeting, and his or her count of all votes and ballots.

The inspector may appoint or retain other persons or entities to assist in the performance of the duties of inspector.

When determining the shares represented and the validity of proxies and ballots, the inspector shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Section 1.8 of these Bylaws, ballots and the regular books and records of the Corporation.  The inspector may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers or their nominees or a similar person which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record.  If the inspector considers other reliable information as outlined in this section, the inspector, at the time of his or her certification pursuant to clause (d) of this section, shall specify the precise information considered, the person or persons from whom the information was obtained, when this information was obtained, the means by which the information was obtained, and the basis for the inspector’s belief that such information is accurate and reliable.

Section 1.12Opening and Closing of Polls.  The date and time for the opening and the closing of the polls for each matter to be voted upon at a stockholder meeting shall be announced at the meeting.  The inspector of the election shall be prohibited from accepting any ballots, proxies or votes or any revocations thereof or changes thereto after the closing of the polls, unless the Court of Chancery upon application by a stockholder shall determine otherwise.

Section 1.13No Stockholder Action by Written Consent or Telephone Conference.

Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders of the Corporation, and the ability of the stockholders to consent in writing or by telephone to the taking of any action is specifically denied.

ARTICLE II

BOARD OF DIRECTORS

Section 2.1General Powers.  Except as may otherwise be provided by law, by the Restated Certificate of Incorporation or by these Bylaws, the property, affairs and business of the Corporation shall be managed by or under the direction of the Board of Directors and the Board of Directors may exercise all the powers of the Corporation and may make all decisions and take all actions for the Corporation.  The powers of the Corporation which may be exercised by the Directors without the approval of the stockholders shall include, without limitation, the power to

6

purchase, hold and sell investments; to borrow and loan funds and provide guarantees of the obligations of others; and to acquire other companies in the ordinary course of business.

Section 2.2Number and Term of Office.  The number of Directors shall be fixed from time to time exclusively pursuant to a resolution adopted by a majority of the entire Board of Directors, but shall consist of not less than five (5) Directors nor more than eleven (11) Directors.  The Directors, other than those who may be elected by the holders of any series of Preferred Stock, if any, shall be divided into three classes, designated as Classes I, II and III, which shall be as nearly equal in number as possible.  Directors of Class I shall be elected to hold office for a term expiring at the annual meeting of stockholders to be held in 2010, Directors of Class II shall be elected to hold office for a term expiring at the annual meeting of stockholders to be held in 2011 and Directors of Class III shall be elected to hold office for a term expiring at the annual meeting of stockholders to be held in 2012.  At each succeeding annual meeting of stockholders following such initial classification and election, the respective successors of each class shall be elected for three year terms.  Each Director (whenever elected) shall hold office until his or her successor has been duly elected and qualified, or until his or her earlier death, insanity, retirement, resignation or removal from office.  Directors need not be residents of the State of Delaware.

Section 2.3Election of Directors.  Except as otherwise provided in Sections 2.11 and 2.12 of these Bylaws, Directors shall be elected at each annual meeting of the stockholders.  If the annual meeting for the election of Directors is not held on the date designated therefor, the Directors shall cause the meeting to be held as soon thereafter as convenient.  In an uncontested election of Directors at any meeting of the stockholders, provided a quorum is present, a nominee for Director shall be elected to the Board of Directors if the votes validly cast for such nominee’s election exceed the votes validly cast against such nominee’s election in such election (with “absentions” and “broker nonvotes” not counted as a vote cast either for or against such nominee’s election).  In a contested election of Directors at any meeting of stockholders, provided a quorum is present, each Director will be elected by a plurality vote of the votes validly cast at such election.  An election of Directors will be considered “contested” if, as of the record date for the applicable meeting of stockholders, there are more nominees for election than positions on the Board of Directors to be filled by election at such meeting.  All other elections of Directors will be considered “uncontested.”  If Directors are to be so elected by a plurality of the votes validly cast, stockholders shall not be permitted to vote against a nominee.

Section 2.4Annual and Regular Meetings.  The annual meeting of the Board of Directors for the purpose of electing officers and for the transaction of such other business as may come before the meeting shall be held as soon as possible following adjournment of the annual meeting of the stockholders at the place of such annual meeting of the stockholders.  Notice of such annual meeting of the Board of Directors need not be given.  The Board of Directors may from time to time provide by resolution for the holding of regular meetings and fix the place (which may be within or without the State of Delaware) and the date and hour of such meetings, provided that such meetings shall be held no less frequently than quarterly.  Notice of regular meetings need not be given, provided, however, that if the Board of Directors

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shall fix or change the time or place of any regular meeting, notice of such action shall be mailed promptly, or sent by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, telegraph, facsimile, electronic mail or other electronic means to each Director who shall not have been present at the meeting at which such action was taken, addressed to him or her at his or her usual place of business, or shall be delivered to him or her personally.

Section 2.5Special Meetings; Notice.  Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board or the Chief Executive Officer, or by a majority of the Directors, date and hour as may be specified in the respective notices or waivers of notice of such meetings.  Special meetings of the Board of Directors may be called on at least twenty-four hours’ notice to each other Director, if notice is given to each Director personally or by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, telegraph, facsimile, electronic mail or other electronic means or on five days’ notice from the official date of deposit in the mail if notice is mailed to each Director, addressed to him or her at his or her usual place of business.  Such notice need not state the purpose or purposes of, nor the business to be transacted at, such meeting, except as may otherwise be required by law or provided for by the Restated Certificate of Incorporation.

Section 2.6Quorum; Voting.  Unless otherwise required by law or provided in the Restated Certificate of Incorporation, at all meetings of the Board of Directors, the presence of a majority of the total number of Directors then in office shall constitute a quorum for the transaction of business of the Directors.  Except as otherwise required by law, or except as provided herein or in the Restated Certificate of Incorporation, the act or vote of a majority of Directors present at a meeting at which a quorum is present shall be the act or vote of the Board of Directors.  A Director who is present at a meeting of the Directors at which action on any matter of the Corporation is taken shall be presumed to have assented to the action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as secretary of the meeting before the adjournment thereof or shall deliver such dissent to the Corporation immediately after the adjournment of the meeting.  Such right to dissent shall not apply to a Director who voted in favor of such action.

Section 2.7Adjournment.  A majority of the Directors present, whether or not a quorum is present, may adjourn any meeting of the Board of Directors to another time or place.  No notice need be given of any adjourned meeting unless the time and place of the adjourned meeting are not announced at the time of adjournment, in which case notice conforming to the requirements of Section 2.5 of these Bylaws shall be given to each Director.

Section 2.8Action Without a Meeting.  Any action permitted or required by law, the Restated Certificate of Incorporation or these Bylaws to be taken at a meeting of the Directors or of any committee designated by the Directors may be taken without a meeting if a consent in writing, setting forth the action to be taken, is signed by all the Directors or members of such committee, as the case may be, provided that the writing or writings are filed with the minutes of proceedings of the Board of Directors or such committee.  Such consent shall have the same

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force and effect as a unanimous vote at a meeting and may be stated as such in any document or instrument filed with the Secretary of State of Delaware, and the execution of such consent shall constitute attendance or presence in person at a meeting of the Board of Directors or any such committee, as the case may be.  Subject to the requirements of law, the Restated Certificate of Incorporation or these Bylaws for notice of meetings, Directors, or members of any committee designated by the Board of Directors, may participate in and hold a meeting of the Board of Directors or any committee of Directors, as the case may be, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such meeting shall constitute attendance and presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

Section 2.9Regulations; Manner of Acting.  Meetings of the Board of Directors may be held at such place or places as shall be determined from time to time by resolution of the Directors.  At all meetings of the Board of Directors, business shall be transacted in such order as shall from time to time be determined by resolution of the Directors to the extent consistent with applicable law, the Restated Certificate of Incorporation and these Bylaws.  The Board of Directors may adopt such other rules and regulations for the conduct of meetings of the Board of Directors and for the management of the property, affairs and business of the Corporation as the Board of Directors may deem appropriate.  Attendance of a Director at a meeting shall constitute a waiver of notice of such meeting, except where a Director attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.  The Directors shall act only as a Board, and the individual Directors shall have no power as such.

Section 2.10Resignations.  Any Director may resign at any time.  Such resignation shall be made in writing, signed by such Director, to the Corporation and shall take effect at the time specified therein, or if no time be specified, at the time of its receipt by the Chairman of the Board or the Secretary.  The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation or in a policy of the Corporation adopted by the Board.

Section 2.11Removal of Directors.  Any Director may be removed at any time, but only for cause upon the affirmative vote of the holders of a majority of the combined voting power of the then outstanding stock of the Corporation entitled to vote generally in the election of Directors at any meeting of such stockholders, including meetings called expressly for that purpose, and at which a quorum of stockholders is present.  Subject to the rights of the holders of any series of preferred stock of the Corporation, any vacancy in the Board of Directors caused by any such removal shall be filled at such meeting by the stockholders entitled to vote for the election of the Director so removed.

Section 2.12Vacancies and Newly Created Directorships.  Subject to the rights of the holders of any series of preferred stock of the Corporation and except as provided in Section

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2.11, if any vacancies occur in the Board of Directors, by reason of death, resignation, removal or otherwise, or if the authorized number of Directors shall be increased, the Directors then in office shall continue to act and such vacancies and newly created Directorships may be filled by a majority of the Directors then in office, although less than a quorum.  A Director elected to fill a vacancy or a newly created Directorship shall hold office until the next election of the class of Directors for which such Director has been chosen and until his or her successor has been elected and qualified or until his or her earlier death, resignation or removal.

Section 2.13Reliance on Accounts and Reports, etc.  A Director, or a member of any committee designated by the Board of Directors shall, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the Corporation and upon information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees designated by the Board of Directors, or by any other person as to the matters the Director or member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.

ARTICLE III

COMMITTEES OF DIRECTORS AND ADVISORY BOARD

Section 3.1Committees of Directors.  The Board of Directors may designate one or more committees, each such committee to consist of one or more Directors, as fixed from time to time by the Board of Directors.  The Board of Directors may designate one or more Directors as alternate members of any such committee, who may replace any absent or disqualified member or members at any meeting of such committee.  Thereafter, members (and alternate members, if any) of each such committee may be designated at the annual meeting of the Board of Directors.  Any such committee may be dissolved or re-designated from time to time by the Board of Directors.  Each member (and each alternate member) of any such committee (whether designated at an annual meeting of the Board of Directors or to fill a vacancy or otherwise) shall hold office until his or her successor shall have been designated or until he or she shall cease to be a Director, or until his or her earlier death, resignation or removal.

Section 3.2Proceedings.  Any such committee may fix its own rules of procedure and may meet at such place (within or without the State of Delaware), at such time and upon such notice, if any, as it shall determine from time to time.  Any such committee shall keep regular minutes of its meetings and report the same to the Board of Directors at the next meeting of the Board following such committee meeting, except that when the Board meeting is held within two days after the committee meeting, such report shall, if not made at the first meeting, be made to the Board of Directors at its second meeting following such committee meeting.

Section 3.3Quorum and Manner of Acting.  Except as may be otherwise provided in the resolution creating such committee, at all meetings of any committee the presence of members (or alternate members) constituting a majority of the total authorized membership of such committee shall constitute a quorum for the transaction of business.  The act of the majority

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of the members present at any meeting at which a quorum is present shall be the act of such committee.  Any action required or permitted to be taken at any meeting of any such committee may be taken without a meeting if all members of such committee shall consent to such action in writing and such writing or writings are filed with the minutes of the proceedings of the committee.  The members of any such committee shall act only as a committee, and the individual members of such committee shall have no power as such.

Section 3.4Action by Telephonic Communications.  Members of any committee designated by the Board of Directors may participate in a meeting of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting.

Section 3.5Absent or Disqualified Members.  In the absence or disqualification of a member of any committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.

Section 3.6Resignations.  Any member (and any alternate member) of any committee may resign at any time by delivering a written notice of resignation, signed by such member, to the Chairman of the Board, the Chief Executive Officer or any President.  Unless otherwise specified therein, such resignation shall take effect upon delivery.

Section 3.7Removal.  Any member (and any alternate member) of any committee may be removed from his or her position as a member (or alternate member, as the case may be) of such committee at any time, either for or without cause, by resolution adopted by a majority of the whole Board of Directors.

Section 3.8Vacancies.  If any vacancy shall occur in any committee, by reason of disqualification, death, resignation, removal or otherwise, the remaining members (and any alternate members) shall continue to act, and any such vacancy may be filled by the Board of Directors.

ARTICLE IV

OFFICERS

Section 4.1Number.  The officers of the Corporation shall be designated by the Board of Directors and shall include such officers as the Directors may from time to time determine, which officers may (but need not) include a Chairman of the Board (who may or may not be an Executive Chairman), a Vice Chairman of the Board, a Chief Executive Officer, one or more Presidents (and in the case of each such President, with such descriptive title, if any, as the Directors shall deem appropriate), one or more Vice Presidents (and in the case of each such Vice President, with such descriptive title, if any, as the Directors shall deem appropriate), a

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Secretary, an Assistant Secretary and a Treasurer.  The Board of Directors also may elect one or more other officers as the Board of Directors may determine.  Any number of offices may be held by the same person.  No officer need be a Director of the Corporation.

Section 4.2Election.  Officers shall be chosen in such manner and shall hold their offices for such terms as determined by the Board of Directors.  Each officer shall hold office until his or her successor has been elected and qualified in his stead, or until his or her earlier death, resignation, retirement, disqualification or removal from office.

Section 4.3Compensation.  The Corporation shall have the authority to pay and provide compensation and other benefits to its officers and employees.  The compensation and benefits of all officers of the Corporation shall be fixed from time to time by the Board of Directors, unless otherwise delegated by the Board of Directors to a particular committee or officer.

Section 4.4Removal and Resignation; Vacancies.  Any officer may be removed for or without cause at any time by the Board of Directors, or by the Chief Executive Officer or any President if such powers of removal have been expressly conferred to such individuals by the Board of Directors, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.  Designation of an officer shall not itself create contract rights.  Any officer may resign at any time by delivering a written notice of resignation, signed by such officer, to the Chairman of the Board, the Chief Executive Officer or any President.  Unless otherwise specified therein, such resignation shall take effect immediately upon delivery.  Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise, shall be filled by the Board of Directors.  The Board of Directors may abolish any office at any time unless prohibited by law or statute.

Section 4.5Authority and Duties of Officers.  In addition to any specifically enumerated duties, services and powers, the officers of the Corporation shall have such authority and shall exercise such powers and perform such duties as may be specified by law or statute, by the Restated Certificate of Incorporation or these Bylaws, or as the Board of Directors may from time to time determine or as may be assigned to such officers by any competent superior officer.  The Board of Directors may also at any time limit or circumvent the enumerated duties, services and powers of any officer.  In addition to the designation of officers and the enumeration of their respective duties, services and powers, the Board of Directors may grant powers of attorneys to individuals to act as agent for or on behalf of the Corporation, to do any act which would be binding on the Corporation, to incur any expenditures on behalf of or for the Corporation, or to execute, deliver and perform any agreements, acts, transactions or other matters on behalf of the Corporation.  Such powers of attorney may be revoked or modified as deemed necessary by the Board of Directors.

Section 4.6Chairman of the Board.  The Chairman of the Board shall, if one is designated by the Board of Directors and is present, preside at all meetings of the stockholders and of the Board of Directors and exercise and perform such other powers and duties as may be assigned from time to time by the Board of Directors.  He shall also assist the Directors in the

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formulation of the policies of the Corporation, and shall be available to other officers on a reasonable basis for consultation and advice.

Section 4.7Lead Director of the Board.  The Lead Director of the Board, shall, in the absence of the Chairman of the Board, preside at all meetings of the stockholders and of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned by the Board of Directors.

Section 4.8Chief Executive Officer.  The Chief Executive Officer shall have day-to-day supervision of the affairs of the Corporation, such powers and duties subject at all times to the authority of the Board of Directors.  In the absence or disability of the Chairman of the Board and the Vice Chairman of the Board, the Chief Executive Officer shall exercise the powers and perform the duties of the Chairman of the Board.

Section 4.9President.  Each President that is designated by the Board of Directors shall generally assist the Chief Executive Officer and shall have such powers and perform such duties and services as shall from time to time be prescribed or delegated to him or her by the Chief Executive Officer or the Board of Directors.  In the absence or disability of the Chief Executive Officer, the Board of Directors shall appoint one President to exercise the powers and perform the duties of the Chief Executive Officer.

Section 4.10Vice Presidents.  Each Vice President that is designated by the Board of Directors shall generally assist one or more Presidents and shall have such powers and perform such duties and services as shall from time to time be prescribed or delegated to him or her by one or more Presidents or the Board of Directors.

Section 4.11Secretary.  The Secretary, if one is designated by the Board of Directors, shall have the following powers and duties:

(a)He or she shall keep or cause to be kept a record of all the proceedings of the meetings of the stockholders and of the Board of Directors in books provided for that purpose.

(b)He or she shall cause all notices to be duly given in accordance with the provisions of these Bylaws and as required by law.

(c)Whenever any committee shall be appointed pursuant to a resolution of the Board of Directors, he or she shall furnish a copy of such resolution to the members of such committee.

(d)He or she shall be the custodian of the records and of the seal of the Corporation and cause such seal (or a facsimile thereof) to be affixed to all certificates representing shares of the Corporation prior to the issuance thereof and to all instruments the execution of which on behalf of the Corporation under its seal shall have been duly authorized in accordance with these Bylaws, and when so affixed he or she may attest the same.

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(e)He or she shall properly maintain and file all books, reports, statements, certificates and all other documents and records required by law, the Restated Certificate of Incorporation or these Bylaws.

(f)He or she shall have charge of the stock books and ledgers of the Corporation and shall cause the stock and transfer books to be kept in such manner as to show at any time the number of shares of stock of the Corporation of each class issued and outstanding, the names (alphabetically arranged) and the addresses of the holders of record of such shares, the number of shares held by each holder and the date as of which each became such holder of record.

(g)He or she shall sign (unless the Treasurer, an Assistant Treasurer or an Assistant Secretary shall have signed) certificates representing shares of the Corporation the issuance of which shall have been authorized by the Board of Directors.

(h)He or she shall perform, in general, all duties incident to the office of Secretary and such other duties as may be specified in these Bylaws or as may be assigned to him or her from time to time by the Board of Directors, the Chief Executive Officer or any President.

Section 4.12Assistant Secretary.  The Assistant Secretary, if one is designated by the Board of Directors, shall generally assist the Secretary.

Section 4.13Treasurer.  The Treasurer, if one is designated by the Board of Directors, or such other officer as may be designated by the Board of Directors, shall be the chief accounting and financial officer of the Corporation and have custody of all the funds, securities and other valuables of the Corporation which may have or shall come into his or her hands.  The Treasurer shall have active control of and shall be responsible for all matters pertaining to the accounts and finances of the Corporation and shall have such powers and perform such duties as may be prescribed by the Chief Executive Officer, any President, the Board of Directors or elsewhere in these Bylaws.

Section 4.14Additional Officers.  The Board of Directors may appoint such other officers and agents as it may deem appropriate, and such other officers and agents shall hold their offices for such terms and shall exercise such powers and perform such duties as may be determined from time to time by the Board of Directors.  The Board of Directors from time to time may delegate to the Chief Executive Officer or any President the power to appoint subordinate officers or agents and to prescribe their respective rights, terms of office, authorities and duties.  Any such officer or agent may remove any such subordinate officer or agent appointed by him or her, for or without cause.

Section 4.15Security.  The Board of Directors may require any officer, agent or employee of the Corporation to provide security for the faithful performance of his or her duties, in such amount and of such character as may be determined from time to time by the Board of Directors.

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ARTICLE V

CAPITAL STOCK

Section 5.1Uncertificated Shares.  Except as otherwise provided in a resolution approved by the Board, all shares of capital stock of the Corporation issued after the date hereof shall be uncertificated shares.  In the event that the Board elects to provide in a resolution that certificates shall be issued to represent any shares of capital stock of the Corporation, holders of such shares (and upon request every holder of uncertificated shares) shall be entitled to have a certificate signed by, or in the name of the Corporation, by the Chairman of the Board or a Vice Chairman of the Board, any President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, representing the number of shares registered in certificate form.  Such certificate shall be in such form as the Board may determine, to the extent consistent with applicable law, the Restated Certificate of Incorporation and these Bylaws.

Section 5.2Signatures; Facsimile.  All of such signatures on the certificate referred to in Section 5.1 of these Bylaws may be a facsimile, engraved or printed, to the extent permitted by law.  In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

Section 5.3Lost, Stolen or Destroyed Certificates.  The Corporation may direct that a new certificate be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon delivery to the Corporation of an affidavit of the owner or owners of such certificate, setting forth such allegation.  The Corporation may require the owner of such lost, stolen or destroyed certificate, or his or her legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate.

Section 5.4Transfer of Stock.  Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares, duly endorsed or accompanied by appropriate evidence of succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.  Within a reasonable time after the transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the Delaware General Corporation Law.  Subject to the provisions of the Restated Certificate of Incorporation and these Bylaws, the Board of Directors may prescribe such additional rules and regulations as it may deem appropriate relating to the issue, transfer and registration of shares of the Corporation.

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Section 5.5Record Date.  In order to determine the stockholders entitled to notice of, or entitled to vote at, any meeting of stockholders or any adjournment thereof, the Board of Directors may fix in advance a record date, which record date shall not precede the date on which the resolution fixing the record date is adopted by the Board of Directors, and which shall not be more than sixty nor less than ten days before the date of such meeting.  A determination of stockholders of record entitled to notice of or entitled to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights of the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action.  If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

Section 5.6Registered Stockholders.  Prior to due surrender of a certificate for registration of transfer, the Corporation may treat the registered owner as the person exclusively entitled to receive dividends and other distributions, to vote, to receive notice and otherwise to exercise all the rights and powers of the owner of the shares represented by such certificate, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in such shares on the part of any other person, whether or not the Corporation shall have notice of such claim or interests.  Whenever any transfer of shares shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer if, when the certificates are presented to the Corporation for transfer or uncertificated shares are requested to be transferred, both the transferor and transferee request the Corporation to do so.

Section 5.7Transfer Agent and Registrar.  The Board of Directors may appoint one or more transfer agents and one or more registrars, and may require all certificates representing shares to bear the signature of any such transfer agents or registrars.

ARTICLE VI

INDEMNIFICATION

Section 6.1Nature of Indemnity.  The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (a “Proceeding”), whether civil, criminal, administrative, arbitrative or investigative, or any appeal in such a Proceeding or any inquiry or investigative (other than an action by or in the right of the Corporation), by reason of the fact that he or she is or was Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines

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and amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, provided that he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding had no reasonable cause to believe his or her conduct was unlawful.  The indemnification provided in this Article VI could involve indemnification for negligence or under theories of strict liability.  In the case of an action or suit by or in the right of the Corporation to procure a judgment in its favor (1) the indemnification of a Director or officer shall be limited to expenses (including attorneys’ fees) actually and reasonably incurred by such person in the defense or settlement of such action or suit, and (2) no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper.  Notwithstanding the foregoing, but subject to Section 6.5 of these Bylaws, the Corporation shall not be obligated to indemnify a Director or officer of the Corporation in respect of a Proceeding (or part thereof) instituted by such Director or officer, unless such Proceeding (or part thereof) has been authorized by the Board of Directors.

The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

The rights granted pursuant to this Article VI shall be deemed contract rights.  No amendment, modification or repeal of this Article VI shall have the effect of limiting or denying any such rights with respect to actions taken or Proceedings arising prior to any such amendment, modification or repeal.

Section 6.2Successful Defense.  To the extent that a present or former Director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 6.1 of these Bylaws or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection therewith.

Section 6.3Determination that Indemnification is Proper.  Any indemnification of a present or former Director or officer of the Corporation under Section 6.1 of these Bylaws (unless ordered by a court) shall be made by the Corporation unless a determination is made that indemnification of the Director or officer is not proper in the circumstances because he or she has not met the applicable standard of conduct set forth in Section 6.1 of these Bylaws.  Any

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such determination shall be made (1) by a majority vote of the Directors who are not parties to such action, suit or proceeding, even though less than a quorum, (2) by a committee of such Directors designated by majority vote of such Directors, even though less than a quorum, (3) if there are no such Directors, or if such Directors so direct, by independent legal counsel in a written opinion or (4) by the stockholders.

Section 6.4Advance Payment of Expenses.  The right to indemnification conferred in this Article VI shall include the right to be paid or reimbursed by the Corporation the reasonable expenses incurred by a person of the type entitled to be indemnified under Sections 6.1, 6.2, and 6.3 who was, is, or is threatened to be made a named defendant or respondent in a Proceeding in advance of the final disposition of the Proceeding and without any determination as to the person’s ultimate entitlement to indemnification; provided, however, that the payment of such expenses incurred by any such person in advance of the final disposition of a Proceeding shall be made only upon delivery to the Corporation of a written affirmation by such person of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification under this Article VI and a written undertaking, by or on behalf of such person, to repay all amounts so advanced if it shall ultimately be determined that such person is not entitled to be indemnified under this Article VI or otherwise.  The Board of Directors may authorize the Corporation’s counsel to represent such present or former Director or officer in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding.

Section 6.5Procedure for Indemnification of Directors and Officers.  Any indemnification of a Director or officer of the Corporation under Sections 6.1, 6.2, and 6.3 of these Bylaws, or advance of costs, charges and expenses to a Director or officer under Section 6.4 of these Bylaws, shall be made promptly, and in any event within thirty days, upon the written request of such person.  If a determination by the Corporation that the Director or officer is entitled to indemnification pursuant to this Article is required, and the Corporation fails to respond within sixty days to a written request for indemnity, the Corporation shall be deemed to have approved such request.  If the Corporation denies a written request for indemnity or advancement of expenses, in whole or in part, or if payment in full pursuant to such request is not made within thirty days, the right to indemnification or advances as granted by this Article shall be enforceable by the Director or officer in any court of competent jurisdiction.  Such person’s costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation.  It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 6.4 of these Bylaws where the required undertaking, if any, has been received by or tendered to the Corporation) that the claimant has not met the standard of conduct set forth in Section 6.1 of these Bylaws, but the burden of proving such defense shall be on the Corporation.  Neither the failure of the Corporation (including its Board of Directors, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 6.1 of these Bylaws, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors, its independent legal counsel,

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and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to such action or create a presumption that the claimant has not met the applicable standard of conduct.

Section 6.6Survival; Preservation of Other Rights.  The foregoing indemnification provisions shall be deemed to be a contract between the Corporation and each Director or officer who serves in any such capacity at any time while these provisions are in effect and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts.  Such a “contract right” may not be modified retroactively without the consent of such Director or officer.

The indemnification and the advancement and payment of expenses provided by this Article VI shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaw, common or statutory law, provision of the Restated Certificate of Incorporation, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a Director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 6.7Insurance.  The Corporation shall purchase and maintain insurance, at its expense, to protect the Corporation and any person who is or was or has agreed to become a Director or officer, or is or was serving at the request of the Corporation as a Director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, limited liability company, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise against any expense, liability, or loss asserted against him or her or incurred by him or her or on his or her behalf in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article, provided that such insurance is available on acceptable terms, which determination shall be made by a vote of a majority of the entire Board of Directors.

Section 6.8Severability.  If this Article VI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify and hold harmless each Director or officer or any other person indemnified pursuant to this Article VI as to costs, charges and expenses (including reasonable attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative to the full extent permitted by any applicable portion of this Article VI that shall not have been invalidated and to the fullest extent permitted by applicable law.

Section 6.9Limitation on Liability.  No Director or officer shall be personally liable, as such, for any action taken or omitted from being taken unless:  (i) such Director or officer breached or failed to perform the duties of his office and (ii) the breach or failure to perform constituted recklessness, self-dealing or willful misconduct.  The foregoing shall not apply to any

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responsibility or liability under a criminal statute or liability for the payment of taxes under Federal, state or local law.

Section 6.10Appearance as a Witness.  Notwithstanding any other provision of this Article VI, the Corporation shall pay or reimburse expenses incurred by a Director or officer in connection with his appearance as a witness or other participation in a Proceeding at a time when he is not a named defendant or respondent in the Proceeding.

Section 6.11Indemnification of Employees and Agents.  The Corporation, by adoption of a resolution of the Board of Directors, may indemnify and advance expenses to an employee or agent of the Corporation to the same extent and subject to the same conditions under which it may indemnify and advance expenses to Directors and officers under this Article VI; and, the Corporation may indemnify and advance expenses to persons who are not or were not Directors, officers, employees or agents of the Corporation but who are or were serving at the request of the Corporation as director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, limited liability company, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise against any liability asserted against him or her and incurred by him or her in such a capacity or arising out of his or her status as such a person to the same extent that it may indemnify and advance expenses to Directors and officers of the Corporation under this Article VI.

ARTICLE VII

OFFICES

Section 7.1Registered Office and Agent.  The registered agent and office of the Corporation in the State of Delaware shall be the Corporation Trust Company, located at 1209 Orange Street in the City of Wilmington, County of New Castle (19801) or such other agent and office (which need not be a place of business of the Corporation) as the Board of Directors may designate from time to time in the manner provided by law.

Section 7.2Other Offices.  The Corporation may maintain offices or places of business at such other locations within or without the State of Delaware as the Board of Directors may from time to time determine or as the business of the Corporation may require.

ARTICLE VIII

GENERAL PROVISIONS

Section 8.1Dividends.  Subject to any applicable provisions of law and the Restated Certificate of Incorporation, dividends upon the shares of the Corporation may be declared by the Board of Directors at any regular or special meeting of the Board of Directors and any such dividend may be paid in cash, property or shares of the Corporation’s capital stock.

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Section 8.2Reserves.  There may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation, and the Board of Directors may similarly modify or abolish any such reserve.

Section 8.3Execution of Instruments.  The Chief Executive Officer, any President, any Vice President, the Secretary or the Treasurer may enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation.  The Board of Directors, the Chief Executive Officer or the President may authorize any other officer or agent to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation.  Any such authorization may be general or limited to specific contracts or instruments.

Section 8.4Deposits.  Any funds of the Corporation may be deposited from time to time in such banks, trust companies or other depositories as may be determined by the Board of Directors, the Chief Executive Officer or any President, or by such officers or agents as may be authorized by the Board of Directors, the Chief Executive Officer or the President to make such determination.

Section 8.5Checks.  All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such agent or agents of the Corporation, and in such manner, as the Board of Directors or the Chief Executive Officer or any President from time to time may determine.

Section 8.6Sale, Transfer, etc. of Securities.  To the extent authorized by the Board of Directors or by the Chief Executive Officer, any President, any Vice President, the Secretary or the Treasurer or any other officers designated by the Board of Directors, the Chief Executive Officer or any President may sell, transfer, endorse, and assign any shares of stock, bonds or other securities owned by or held in the name of the Corporation, and may make, execute and deliver in the name of the Corporation, under its corporate seal, any instruments that may be appropriate to effect any such sale, transfer, endorsement or assignment.

Section 8.7Voting as Stockholder.  Unless otherwise determined by resolution of the Board of Directors, the Chief Executive Officer or any President or any Vice President shall have full power and authority on behalf of the Corporation to attend any meeting of stockholders of any corporation in which the Corporation may hold stock and to act, vote (or execute proxies to vote) and exercise in person or by proxy all other rights, powers and privileges incident to the ownership of such stock.  Such officers acting on behalf of the Corporation shall have full power and authority to execute any instrument expressing consent to or dissent from any action of any such corporation without a meeting.  The Board of Directors may by resolution from time to time confer such power and authority upon any other person or persons.

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Section 8.8Fiscal Year.  The fiscal year of the Corporation shall commence on the first day of January of each year (except for the Corporation’s first fiscal year which shall commence on the date of incorporation) and shall terminate in each case on December 31.

Section 8.9Seal.  The seal of the Corporation shall be circular in form, and shall contain the name of the Corporation, the year of its incorporation and the words “Corporate Seal” and “Delaware.”  The form of such seal shall be subject to alteration by the Board of Directors.  The seal may be used by causing it or a facsimile thereof to be impressed, affixed or reproduced, or may be used in any other lawful manner.

Section 8.10Books and Records; Inspection.  Except to the extent otherwise required by law, the books and records of the Corporation shall be kept at such place or places within or without the State of Delaware as may be determined from time to time by the Board of Directors.

Section 8.11Venue. Unless the Corporation consents in writing to the selection of an alternate forum, the state courts of the State of Delaware in and for New Castle County (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum, to the fullest extent permitted by law, for (a) any derivative action or proceeding brought on behalf of the Corporation; (b) any action asserting a claim of a breach of fiduciary duty owed by any Director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders; (c) any action asserting a claim against the Corporation arising pursuant to any provision of the Delaware General Corporation Law or the Certificate of Incorporation or these Bylaws (in each case, as they may be amended from time to time); (d) any action seeking to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws of the Corporation (in each case, as they may be amended from time to time); or (e) any action asserting a claim against the Corporation or any Director or officer or other employee of the Corporation governed by the internal affairs doctrine.

ARTICLE IX

AMENDMENT OF BYLAWS

Section 9.1Amendment.  Subject to any express provision in the Restated Certificate of Incorporation to the contrary, these Bylaws may be amended, altered or repealed:

(a)by resolution adopted by a majority of the Board of Directors at any special or regular meeting of the Board of Directors without the assent or vote of the stockholders of the Corporation if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting; or

(b)at any regular or special meeting of the stockholders upon the affirmative vote of not less than two-thirds (662/3%) of the holders of the combined voting power of the outstanding shares of the Corporation entitled to vote generally in the election of Directors if, in

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the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting.

ARTICLE X

CONSTRUCTION

Section 10.1Construction.  In the event of any conflict between the provisions of these Bylaws as in effect from time to time and the provisions of the Restated Certificate of Incorporation of the Corporation as in effect from time to time, the provisions of such Restated Certificate of Incorporation shall be controlling.

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EX-10.80

Exhibit 10.80

SELECT MEDICAL HOLDINGS CORPORATION

RESTRICTED STOCK AWARD AGREEMENT UNDER THE

2005 EQUITY INCENTIVE PLAN FOR NON-EMPLOYEE DIRECTORS

This Restricted Stock Award Agreement (this “Agreement”) is made as of August 5, 2015 (the “Effective Date”), between SELECT MEDICAL HOLDINGS CORPORATION, a Delaware corporation (the “Company”), and RUSSELL L. CARSON, an individual (the “Participant”).

WHEREAS, the Company has adopted the 2005 Equity Incentive Plan for Non-Employee Directors, amended and restated as of August 12, 2009 and further amended on March 3, 2011 (the “Plan”), all of the terms and provisions of which are incorporated herein by reference and made a part hereof;

WHEREAS, the Participant serves as an member of the Board of Directors of the Company;

WHEREAS, in order to provide an incentive to the Participant to serve as a member of the Board of Directors of the Company, the Company has approved and authorized the issuance of certain shares of the Common Stock of the Company, par value $.001 per share (the “Stock”), to the Participant, subject to the terms of the Plan and this Agreement; and

WHEREAS, all capitalized terms used but not defined herein shall have the meanings set forth in the Plan.

NOW, THEREFORE, in consideration of the services to be rendered by the Participant as a member of the Board of Directors of the Company, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Participant agree to the terms and conditions set forth herein.

1.Award of Restricted Stock.  The Company hereby awards and issues to the Participant, effective as of the date hereof, 10,000 shares of Stock (the “Restricted Stock”).

2.Vesting Schedule. Subject to the further provisions of this Agreement, and the Participant’s continued service as a member of the Board of Directors of the Company, all of the shares of Restricted Stock shall vest on August 5, 2016.  Subject to Section 5 hereof, the period beginning on the date hereof through and including the vesting date for any shares of Restricted Stock shall be referred to herein as the “Restricted Period” with respect to such shares of Restricted Stock.

3.Transferability.  Shares of Restricted Stock which have not vested may not be sold, assigned, transferred, pledged, or otherwise disposed of under any circumstances during the applicable Restricted Period, except that such shares may be transferred to a Permitted Transferee who agrees in writing (in a form satisfactory to the Company and its counsel) to be bound by this Agreement to the same extent as the Participant, and any such transferred shares shall continue to be subject to forfeiture upon the Participant’s termination of service as a

member of the Board of Directors of the Company as provided herein.  The Restricted Stock shall not be subject to execution, attachment or similar process during the applicable Restricted Period.  Upon any attempt to transfer, assign, pledge, or otherwise dispose of the Restricted Stock during the applicable Restricted Period contrary to the provisions of the Plan or this Agreement, or upon the levy of any attachment or similar process upon the Restricted Stock during the applicable Restricted Period, the Restricted Stock shall immediately be forfeited to the Company and cease to be outstanding.

4.Forfeiture of Restricted Stock.  All unvested shares of Restricted Stock shall immediately be forfeited to the Company and cease to be outstanding upon the termination of the Participant’s service as a member of the Board of Directors of the Company.  The Participant acknowledges that neither the Participant nor the Participant’s estate will have any claim whatsoever against the Company or any Subsidiary related to any forfeiture of the Restricted Stock.

5.Acceleration of Vesting Upon Change of Control.  Upon a Change of Control all Restricted Periods shall terminate and all outstanding shares of Restricted Stock shall be vested in full and all limitations on such Restricted Stock set forth in this Agreement shall automatically lapse.

6.Plan Governing.  The Participant hereby acknowledges receipt of a copy of the Plan and accepts and agrees to be bound by all of the terms and conditions of the Plan as if set out verbatim in this Agreement.  In the event of a conflict between the terms of the Plan and the terms of this Agreement, the terms of the Plan shall control.

7.Miscellaneous.  This Agreement may be amended only by written agreement of the Participant and the Company and may be amended without the consent of any other person.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, representatives, heirs, descendants, distributees and permitted assigns.  This Agreement may be executed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the

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Effective Date.

SELECT MEDICAL HOLDINGS CORPORATION
By:	/s/ Robert A. Ortenzio
Name:	Robert A. Ortenzio
Title:	Executive Chairman & Co-Founder
PARTICIPANT:
/s/ Russell L. Carson
	Russell L. Carson

3

EX-10.81

Exhibit 10.81

EXECUTION VERSION

AMENDMENT NO. 6

AMENDMENT NO. 6 (this “Amendment No. 6”), dated as of December 11, 2015, to that certain Credit Agreement, dated as of June 1, 2011 and as amended by Amendment No. 1 dated as of August 8, 2012, the Additional Credit Extension Amendment dated as of August 13, 2012, Amendment No. 2 dated as of November 6, 2012, Amendment No. 3 dated as of February 15, 2013, the Additional Credit Extension Amendment dated as of February 20, 2013 and Amendment No. 4 dated as of June 3, 2013, Amendment No. 5 dated as of March 4, 2014, the Additional Credit Extension Amendment (Incremental Revolver) dated as of October 23, 2014, the Additional Credit Extension Amendment (Revolver Extension) dated as of October 23, 2014 and the Additional Credit Extension Amendment dated as of May 20, 2015, and as amended, supplemented and in effect from time to time (the “Credit Agreement”; capitalized terms used herein and not defined shall have the meanings set forth in the Credit Agreement), among SELECT MEDICAL HOLDINGS CORPORATION (“Holdings”), SELECT MEDICAL CORPORATION (the “Borrower”), JPMORGAN CHASE BANK, N.A., as Administrative Agent and Collateral Agent (the “Administrative Agent” and the “Collateral Agent,” respectively), MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED and GOLDMAN SACHS BANK USA, as Co-Syndication Agents, MORGAN STANLEY SENIOR FUNDING, INC. and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Co-Documentation Agents, and the several banks and other financial institutions from time to time party thereto as lenders (the “Lenders”).

W I T N E S S E T H:

WHEREAS, Section 9.02 of the Credit Agreement permits the Credit Agreement to be amended from time to time;

WHEREAS, each Amendment No. 6 Consenting Lender (as defined in Exhibit A) has agreed, on the terms and conditions set forth herein, (x) to have the entire principal amount (or such lesser amount as permitted by the Borrower in consultation with the Arranger) of its outstanding Series D Tranche B Term Loans, if any, converted into a like principal amount of the Series E Tranche B Term Loans, effective as of the Amendment No. 6 Effective Date (as defined below) and (y) to the amendments to the Credit Agreement reflected in Exhibit A, including, without limitation, the increase in the Applicable Rate with respect to the Series E Tranche B Term Loans;

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION ONE.  Amendments.  The Credit Agreement is, effective as of the Amendment No. 6 Effective Date (as defined below), hereby amended to delete the stricken text (indicated textually in the same manner as the following example:  stricken text) and to add the double-underlined text (indicated textually in the same manner as the following example:  double-underlined text) as set forth in the pages of the Credit Agreement attached as Exhibit A hereto.  Any previously issued Notes, if any, evidencing Converted Series D Tranche B Term Loans are amended to reflect the terms and conditions evidencing the Series E Tranche B Term Loans.

SECTION TWO.  Conditions to Effectiveness.  This Amendment No. 6 shall become effective as of the date (the “Amendment No. 6 Effective Date”) when, and only when, the following conditions have been satisfied:

(i)this Amendment No. 6 shall have been executed and delivered by the Borrower, Holdings, the other Loan Parties, the Required Lenders and the Administrative Agent;

(ii)the Administrative Agent shall have received copies of the resolutions of the board of directors (or authorized committee thereof) of (x) Holdings, (y) the Borrower and (z) each Subsidiary Loan Party approving and authorizing the execution, delivery and performance of this Amendment No. 6, certified as of the Amendment No. 6 Effective Date by the corporate secretary or an assistant secretary thereof as being in full force and effect without modification or amendment;

(iii)the Administrative Agent shall have received a legal opinion dated the Amendment No. 6 Effective Date from Dechert LLP in form and substance reasonably satisfactory to the Arranger and the Administrative Agent;

(iv)the representations and warranties set forth in Article III of the Credit Agreement and in each other Loan Document shall be true and correct in all material respects (except to the extent any such representation or warranty is qualified by “materially,” “Material Adverse Effect” or a similar term, in which case such representation and warranty shall be true and correct in all respects) on and as of the date hereof (both before and after giving effect to the effectiveness of Amendment No. 6) with the same effect as though made on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date (provided that the solvency representation will be deemed to have been made on the Amendment No. 6 Effective Date after giving effect to the effectiveness of Amendment No. 6);

(v)to the extent not previously delivered, the Administrative Agent shall have received at least 3 business days prior to the date hereof all documentation and other information about the Borrower and the Subsidiary Loan Parties required under applicable “know your customer” and anti-money laundering rules and regulations, including the PATRIOT Act that has been requested in writing at least 5 business days prior to the date hereof;

(vi)the Administrative Agent shall have received from the Borrower (x) a payment in respect of all accrued and unpaid interest in respect of all Term Loans outstanding immediately prior to the effectiveness of Amendment No. 6 and (y) an Interest Election Request in respect of (A) the Series D Tranche B Term Loans, if any, that are to remain outstanding from and after the effectiveness of Amendment No. 6 and (B) the Series E Tranche B Term Loans, in each case for this subclause (y) in accordance with Section 2.07 of the Credit Agreement;

(vii)immediately prior to and after giving effect to the effectiveness of Amendment No. 6, no Default has occurred or is continuing or shall result from the effectiveness of Amendment No. 6;

(viii)the Administrative Agent shall have received payment of all fees and out-of-pocket expenses required to be paid or reimbursed by Borrower as separately agreed by Borrower and J.P. Morgan Securities LLC (the “Arranger”), and reimbursement or payment of all reasonable out-of-pocket expenses (including the reasonable fees, charges and disbursements of Cahill Gordon & Reindel LLP) required to be reimbursed or paid by any Loan Party hereunder or under any other Loan Document, in each case to the extent such out-of-pocket expenses have been invoiced;

(ix)The Borrower shall have paid to the Administrative Agent for the account of each Lender that has returned an executed signature page to this Amendment No. 6 to the Administrative Agent at or prior to 5:00 p.m., New York City time on December 8, 2015 (the “Consent Deadline”) a fee equal to 0.25% of the sum of (x) the Series D Tranche B Term Loans, if any, of

2

such Lender at the Consent Deadline, (y) the Series E Tranche B Term Loans, if any, of such Lender at the Consent Deadline and (z) the 2018 Extended Revolving Commitments, if any, of such Lender at the Consent Deadline; and

(x)to the extent not previously delivered, (i) the Administrative Agent shall have received a completed “Life-of-Loan” Federal Emergency Management Agency Standard Flood Hazard Determination with respect to each Mortgaged Property (together with a notice about special flood hazard area status and flood disaster assistance, if applicable, duly executed by the Borrower and each Loan Party relating thereto) and (ii) the Administrative Agent shall have received a copy of, or a certificate as to coverage under, the insurance policies required by Section 5.07 of the Credit Agreement including, without limitation, flood insurance policies (to the extent required in order to comply with applicable law) and the applicable provisions of the Security Documents, each of which shall be endorsed or otherwise amended to include a “standard” or “New York” lender’s loss payable or mortgagee endorsement (as applicable) and shall name the Collateral Agent, on behalf of the Secured Parties, as additional insured, in form and substance reasonably satisfactory to the Administrative Agent.

SECTION THREE.  Representations and Warranties.  In order to induce the Lenders and the Administrative Agent to enter into this Amendment No. 6, the Borrower represents and warrants to each of the Lenders and the Administrative Agent that, after giving effect to this Amendment No. 6, and both before and after giving effect to the transactions contemplated by this Amendment No. 6:

(a)no Default or Event of Default has occurred and is continuing;

(b)the entry into this Amendment No. 6 by (x) Holdings, (y) the Borrower and (z) each other Loan Party has been duly authorized by all necessary corporate or other action of each such entity; and

(c)each of the representations and warranties made by each of the Loan Parties in or pursuant to the Loan Documents is true and correct in all material respects (except to the extent any such representation or warranty is qualified by “materially,” “Material Adverse Effect” or a similar term, in which case such representation and warranty shall be true and correct in all respects) on and as of the date hereof as if made on the date hereof (or, if any such representation or warranty is expressly stated to have been made as of a specific date, in all material respects as of such specific date).

SECTION FOUR.  Post-Closing Covenant.  Subject to the provisions of the Collateral and Guarantee Requirement and any applicable limitations in any Loan Document, Borrower hereby agrees with the Administrative Agent to deliver, on or before the date that is 120 days after the Amendment No. 6 Effective Date (or such longer period of time as may be agreed by the Administrative Agent in its sole discretion), with respect to each Mortgaged Property:

(a)an amendment to each existing Mortgage (each, a “Mortgage Amendment”) duly executed and acknowledged by the applicable Loan Party and in form for recording in the recording office where such Mortgage was recorded, together with such certificates, affidavits, questionnaires or returns as shall be required in connection with the recording or filing thereof under applicable law, in each case in form and substance reasonably satisfactory to the Administrative Agent and otherwise approved by the applicable local counsel for filing in the appropriate jurisdiction;

3

(b)with respect to each Mortgage Amendment (other than those Mortgage Amendments relating to Mortgaged Property located in New Jersey and Ohio), a datedown endorsement to each existing mortgage title policy (if such endorsement is not available in the jurisdiction, a title search and modification endorsement in lieu thereof) (each, a “Datedown Endorsement,” collectively, the “Datedown Endorsements”) relating to the Mortgaged Property subject to such Mortgage insuring the Administrative Agent that such Mortgage, as amended by such Mortgage Amendment is a valid and enforceable first priority lien on such Mortgaged Property in favor of the Collateral Agent for the benefit of the Secured Parties and that there are no Liens of record in violation of the provisions of the Loan Documents, and such Datedown Endorsement shall otherwise be in form and substance reasonably satisfactory to the Administrative Agent; and

(c)with respect to each Mortgage Amendment relating to Mortgaged Property located in New Jersey and Ohio, (i) title searches in form and substance reasonably acceptable to the Administrative Agent, conducted by a title insurance company reasonably acceptable to the Administrative Agent, which reflect that there are no Liens of record in violation of the provisions of the Loan Documents and (ii) opinions addressed to the Administrative Agent and the Collateral Agent for its benefit and for the benefit of the Secured Parties of (A) local counsel in each jurisdiction where the Mortgaged Property is located with respect to the enforceability and perfection of the Mortgages, as amended by such Mortgage Amendments, and other matters customarily included in such opinions and (ii) counsel for the Borrower regarding due authorization, execution and delivery of such Mortgage Amendments, in each case, in form and substance reasonably satisfactory to the Administrative Agent.

SECTION FIVE.  Reference to and Effect on the Loan Documents.  On and after the Amendment No. 6 Effective Date, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof” or words of like import referring the Credit Agreement, and each reference in the Notes and each of the other Loan Documents to “the Credit Agreement,” “thereunder,” “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Amendment No. 6 and this Amendment No. 6 shall constitute a “Loan Document” for all purposes under the Credit Agreement.  The Credit Agreement, the Notes and each of the other Loan Documents, as specifically amended by this Amendment No. 6, are and shall continue to be in full force and effect.  The execution, delivery and effectiveness of this Amendment No. 6 shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or any Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents.

SECTION SIX.  Reaffirmation.  Each Loan Party (x) hereby expressly acknowledges the terms of this Amendment and reaffirms, as of the date hereof, the covenants and agreements contained in each Loan Document to which it is a party, including, in each case, such covenants and agreements as in effect immediately after giving effect to this Amendment No. 6 and the transactions contemplated hereby, (y) by its signature below, hereby affirms and confirms (a) its obligations under each of the Loan Documents to which it is a party, and (b) the pledge of and/or grant of a security interest in its assets which are Collateral to secure such Obligations, all as provided in the Security Documents as originally executed, and acknowledges and agrees that such guarantee, pledge and/or grant shall continue in full force and effect in respect of, and to secure, such Obligations under the Credit Agreement and the other Loan Documents and (z) acknowledges and agrees that each of the Loan Documents in existence as of the date hereof shall be henceforth read and construed in accordance with and so as to give full force and effect to the ratifications, confirmations, acknowledgements and agreements made herein.

SECTION SEVEN.  Costs, Expenses and Taxes.  The Borrower agrees to pay all reasonable out-of-pocket expenses incurred by the Administrative Agent in connection with the preparation, execution and delivery of this Amendment No. 6 and the other instruments and documents to be delivered hereunder, if any (including, without limitation, the reasonable fees, charges and disbursements of Cahill

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Gordon & Reindel LLP, counsel to the Administrative Agent) in accordance with the terms of Section 9.03 of the Credit Agreement.

SECTION EIGHT.  Execution in Counterparts.  This Amendment No. 6 may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a signature page to this Amendment No. 6 by telecopy or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Amendment No. 6.

SECTION NINE.  Governing Law.  THIS AMENDMENT NO. 6 AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT NO. 6 SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

SECTION TEN.  Loss of FATCA Grandfathering.  For purposes of FATCA, from and after the Amendment No. 6 Effective Date, the Borrower and the Administrative Agent shall treat (and the Lenders hereby authorize the Administrative Agent to treat) the Loans (including any Revolving Loans) as not qualifying as “grandfathered obligations” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).

[Signature Pages Follow]

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SELECT MEDICAL CORPORATION,
as the Borrower
By:	/s/ Michael E. Tarvin
	Name: Michael E. Tarvin
	Title: Executive Vice President, General Counsel and Secretary
SELECT MEDICAL HOLDINGS CORPORATION
By:	/s/ Michael E. Tarvin
	Name: Michael E. Tarvin
	Title: Executive Vice President, General Counsel and Secretary
EACH OF THE SUBSIDIARIES LISTED ON SCHEDULE I HERETO
By:	/s/ Michael E. Tarvin
	Name: Michael E. Tarvin
	Title: Vice President

S-1

JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
By:	/s/ Dawn Lee Lum
	Name: Dawn Lee Lum
	Title: Executive Director

S-2

SCHEDULE I
TO AMENDMENT NO. 6

SUBSIDIARY LOAN PARTIES

1.Advantage Rehabilitation Clinics, Inc.

2.Argosy Health, LLC

3.Baseline Rehabilitation, Inc.

4.C.E.R. - West, Inc.

5.Community Rehab Centers of Massachusetts, Inc.

6.CRI ES, Inc.

7.Crowley Physical Therapy Clinic, Inc.

8.Dade Prosthetics & Orthotics, Inc.

9.Douglas Avery & Associates, Ltd.

10.Eagle Rehab Corporation

11.Fine, Bryant & Wah, Inc.

12.Georgia Physical Therapy, Inc.

13.GH General - San Antonio, LLC

14.GP Therapy, L.L.C.

15.GR General - Scottsdale, LLC

16.Great Lakes Specialty Hospital — Hackley, LLC

17.Great Lakes Specialty Hospital — Oak, LLC

18.GRSH ES, Inc.

19.Gulf Breeze Physical Therapy, Inc.

20.Hospital Holdings Corporation

21.Indianapolis Physical Therapy and Sports Medicine, Inc.

22.Intensiva HealthCare Corporation

23.Intensiva Hospital of Greater St. Louis, Inc.

24.Johnson Physical Therapy, Inc.

25.Joyner Sportsmedicine Institute, Inc.

26.Kentucky Rehabilitation Services, Inc.

27.Kessler Institute for Rehabilitation, Inc.

28.Kessler Orthotic & Prosthetic Services, Inc.

29.Kessler Professional Services, LLC

30.Kessler Rehab Centers, Inc.

31.Kessler Rehabilitation Corporation

32.Kessler Rehabilitation Services, Inc.

33.Madison Rehabilitation Center, Inc.

34.Metro Rehabilitation Services, Inc.

35.Metro Therapy, Inc.

36.New England Rehabilitation Center of Southern New Hampshire, Inc.

37.NovaCare Occupational Health Services, Inc.

38.NovaCare Outpatient Rehabilitation East, Inc.

39.NovaCare Outpatient Rehabilitation, Inc.

40.NovaCare Rehabilitation of Ohio, Inc.

41.NovaCare Rehabilitation, Inc.

42.OHRH ES, Inc.

43.Pacific Rehabilitation & Sports Medicine, Inc.

44.PR Acquisition Corporation

45.Pro Active Therapy of North Carolina, Inc.

46.Pro Active Therapy of South Carolina, Inc.

47.Pro Active Therapy of Virginia, Inc.

48.Pro Active Therapy, Inc.

49.Professional Sports Care Management, Inc.

50.Professional Therapeutic Services, Inc.

51.Professional Therapy Systems, Inc.

52.PTSMA, Inc.

53.RCI (Michigan), Inc.

54.RCI (WRS), Inc.

55.Regency Hospital Company of Macon, LLC

56.Regency Hospital Company of Meridian, L.L.C.

57.Regency Hospital Company of South Atlanta, L.L.C.

58.Regency Hospital Company of South Carolina, L.L.C.

59.Regency Hospital Company, L.L.C.

60.Regency Hospital of Cincinnati, LLC

61.Regency Hospital of Columbus, LLC

62.Regency Hospital of Fort Worth Holdings, LLC

63.Regency Hospital of Greenville, LLC

64.Regency Hospital of Jackson, LLC

65.Regency Hospital of Minneapolis, LLC

66.Regency Hospital of North Central Ohio, LLC

67.Regency Hospital of Northwest Arkansas, LLC

68.Regency Hospital of Northwest Indiana, LLC

69.Regency Hospital of Odessa Limited Partner, LLC

70.Regency Hospital of Odessa, LLLP

71.Regency Hospital of Southern Mississippi, LLC

72.Regency Hospital of Toledo, LLC

73.Regency Hospitals, LLC

74.Regency Management Company, Inc.

75.Rehab Provider Network - East I, Inc.

76.Rehab Provider Network - East II, Inc.

77.Rehab Provider Network - Indiana, Inc.

78.Rehab Provider Network - New Jersey, Inc.

79.Rehab Provider Network - Pennsylvania, Inc.

80.Rehab Provider Network of Colorado, Inc.

81.Rehab Provider Network of Florida, Inc.

82.Rehab Provider Network of New Mexico, Inc.

83.Rehab Provider Network of North Carolina, Inc.

84.Rehab Provider Network of South Carolina, Inc.

85.Rehab Provider Network of Texas, Inc.

86.Rehab Provider Network of Virginia, Inc.

S-2

87.Rehab Provider Network-Michigan, Inc.

88.Rehab Provider Network-Ohio, Inc.

89.RehabClinics (GALAXY), Inc.

90.RehabClinics (PTA), Inc.

91.RehabClinics (SPT), Inc.

92.RehabClinics, Inc.

93.Rehabilitation Center of Washington, D.C., Inc.

94.RPN of NC, Inc.

95.S.T.A.R.T., Inc.

96.Select Employment Services, Inc.

97.Select Hospital Investors, Inc.

98.Select LifeCare Western Michigan, LLC

99.Select Medical of Kentucky, Inc.

100.Select Medical of Maryland, Inc.

101.Select Medical of New York, Inc.

102.Select Medical Property Ventures, LLC

103.Select Medical Rehabilitation Clinics, Inc.

104.Select Medical Rehabilitation Services, Inc.

105.Select NovaCare - KOP, Inc.

106.Select NovaCare - PBG, Inc.

107.Select NovaCare - PIT, Inc.

108.Select Physical Therapy Holdings, Inc.

109.Select Physical Therapy Limited Partnership for Better Living

110.Select Physical Therapy Network Services, Inc.

111.Select Physical Therapy of Albuquerque, Ltd.

112.Select Physical Therapy of Birmingham, Ltd.

113.Select Physical Therapy of Blue Springs Limited Partnership

114.Select Physical Therapy of Cave Springs Limited Partnership

115.Select Physical Therapy of Chicago, Inc.

116.Select Physical Therapy of Colorado Springs Limited Partnership

117.Select Physical Therapy of Connecticut Limited Partnership

118.Select Physical Therapy of Denver, Ltd.

119.Select Physical Therapy of Green Bay Limited Partnership

120.Select Physical Therapy of Illinois Limited Partnership

121.Select Physical Therapy of Kendall, Ltd.

122.Select Physical Therapy of Knoxville Limited Partnership

123.Select Physical Therapy of Lorain Limited Partnership

124.Select Physical Therapy of Louisville, Ltd.

125.Select Physical Therapy of Ohio Limited Partnership

126.Select Physical Therapy of Portola Valley Limited Partnership

127.Select Physical Therapy of Scottsdale Limited Partnership

128.Select Physical Therapy of St. Louis Limited Partnership

129.Select Physical Therapy of West Denver Limited Partnership

130.Select Physical Therapy Orthopedic Services, Inc.

131.Select Physical Therapy Texas Limited Partnership

132.Select Provider Networks, Inc.

S-3

133.Select Rehabilitation Hospital - Hershey, Inc.

134.Select Specialty Hospital - Ann Arbor, Inc.

135.Select Specialty Hospital - Arizona, Inc.

136.Select Specialty Hospital - Augusta, Inc.

137.Select Specialty Hospital - Beech Grove, Inc.

138.Select Specialty Hospital - Charleston, Inc.

139.Select Specialty Hospital - Cincinnati, Inc.

140.Select Specialty Hospital - Colorado Springs, Inc.

141.Select Specialty Hospital - Columbus, Inc.

142.Select Specialty Hospital - Conroe, Inc.

143.Select Specialty Hospital - Dallas, Inc.

144.Select Specialty Hospital - Danville, Inc.

145.Select Specialty Hospital — Daytona Beach, Inc.

146.Select Specialty Hospital - Denver, Inc.

147.Select Specialty Hospital - Durham, Inc.

148.Select Specialty Hospital - Erie, Inc.

149.Select Specialty Hospital - Evansville, Inc.

150.Select Specialty Hospital - Flint, Inc.

151.Select Specialty Hospital - Fort Smith, Inc.

152.Select Specialty Hospital - Fort Wayne, Inc.

153.Select Specialty Hospital - Gainesville, Inc.

154.Select Specialty Hospital - Greensboro, Inc.

155.Select Specialty Hospital - Grosse Pointe, Inc.

156.Select Specialty Hospital - Jackson, Inc.

157.Select Specialty Hospital - Johnstown, Inc.

158.Select Specialty Hospital - Kalamazoo, Inc.

159.Select Specialty Hospital - Kansas City, Inc.

160.Select Specialty Hospital - Knoxville, Inc.

161.Select Specialty Hospital - Laurel Highlands, Inc.

162.Select Specialty Hospital - Lexington, Inc.

163.Select Specialty Hospital - Lincoln, Inc.

164.Select Specialty Hospital - Little Rock, Inc.

165.Select Specialty Hospital - Longview, Inc.

166.Select Specialty Hospital - Macomb County, Inc.

167.Select Specialty Hospital - Madison, Inc.

168.Select Specialty Hospital - McKeesport, Inc.

169.Select Specialty Hospital - Memphis, Inc.

170.Select Specialty Hospital - Milwaukee, Inc.

171.Select Specialty Hospital - Nashville, Inc.

172.Select Specialty Hospital - North Knoxville, Inc.

173.Select Specialty Hospital - Northeast New Jersey, Inc.

174.Select Specialty Hospital - Northeast Ohio, Inc.

175.Select Specialty Hospital - Northern Kentucky, LLC

176.Select Specialty Hospital - Northwest Detroit, Inc.

177.Select Specialty Hospital - Oklahoma City, Inc.

178.Select Specialty Hospital - Omaha, Inc.

S-4

179.Select Specialty Hospital - Orlando, Inc.

180.Select Specialty Hospital - Palm Beach, Inc.

181.Select Specialty Hospital - Panama City, Inc.

182.Select Specialty Hospital - Pensacola, Inc.

183.Select Specialty Hospital - Phoenix, Inc.

184.Select Specialty Hospital - Pittsburgh/UPMC, Inc.

185.Select Specialty Hospital - Pontiac, Inc.

186.Select Specialty Hospital - Quad Cities, Inc.

187.Select Specialty Hospital - Saginaw, Inc.

188.Select Specialty Hospital - San Antonio, Inc.

189.Select Specialty Hospital - Savannah, Inc.

190.Select Specialty Hospital - Sioux Falls, Inc.

191.Select Specialty Hospital - South Dallas, Inc.

192.Select Specialty Hospital - Springfield, Inc.

193.Select Specialty Hospital - Tallahassee, Inc.

194.Select Specialty Hospital - Topeka, Inc.

195.Select Specialty Hospital - TriCities, Inc.

196.Select Specialty Hospital - Tulsa, Inc.

197.Select Specialty Hospital - Tulsa/Midtown, LLC

198.Select Specialty Hospital - Western Michigan, Inc.

199.Select Specialty Hospital - Western Missouri, Inc.

200.Select Specialty Hospital - Wichita, Inc.

201.Select Specialty Hospital - Wilmington, Inc.

202.Select Specialty Hospital — Winston - Salem, Inc.

203.Select Specialty Hospital - Youngstown, Inc.

204.Select Specialty Hospital - Zanesville, Inc.

205.Select Specialty Hospitals, Inc.

206.Select Subsidiaries, Inc.

207.Select Synergos, Inc.

208.Select Transport, Inc.

209.Select Unit Management, Inc.

210.SelectMark, Inc.

211.SemperCare, Inc.

212.SLMC Finance Corporation

213.Sports & Orthopedic Rehabilitation Services, Inc.

214.The Rehab Group, Inc.

215.The Rehab Group-Murfreesboro, LLC

216.Theraworks, Inc.

217.Victoria Healthcare, Inc.

218.West Gables Rehabilitation Hospital, L.L.C.

S-5

Exhibit A

[See attached]

S-6

AMENDED AND RESTATED CREDIT AGREEMENT

consisting of a

$218,615,974.41

Series D Tranche B Term Loan Facility

$534,660,556.84

Series E Tranche B Term Loan Facility

and a

$450,000,000.00

Revolving Credit Facility

dated as of

December 11, 2015,

among

SELECT MEDICAL HOLDINGS CORPORATION,

as Holdings

SELECT MEDICAL CORPORATION,

as the Borrower

The Lenders Party Hereto from Time to Time

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent and Collateral Agent

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, and

GOLDMAN SACHS BANK USA,

as Co-Syndication Agents

and

MORGAN STANLEY SENIOR FUNDING, INC., and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Co-Documentation Agents

J.P. MORGAN SECURITIES LLC,

as Lead Arranger and Bookrunner

TABLE OF CONTENTS

		Page
ARTICLE I
Definitions
SECTION 1.01.	Defined Terms	1
SECTION 1.02.	Classification of Loans and Borrowings	32
SECTION 1.03.	Terms Generally	32
SECTION 1.04.	Accounting Terms; GAAP	32
SECTION 1.05.	Specified Transactions	32
SECTION 1.06.	Effect of this Agreement on the Original Credit Agreement and the Other Existing Loan Documents	33
ARTICLE II
The Credits
SECTION 2.01.	Commitments and Extension Requests	33
SECTION 2.02.	Loans and Borrowings	33
SECTION 2.03.	Requests for Borrowings	34
SECTION 2.04.	Swingline Loans	35
SECTION 2.05.	Letters of Credit	36
SECTION 2.06.	Funding of Borrowings	40
SECTION 2.07.	Interest Elections	40
SECTION 2.08.	Termination and Reduction of Commitments	41
SECTION 2.09.	Repayment of Loans; Evidence of Debt	42
SECTION 2.10.	Amortization of Tranche B Term Loans	43
SECTION 2.11.	Prepayment of Loans	44
SECTION 2.12.	Fees	45
SECTION 2.13.	Interest	47
SECTION 2.14.	Alternate Rate of Interest; Illegality	48
SECTION 2.15.	Increased Costs	49
SECTION 2.16.	Break Funding Payments	49
SECTION 2.17.	Taxes	50
SECTION 2.18.	Payments Generally; Pro Rata Treatment; Sharing of Setoffs	52
SECTION 2.19.	Mitigation Obligations; Replacement of Lenders	54
SECTION 2.20.	Incremental Extensions of Credit	54
SECTION 2.21.	Extended Term Loans and Extended Revolving Commitments	56
SECTION 2.22.	Defaulting Lenders	57
ARTICLE III
Representations and Warranties
SECTION 3.01.	Organization; Power	59
SECTION 3.02.	Authorization; Enforceability	59
SECTION 3.03.	Governmental Approvals; No Conflicts	60
SECTION 3.04.	Financial Condition; No Material Adverse Change	60

i

		Page
SECTION 3.05.	Properties	61
SECTION 3.06.	Litigation and Environmental Matters	61
SECTION 3.07.	Compliance with Laws and Agreements	61
SECTION 3.08.	Investment and Holding Company Status	62
SECTION 3.09.	Taxes	62
SECTION 3.10.	ERISA	62
SECTION 3.11.	Disclosure	62
SECTION 3.12.	Subsidiaries	62
SECTION 3.13.	Insurance	62
SECTION 3.14.	Labor Matters	62
SECTION 3.15.	Solvency	63
SECTION 3.16.	Federal Reserve Regulations	63
SECTION 3.17.	Reimbursement from Third Party Payors	63
SECTION 3.18.	Fraud and Abuse	63
SECTION 3.19.	USA PATRIOT Act, Etc.	64
ARTICLE IV
Conditions
SECTION 4.01.	[Reserved]	64
SECTION 4.02.	Each Credit Event	64
ARTICLE V
Affirmative Covenants
SECTION 5.01.	Financial Statements and Other Information	65
SECTION 5.02.	Notices of Material Events	67
SECTION 5.03.	Information Regarding Collateral	67
SECTION 5.04.	Existence; Conduct of Business	68
SECTION 5.05.	Payment of Obligations	68
SECTION 5.06.	Maintenance of Properties	68
SECTION 5.07.	Insurance	68
SECTION 5.08.	Casualty and Condemnation	68
SECTION 5.09.	Books and Records; Inspection and Audit Rights	69
SECTION 5.10.	Compliance with Laws	69
SECTION 5.11.	Use of Proceeds and Letters of Credit	69
SECTION 5.12.	Additional Subsidiaries; Succeeding Holdings	69
SECTION 5.13.	Further Assurances	69
SECTION 5.14.	Post-Closing Matters	70
ARTICLE VI
Negative Covenants
SECTION 6.01.	Indebtedness; Certain Equity Securities	70
SECTION 6.02.	Liens	72
SECTION 6.03.	Fundamental Changes	73
SECTION 6.04.	Investments, Loans, Advances, Guarantees and Acquisitions	74
SECTION 6.05.	Asset Sales	76

ii

		Page
SECTION 6.06.	Sale and Leaseback Transactions	77
SECTION 6.07.	Swap Agreements	78
SECTION 6.08.	Restricted Payments; Certain Payments of Indebtedness	78
SECTION 6.09.	Transactions with Affiliates	80
SECTION 6.10.	Restrictive Agreements	82
SECTION 6.11.	Amendment of Material Documents	82
SECTION 6.12.	[Reserved]	82
SECTION 6.13.	Leverage Ratio	83
SECTION 6.14.	Maximum Capital Expenditures	84
ARTICLE VII
Events of Default
SECTION 7.01.	Events of Default	84
SECTION 7.02.	Borrower’s Right to Cure	87
SECTION 7.03.	Exclusion of Immaterial Subsidiaries	87
ARTICLE VIII
The Agents
SECTION 8.01.	The Agents	88
ARTICLE IX
Miscellaneous
SECTION 9.01.	Notices	90
SECTION 9.02.	Waivers; Amendments	91
SECTION 9.03.	Expenses; Indemnity; Damage Waiver	94
SECTION 9.04.	Successors and Assigns	95
SECTION 9.05.	Survival	98
SECTION 9.06.	Counterparts; Integration; Effectiveness	98
SECTION 9.07.	Severability	98
SECTION 9.08.	Right of Setoff	98
SECTION 9.09.	Governing Law; Jurisdiction; Consent to Service of Process	99
SECTION 9.10.	WAIVER OF JURY TRIAL	99
SECTION 9.11.	Headings	100
SECTION 9.12.	Confidentiality	100
SECTION 9.13.	Interest Rate Limitation	100
SECTION 9.14.	USA Patriot Act	100
SECTION 9.15.	Release of Collateral	101
SECTION 9.16.	No Fiduciary Duty	101

iii

SCHEDULES:

Schedule 1.01	— Mortgaged Property
Schedule 2.01	— Commitments
Schedule 2.05	— Existing Letters of Credit
Schedule 3.05	— Real Property
Schedule 3.06	— Litigation and Environmental Matters
Schedule 3.12	— Subsidiaries
Schedule 3.13	— Insurance
Schedule 4.01	— Local Counsel Jurisdictions
Schedule 5.14	— Post-Closing Matters
Schedule 6.01	— Existing Indebtedness
Schedule 6.02	— Existing Liens
Schedule 6.04	— Existing Investments
Schedule 6.05	— Asset Sales
Schedule 6.09	— Existing Transactions with Affiliates
Schedule 6.10	— Existing Restrictions
EXHIBITS:
Exhibit A	— Form of Assignment and Assumption
Exhibit B-1	— Form of Opinion of Dechert LLP
Exhibit B-2	— Form of Opinion of Local Counsel
Exhibit C	— Form of Collateral Agreement
Exhibit D	— Form of Perfection Certificate
Exhibit E	— Form of Borrowing Request
Exhibit F	— Form of Interest Election Request
Exhibit G	— Form of First Lien Intercreditor Agreement
Exhibit H	— Form of IRPTL Waiver and Certificate

iv

AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 11, 2015, among SELECT MEDICAL HOLDINGS CORPORATION, a Delaware corporation, SELECT MEDICAL CORPORATION, a Delaware corporation, the LENDERS party hereto from time to time and JPMORGAN CHASE BANK, N.A., as Administrative Agent and Collateral Agent.

The Borrower, Holdings, the Lenders, the Administrative Agent and the Collateral Agent are party to a credit agreement dated as of June 1, 2011 (as amended by Amendment No. 1 dated as of August 8, 2012, the Additional Credit Extension Amendment dated as of August 13, 2012, Amendment No. 2 dated as of November 6, 2012, Amendment No. 3 dated as of February 15, 2013, the Additional Credit Extension Amendment dated as of February 20, 2013, Amendment No. 4 dated as of June 3, 2013, Amendment No. 5 dated as of March 4, 2014, the Additional Credit Extension Amendment (Incremental Revolver) dated as of October 23, 2014, the Additional Credit Extension Amendment (Revolver Extension) dated as of October 23, 2014 and the Additional Credit Extension Amendment dated as of May 20, 2015, the “Original Credit Agreement”).

Pursuant to Amendment No. 6, dated as of the date hereof (“Amendment No. 6”), the parties thereto have agreed to amend and restate in its entirety the Original Credit Agreement and replace it in its entirety with this Agreement.

The Lenders are willing to extend such credit to the Borrower, and the Issuing Bank is willing to issue Letters of Credit for the account of the Borrower, on the terms and subject to the conditions set forth herein.  Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01.Defined Terms.  As used in this Agreement, the following terms have the meanings specified below:

“2018 Extended Revolving Availability Period” means the period from and including the Amendment No. 4 Effective Date to but excluding the earlier of (a) the 2018 Extended Revolving Maturity Date and (b) the date of termination of the 2018 Extended Revolving Commitments.

“2018 Extended Revolving Commitment” means, with respect to each Lender, the commitment, if any, of such Lender to make 2018 Extended Revolving Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder on or after the Amendment No. 4 Effective Date, expressed as an amount representing the maximum possible aggregate amount of such Lender’s 2018 Extended Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04.  The aggregate amount of the Lenders’ 2018 Extended Revolving Commitments on the Restatement Effective Date is set forth on Schedule 2.01.

“2018 Extended Revolving Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s 2018 Extended Revolving Loans and its LC Exposure and Swingline Exposure at such time.

“2018 Extended Revolving Lender” means a Lender with a 2018 Extended Revolving Commitment or, if the 2018 Extended Revolving Commitments have terminated or expired, a Lender with 2018 Extended Revolving Exposure.

1

“2018 Extended Revolving Loan” means a Loan made pursuant to clause (c) of Section 2.01.

“2018 Extended Revolving Maturity Date” means March 1, 2018.

“ABR,” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

“Additional Credit Extension Amendment” means an amendment to this Agreement (which may, at the option of the Administrative Agent, be in the form of an amendment and restatement of this Agreement) and any other applicable Loan Document providing for any Incremental Term Loans, Replacement Term Loans, Extended Term Loans or Extended Revolving Commitments which shall be consistent with the applicable provisions of this Agreement relating to Incremental Term Loans, Replacement Term Loans, Extended Term Loans or Extended Revolving Commitments and otherwise satisfactory to the Administrative Agent.

“Additional Lender” has the meaning set forth in Section 2.20.

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for the applicable Class of Loans for such Interest Period multiplied by (b) the Statutory Reserve Rate.

“Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the Lenders under the Loan Documents.

“Administrative Questionnaire” means an administrative questionnaire in a form supplied by the Administrative Agent.

“Affiliate” means, with respect to a specified Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the Person specified.

“Agents” means the Administrative Agent, the Collateral Agent, the Arranger, the Co-Syndication Agents and the Co-Documentation Agents.

“Agreement” means this Amended and Restated Credit Agreement, as the same may be renewed, extended, modified, supplemented, amended or amended and restated from time to time.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus ½ of 1% and (c) the Adjusted LIBO Rate for the applicable Class of Loans (after giving effect to any applicable minimum rate set forth therein) for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1%, provided that, for the avoidance of doubt (subject to any minimum rate specified in such definition), the Adjusted LIBO Rate for any day shall be based on the rate appearing on the Reuters Screen LIBOR01 Page (or on any successor or substitute page of such page) at approximately 11:00 a.m. London time on such day.  Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, respectively.

2

“Amendment No. 1” means that certain Amendment No. 1 to the Original Credit Agreement, dated as of the Amendment No. 1 Effective Date, by and among the Borrower, Holdings, the Administrative Agent and the Collateral Agent, and the other parties thereto.

“Amendment No. 1 Effective Date” means August 8, 2012, the date on which each of the conditions set forth in Section 2 of Amendment No. 1 was satisfied in accordance with its terms.

“Amendment No. 2” means that certain Amendment No. 2 to the Original Credit Agreement, dated as of the Amendment No. 2 Effective Date, by and among the Borrower, Holdings, the Administrative Agent and the Collateral Agent, and the other parties thereto.

“Amendment No. 2 Effective Date” means November 6, 2012, the date on which each of the conditions set forth in Section 2 of Amendment No. 2 was satisfied in accordance with its terms.

“Amendment No. 3” means that certain Amendment No. 3 to the Original Credit Agreement, dated as of the Amendment No. 3 Effective Date, by and among the Borrower, Holdings, the Administrative Agent and the Collateral Agent, and the other parties thereto.

“Amendment No. 3 Effective Date” means February 15, 2013, the date on which each of the conditions set forth in Section 2 of Amendment No. 3 was satisfied in accordance with its terms.

“Amendment No. 4” means that certain Amendment No. 4 to the Original Credit Agreement, dated as of the Amendment No. 4 Effective Date, by and among the Borrower, Holdings, the Administrative Agent and the Collateral Agent, and the other parties thereto.

“Amendment No. 4 Effective Date” means June 3, 2013, the date on which each of the conditions in Section 2 of Amendment No. 4 was satisfied in accordance with its terms.

“Amendment No. 5” means that certain Amendment No. 5 to the Original Credit Agreement, dated as of the Amendment No. 5 Effective Date, by and among the Borrower, Holdings, the Administrative Agent and the Collateral Agent, and the other parties thereto.

“Amendment No. 5 Effective Date” means March 4, 2014, the date on which each of the conditions in Section 2 of Amendment No. 5 was satisfied in accordance with its terms.

“Amendment No. 6” has the meaning set forth in the preamble to this Agreement.

“Amendment No. 6 Consenting Lender” means each Lender that provided the Administrative Agent with a counterpart to Amendment No. 6 executed by such Lender.

“Amendment No. 6 Effective Date” has the meaning set forth in Amendment No. 6.

“Applicable Percentage” means, with respect to any Revolving Lender or 2018 Extended Revolving Lender, the percentage of the aggregate Revolving Commitments or 2018 Extended Revolving Commitments represented by such Lender’s Revolving Commitment or 2018 Extended Revolving Commitments; provided that in the case of Section 2.22 when a Defaulting Lender shall exist, “Applicable Percentage” shall mean, with respect to any Revolving Lender or 2018 Extended Revolving Lender, the percentage of the total Revolving Commitments or 2018 Extended Revolving Commitments (disregarding any Defaulting Lender’s Revolving Commitment or 2018 Extended Revolving Commitments) represented by such Revolving Lender’s or 2018 Extended Revolving Lender’s Revolving Commitment or 2018 Extended Revolving Commitments.  If the Revolving Commitments or 2018 Extended Revolving Commitments

3

have terminated or expired, the Applicable Percentage of the Revolving Commitments or 2018 Extended Revolving Commitments shall be determined based upon the Revolving Commitments or 2018 Extended Revolving Commitments, as applicable, most recently in effect, giving effect to any assignments that occur thereafter and to any Revolving Lender’s or 2018 Extended Revolving Lender status as a Defaulting Lender at the time of determination.

“Applicable Rate” means, for any day with respect to (a) any ABR Loan or Eurodollar Loan that is a Revolving Loan or 2018 Extended Revolving Loan or (b) the commitment fees payable hereunder in respect of the Revolving Commitments or 2018 Extended Revolving Commitments, as applicable, the applicable rate per annum set forth below under the caption “Revolving Loan ABR Spread,” “Revolving Loan Eurodollar Spread” or “Commitment Fee Rate,” as applicable, in each case, based upon the Leverage Ratio as of the most recent determination date:

Leverage Ratio	Revolving Loan ABR Spread	Revolving Loan Eurodollar Spread	Commitment Fee Rate
Category 1 > 3.5x	2.75%	3.75%	0.50%
Category 2 > 3.0x and < 3.5x	2.50%	3.50%	0.50%
Category 3 > 2.5x and < 3.0x	2.25%	3.25%	0.50%
Category 4 > 2.0x and < 2.5x	2.00%	3.00%	0.50%
Category 5 < 2.0x	1.75%	2.75%	0.375%

The Applicable Rate for Series D Tranche B Term Loans shall at all times be 2.75% per annum for Eurodollar Loans and 1.75% per annum for ABR Loans.

The Applicable Rate for Series E Tranche B Term Loans shall be 4.00% per annum for Eurodollar Loans and 3.00% per annum for ABR Loans; provided that if the Borrower’s corporate ratings are below B1 from Moody’s or B+ from S&P (a “Ratings Event”), the Applicable Rate for Series E Tranche B Term Loans shall be 4.25% per annum for Eurodollar Loans and 3.25% per annum for ABR Loans.

For purposes of the foregoing, (a) the Leverage Ratio shall be determined on a Pro Forma Basis as of the end of each fiscal quarter of Holdings based upon Holdings’ consolidated financial statements delivered pursuant to Section 5.01(a) or (b), and (b) each change in the Applicable Rate resulting from a change in the Leverage Ratio shall be effective during the period commencing on and including the date of delivery to the Administrative Agent of such consolidated financial statements indicating such change and ending on the date immediately preceding the effective date of the next such change, provided that the Leverage Ratio, for purposes of determining the Applicable Rate, shall be deemed to be in Category 1 (i) at any time that an Event of Default has occurred and is continuing or (ii) at the option of the Administrative Agent or at the request of the Required Lenders if the Borrower fails to deliver the consolidated financial statements required to be delivered by it pursuant to Section 5.01(a) or (b), during the period

4

from the expiration of the time for delivery thereof until such consolidated financial statements are delivered.

“Approved Fund” has the meaning assigned to such term in Section 9.04(b).

“Arranger” means J.P. Morgan Securities LLC.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04) and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.

“Available Amount” means, the sum, without duplication, of:

(a)the sum (determined on a cumulative basis and in no event less than zero) of the Borrower’s Portion of Excess Cash Flow for (i) the period from January 1, 2014 through March 31, 2014 and (ii) all fiscal quarters ending after April 1, 2014; plus

(b)the amount of Net Proceeds actually received by the Borrower from the issuance by Holdings of any Equity Interests (or capital contribution in respect thereof) after the Original Effective Date) other than pursuant to the Cure Right or to the extent Otherwise Applied; plus

(c)the amount of Net Proceeds actually received by the Borrower from the issuance after the Original Effective Date of Qualified Holdings Discount Debt; plus

(d)an amount equal to any returns (including dividends, interest, distributions, returns of principal and profits on sale) actually received by the Borrower or any of the Borrower’s Subsidiaries in cash in respect of any Investments made after the Original Effective Date pursuant to Section 6.04(xviii); plus

(e)as of the Restatement Effective Date, $100.0 million; minus

(f)the sum of (i) the aggregate amount of Investments made after the Restatement Effective Date pursuant to Section 6.04(xviii), (ii) the aggregate amount of Restricted Payments made after the Restatement Effective Date pursuant to Section 6.08(a)(x) and (iii) the aggregate amount of payments made after the Restatement Effective Date pursuant to Section 6.08(b)(iii).

For the avoidance of doubt, any Investments pursuant to Section 6.04(xviii), Restricted Payments pursuant to Section 6.08(a)(x) and payments pursuant to Section 6.08(b)(iii) made prior to the Restatement Effective Date in reliance on the definition of “Available Amount” then in effect are permitted hereunder and are not included in the calculation of the Available Amount set forth above.

“Bankruptcy Event” means, with respect to any Person, such Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, provided, further, that such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States or from the enforcement

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of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Borrower” has the meaning set forth in the preamble to this Agreement.

“Borrower’s Portion of Excess Cash Flow” means, (i) on any date after January 1, 2012 and prior to January 1, 2013, the portion of Excess Cash Flow for the period from July 1, 2011 to December 31, 2011 for which financial statements have been delivered pursuant to Section 5.01 and (ii) on any date after January 1, 2013, the portion of Excess Cash Flow for the immediately preceding full fiscal year of the Borrower for which financial statements have been delivered pursuant to Section 5.01, in each case, that has not been, or is not required to be, applied to prepay Loans pursuant to Section 2.11(d).

“Borrowing” means (a) Loans of the same Class and Type made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect, or (b) a Swingline Loan.

“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03, provided that a written Borrowing Request shall be substantially in the form of Exhibit E, or such other form as shall be approved by the Administrative Agent.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed, provided that when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

“Capital Expenditures” means, for any period (and without duplication), (a) the additions to property, plant and equipment and other capital expenditures of the Borrower and any of the Subsidiaries that are (or would be) set forth in a consolidated statement of cash flows of the Borrower for such period prepared in accordance with GAAP and (b) Capital Lease Obligations incurred by the Borrower and the Subsidiaries during such period; provided that Capital Expenditures shall not include (i) expenditures to the extent they are made with the Net Proceeds of the issuance by Holdings of Equity Interests (or capital contributions in respect thereof) after the Original Effective Date to the extent not Otherwise Applied or Qualified Holdings Discount Debt, (ii) investments that constitute a portion of the purchase price of a Permitted Acquisition, (iii) expenditures that constitute a reinvestment of the Net Proceeds of any event described in clause (a) or (b) of the definition of the term “Prepayment Event,” to the extent permitted by Section 2.11(c), and (iv) the purchase price of equipment purchased during such period to the extent the consideration therefor consists of any combination of (x) used or surplus equipment traded in at the time of such purchase and (y) the proceeds of a concurrent sale of used or surplus equipment.

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Cash Management Bank” means any Person that was a Lender or an Affiliate of a Lender (i) on the Original Effective Date and to whom Cash Management Obligations are then owed, (ii) at the

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time it enters into an agreement with Parent or any Subsidiary with respect to Cash Management Obligations or (iii) at the time the Borrower notifies the Administrative Agent that such Lender and its Affiliates are “Cash Management Banks” hereunder.

“Cash Management Obligations” means obligations owed by Holdings or any Subsidiary to any Lender or any Affiliate of a Lender in respect of (1) any overdraft and related liabilities arising from treasury, depository and cash management services or any automated clearing house transfers of funds and (2) Holdings’ or any Subsidiary’s participation in commercial (or purchasing) card programs at the Lender or any Affiliate (“card obligations”).

“CFC” means (i) a “controlled foreign corporation” within the meaning of Section 957(a) of the Code, (ii) any direct subsidiary of an entity described in clause (i) of this definition or (iii) any entity that wholly-owns the Equity Interests of an entity described in clause (i) of this definition and which is disregarded for United States federal income tax purposes as an entity that is separate from its owner, but only so long as such entity has no assets other than the Equity Interests of a CFC and de minimis assets.

“Change in Control” means:

(a)the acquisition of record ownership by any Person other than Holdings of any Equity Interests in the Borrower,

(b)(i) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934, as amended, and the rules of the SEC thereunder as in effect on the Original Effective Date) other than one or more Permitted Investors of Equity Interests in Holdings representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in Holdings and (ii) the ownership, directly or indirectly, beneficially or of record, by the Permitted Investors of Equity Interests in Holdings representing in the aggregate a lesser percentage of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in Holdings than such Person or group,

(c)occupation of a majority of the seats (other than vacant seats) on the Board of Directors of Holdings by Persons who were not (i) nominated by the Board of Directors of Holdings, (ii) appointed by directors so nominated or (iii) nominated by the Permitted Investors or

(d)the occurrence of a “Change of Control,” as defined in any indenture or other instrument, agreement or other document evidencing or governing any Qualified Holdings Discount Debt or Permitted Debt Securities or any certificate of designations relating to the Qualified Preferred Stock, in each case to the extent then in effect.

“Change in Law” means (a) the adoption of any law, rule or regulation after the Original Effective Date, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the Original Effective Date or (c) compliance by any Lender or any Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender’s or such Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the Original Effective Date; provided that, notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and Basel III and all requests, rules, guidelines or directives thereunder or issued in connection therewith shall be deemed to be a “Change in Law,” regardless of the date enacted, adopted or issued.

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“Charges” has the meaning set forth in Section 9.13.

“Class,” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, 2018 Extended Revolving Loans, Series D Tranche B Term Loans, Series E Tranche B Term Loans, Incremental Term Loans of any series, Extended Term Loans of any series, Replacement Term Loans of any series or Swingline Loans and, when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment, a 2018 Extended Revolving Commitment or a Commitment in respect of an Incremental Extension of Credit.

“CLO” has the meaning assigned to such term in Section 9.04(b).

“Code” means the Internal Revenue Code of 1986 and the rules and regulations promulgated thereunder, as amended from time to time.

“Collateral” means any and all “Collateral,” as defined in any applicable Security Document.

“Collateral Agent” means JPMorgan Chase Bank, N.A., in its capacity as collateral agent for the Lenders under this Agreement and any Security Document.

“Collateral Agreement” means the Guarantee and Collateral Agreement among the Loan Parties and the Collateral Agent, substantially in the form of Exhibit C.

“Collateral and Guarantee Requirement” means the requirement that:

(a)the Collateral Agent shall have received from each Loan Party either (i) a counterpart of the Collateral Agreement duly executed and delivered on behalf of such Loan Party or (ii) in the case of any Person that becomes a Loan Party after the Original Effective Date, a supplement to the Collateral Agreement, in the form specified therein, duly executed and delivered on behalf of such Loan Party;

(b)all outstanding Equity Interests of (i) the Borrower and (ii) each Subsidiary owned directly by any Loan Party shall have been pledged pursuant to the Collateral Agreement (except that the Loan Parties shall not be required to pledge more than 65% of the outstanding voting Equity Interests of any Foreign Subsidiary) and the Collateral Agent shall have received certificates or other instruments representing all such Equity Interests, together with undated stock powers or other instruments of transfer with respect thereto endorsed in blank;

(c)all Indebtedness of Holdings, the Borrower and each Subsidiary that is owing to any Loan Party shall be evidenced by a promissory note and shall have been pledged pursuant to the Collateral Agreement, and the Collateral Agent shall have received all such promissory notes, together with undated instruments of transfer with respect thereto endorsed in blank;

(d)all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Collateral Agent to be filed, registered or recorded to create the Liens intended to be created by the Collateral Agreement and perfect such Liens to the extent required by the Collateral Agreement, shall have been executed, filed, registered or recorded or delivered to the Collateral Agent for filing, registration or recording;

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(e)the Collateral Agent shall have received (i) counterparts of a Mortgage with respect to each Mortgaged Property duly executed and delivered by the record owner of such Mortgaged Property, (ii) a policy or policies of title insurance issued by a nationally recognized title insurance company insuring the Lien of each such Mortgage as a valid first-priority Lien on the Mortgaged Property described therein, free of any other Liens except as expressly permitted by Section 6.02 in amounts reasonably acceptable to the Collateral Agent (not to exceed 100% of the Fair Market Value of such Mortgaged Property in jurisdictions that impose mortgage recording taxes or 110% otherwise), together with such endorsements, coinsurance and reinsurance as the Collateral Agent or the Required Lenders may reasonably request, and such surveys, appraisals, legal opinions and other documents as the Collateral Agent or the Required Lenders may reasonably request with respect to any such Mortgage or Mortgaged Property; and

(f)each Loan Party shall have obtained all material consents and approvals required to be obtained by it in connection with the execution and delivery of all Security Documents to which it is a party, the performance of its obligations thereunder and the granting by it of the Liens thereunder.

Notwithstanding anything to the contrary in this Agreement or any Security Document, no Loan Party shall be required to pledge or grant security interests (i) in particular assets if, in the reasonable judgment of the Administrative Agent or the Collateral Agent, the costs of creating or perfecting such pledges or security interests in such assets (including any mortgage, mortgage recording, stamp, intangibles or other tax) are excessive in relation to the benefits to the Lenders therefrom, (ii) in any owned real property other than Material Real Property or (iii) in any leasehold interests.

“Commitment” means a Revolving Commitment, a 2018 Extended Revolving Commitment, a Tranche B Commitment, any Commitment in respect of an Incremental Extension of Credit or any combination thereof (as the context requires).

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

“Consolidated EBITDA” means, for any period, Consolidated Net Income for such period plus

(a)without duplication and to the extent deducted in determining such Consolidated Net Income for such period, the sum of:  (i) consolidated interest expense of the Borrower and its subsidiaries, for such period, (ii) (A) consolidated income tax expense of the Borrower and its subsidiaries for such period and (B) income tax expense of Holdings for such period to the extent paid in such period using the proceeds of Restricted Payments made by the Borrower pursuant to clause (v) of Section 6.08(a), (iii) all amounts attributable to depreciation and amortization expense of the Borrower and its subsidiaries for such period, (iv) any non-cash charges for such period (but excluding (A) any non-cash charge in respect of an item that was included in Consolidated Net Income in a prior period and (B) any non-cash charge that relates to the write-down or write-off of inventory), (v) any non-recurring fees, cash charges and other cash expenses (A) made or incurred by the Borrower and its subsidiaries in connection with any Permitted Acquisition, including severance, relocation and facilities closing costs, that are paid, accrued or reserved for within 180 days of such transaction or (B) incurred in connection with the issuance of Equity Interests or Indebtedness or the extinguishment of Indebtedness, (vi) [reserved], (vii) other cash expenses incurred during such period in connection with a Permitted Acquisition to the extent that such expenses are reimbursed in cash during such period pursuant to indemnification provisions of any agreement relating to such transaction, (viii) fees paid to any Sponsor or Sponsor Affiliate

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under Section 6.09(h), (ix) Consolidated Net Income attributable to non-controlling interests of a subsidiary (less the amount of any mandatory cash distribution with respect to any non-controlling interest other than in connection with a proportionate discretionary cash distribution with respect to the interest held by the Borrower or any subsidiary), (x) the amount of Startup Operating Losses; provided that all amounts added to Consolidated EBITDA pursuant to this subclause (x) shall not exceed the greater of (i) $15.0 million during any fiscal year plus, without duplication, up to $7.5 million of any such Startup Operating Losses from the prior fiscal year not otherwise added back pursuant to this subclause (x) and (ii) 4.5% of Consolidated EBITDA of such four quarter period (calculated prior to giving effect to the addbacks pursuant to this subclause (x)), and (xi) cash expenses incurred during such period in connection with extraordinary casualty events to the extent such expenses are reimbursed in cash by insurance during such period, minus

(b)without duplication and to the extent included in determining such Consolidated Net Income, (i) any cash payments made during such period in respect of non-cash charges described in clause (a)(iv) taken in a prior period and (ii) any non-cash items of income for such period, all determined on a consolidated basis in accordance with GAAP, and

(c)(without duplication) plus unrealized losses and minus unrealized gains in each case in respect of Swap Agreements, as determined in accordance with GAAP.

“Consolidated Net Income” means, for any period, the net income or loss of the Borrower and its subsidiaries (other than any Permitted Joint Venture that is a subsidiary but not a Permitted Joint Venture Loan Party) for such period determined on a consolidated basis in accordance with GAAP, provided that there shall be excluded from Consolidated Net Income (a) the income of any subsidiary (other than a Consolidated Practice) to the extent that the declaration or payment of dividends or other distributions by such subsidiary of that income is not at the time permitted by a Requirement of Law or any agreement or instrument applicable to such subsidiary, except to the extent of the amount of cash dividends or other cash distributions actually paid to the Borrower or any subsidiary during such period (unless the income of any subsidiary receiving such dividend or distribution would be excluded from Consolidated Net Income pursuant to this proviso), and (b) any gains or losses attributable to sales of assets out of the ordinary course of business and any extraordinary losses or gains.  Notwithstanding the foregoing, (1) the income of (x) any Permitted Joint Venture that is not a subsidiary and (y) any Permitted Joint Venture that is a subsidiary but not a Permitted Joint Venture Loan Party, in each case, shall be included in Consolidated Net Income during any four-quarter period only to the extent of the amount of cash dividends or other cash distributions of such income actually paid to the Borrower or any subsidiary prior to the date financial statements are required to be delivered pursuant to Section 5.01(a) or (b) for the most recent fiscal period (unless the income of the subsidiary receiving such dividend or distribution would be excluded from Consolidated Net Income pursuant to this definition) and (2) for purposes of calculating the “Available Amount,” Consolidated Net Income shall be increased (without duplication) by the amount of cash dividends or other cash distributions actually paid to the Borrower or any subsidiary (unless the income of the subsidiary receiving such dividend or distribution would be excluded from Consolidated Net Income pursuant to this definition) since the Original Effective Date, to the extent not previously included therein.

“Consolidated Practice” means any therapist- or physician-owned professional organization, association or corporation that employs or contracts with physicians and has entered into a management services agreement with the Borrower or any other Subsidiary, the accounts of which are consolidated with the Borrower and its subsidiaries in accordance with GAAP.

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“Consolidated Tangible Assets” means, as of any date, the total assets of the Borrower and its subsidiaries determined in accordance with GAAP (less, to the extent not deducted in the determination of total assets, accumulated depreciation and amortization, allowances for doubtful receivables, other applicable reserves and other properly deductible items) after giving effect to purchase accounting and, after deducting therefrom, to the extent otherwise included, the amounts of (without duplication):  (a) the excess of cost over fair market value of real property; (b) any revaluation or other write-up in book value of assets subsequent to the last day of the fiscal quarter of the Borrower immediately preceding the Original Effective Date as a result of any change in the method of valuation in accordance with GAAP; (c) unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items as to which Statement of Financial Accounting Standards No. 142 (“Goodwill and Other Intangible Assets”) applies; (d) non-controlling interests in subsidiaries held by Persons other than the Borrower or any subsidiary; (e) treasury stock; (f) cash or securities set aside and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Equity Interests; (g) investments in (and, for the avoidance of doubt, assets of) Permitted Joint Ventures; and (h) non-current deferred tax assets.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.

“Converted Series D Tranche B Term Loan” means each Series D Tranche B Term Loan held by an Amendment No. 6 Consenting Lender on the Amendment No. 6 Effective Date immediately prior to the effectiveness of Amendment No. 6 that has made an election pursuant to its signature page to Amendment No. 6 to consent its Series D Tranche B Term Loans for Series E Tranche B Term Loans.

“Default” means any event or condition that constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“Defaulting Lender” means any Revolving Lender or 2018 Extended Revolving Lender that (a) has failed, within three Business Days of the date required to be funded or paid, to (i) fund any portion of its Revolving Loans or 2018 Extended Revolving Loans, as applicable, (ii) fund any portion of its participations in Letters of Credit or Swingline Loans or (iii) pay over to the Administrative Agent, any Issuing Bank, the Swingline Lender or any other Lender any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Revolving Lender or 2018 Extended Revolving Lender notifies the Administrative Agent in writing that such failure is the result of such Revolving Lender’s or 2018 Extended Revolving Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the Borrower or the Administrative Agent, any Issuing Bank, the Swingline Lender or any other Lender in writing, or has made a public statement to the effect, that it does not intend or expect to comply with (i) any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Revolving Lender’s or 2018 Extended Revolving Lender’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a loan under this Agreement cannot be satisfied) or (ii) its funding obligations generally under other agreements in which it commits to extend credit, (c) has failed, within three Business Days after written request by the Administrative Agent, acting in good faith, to provide a certification in writing from an authorized officer of such Revolving Lender or 2018 Extended Revolving Lender that it will comply with its obligations (and is financially able to meet such obligations) to fund prospective Revolving Loans or 2018 Extended Revolving Loans, as applicable, and participations in then outstanding Letters of Credit and Swingline Loans under this Agreement, provided that such Revolving Lender or 2018 Extended Revolving Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such

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Loan Party’s receipt of such certification in form and substance reasonably satisfactory to it and the Administrative Agent, or (d) has become the subject of a Bankruptcy Event.

“dollars” or “$” refers to lawful money of the United States of America.

“Domestic Subsidiary” means any Subsidiary incorporated or organized under the laws of the United States of America, any State thereof or the District of Columbia, other than a Subsidiary that is a CFC.

“Environmental Laws” means all laws (including the common law), rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by or with any Governmental Authority, relating in any way to the environment, preservation or reclamation of or damage to natural resources, the presence, management, storage, treatment, transports, exposure to, Release or threatened Release of any Hazardous Material, or to health and safety matters.

“Environmental Liability” means liabilities, obligations, damages, claims, actions, suits, judgments, orders, fines, penalties, fees, expenses and costs (including administrative oversight costs, natural resource damages and medical monitoring, investigation or remediation costs), whether contingent or otherwise, arising out of or relating to (a) compliance or non-compliance with any Environmental Law, (b) the generation, use, handling, transportation, storage or treatment of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest from the issuer thereof.

“ERISA” means the Employee Retirement Income Security Act of 1974 and the regulations promulgated thereunder, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414 of the Code.

“ERISA Event” means (a) any “reportable event,” as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30 day notice period is waived), (b) a failure to satisfy the minimum funding standard under Section 412 of the Code or Section 302 of ERISA, whether or not waived, (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan or Multiemployer Plan, (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan, (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Multiemployer Plan or to appoint a trustee to administer any Plan or Multiemployer Plan, (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan, (g) the withdrawal of the Borrower or any of its ERISA Affiliates from a Plan subject to Section 4063 of ERISA during a plan year in which such entity was a “substantial employer” (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA, or (h) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any

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Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA or that a Multiemployer Plan is in “critical” status (within the meaning of Section 432 of the Code or Section 305 of ERISA) or (i) the occurrence of a non-exempt prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan.

“Eurodollar,” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

“Event of Default” has the meaning assigned to such term in Section 7.01.

“Excess Cash Flow” means, for any Excess Cash Flow Period, the sum (without duplication) of:

(a)Consolidated Net Income for such Excess Cash Flow Period, adjusted to exclude any gains or losses attributable to Prepayment Events; plus

(b)depreciation, amortization and other non-cash charges or losses (including deferred income taxes) deducted in determining such Consolidated Net Income for such Excess Cash Flow Period; plus

(c)the amount, if any, by which Net Working Capital decreased during such Excess Cash Flow Period (except as a result of reclassification of items from short-term to long-term); minus

(d)the sum of (i) any non-cash gains or non-cash items of income included in determining Consolidated Net Income for such Excess Cash Flow Period plus (ii) the amount, if any, by which Net Working Capital increased during such Excess Cash Flow Period (except as a result of reclassification of items from long-term to short-term); minus

(e)the greater of (x) the amount of Capital Expenditures of the Borrower and its subsidiaries in such Excess Cash Flow Period (except to the extent attributable to the incurrence of Capital Lease Obligations or otherwise financed by incurring Long-Term Indebtedness) and (y) the amount of Capital Expenditures budgeted by the Borrower and its subsidiaries for the next succeeding Excess Cash Flow Period; minus

(f)the aggregate principal amount of Long-Term Indebtedness repaid or prepaid by the Borrower and its subsidiaries during such Excess Cash Flow Period, excluding (i) Indebtedness in respect of Revolving Loans, 2018 Extended Revolving Loans and Letters of Credit (unless there is a corresponding reduction in the aggregate Revolving Commitments or 2018 Extended Revolving Commitments, as applicable), (ii) Tranche B Term Loans prepaid pursuant to Section 2.11(a), (c) or (d), and (iii) repayments or prepayments of Long-Term Indebtedness financed by the incurrence of other Long-Term Indebtedness by a Parent or any Loan Party or the issuance of Equity Interests (or capital contributions in respect thereof) after the Original Effective Date to the extent not Otherwise Applied; minus

(g)the amount of Restricted Payments made by a Loan Party in such Excess Cash Flow Period pursuant to clause (iii) of Section 6.08(a); minus

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(h)cash Taxes paid in such Excess Cash Flow Period that did not reduce Consolidated Net Income for such Excess Cash Flow Period; minus

(i)cash payments made during such Excess Cash Flow Period in respect of non-cash charges that increased Excess Cash Flow in any prior Excess Cash Flow Period.

“Excess Cash Flow Period” means (i) for purposes of calculating the Available Amount, (A) the period from July 1, 2011 to December 31, 2011, (B) the period from January 1, 2012 to December 31, 2012 and (C) each full fiscal quarter ending after January 1, 2013 and (ii) for purposes of Section 2.11(d), any fiscal year.

“Excluded Swap Obligation” means, with respect to any Loan Party, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Loan Party of, or the grant by such Loan Party of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder (determined after giving effect to Section 2.11 of the Collateral Agreement, any other keepwell, support or other agreement for the benefit of such Loan Party and any and all guarantees of such Loan Party’s Swap Obligations by other Loan Parties) at the time the Guarantee of such Loan Party or the grant of such security interest becomes effective with respect to such Swap Obligation but for such Loan Party’s failure to constitute an “eligible contract participant” at such time.  If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee or security interest is or becomes illegal in accordance with the first sentence of this definition.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower or any Loan Party hereunder, (a) income taxes imposed on (or measured by) its net income (however denominated) (including any backup withholding with respect thereto) and franchise taxes imposed on it (in lieu of net income taxes) (i) by the United States of America, (ii) by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located or (iii) by any other jurisdiction as a result of a present or former connection between the Administrative Agent, the Lender or the Issuing Bank, as applicable, and the jurisdiction imposing such tax (other than a connection arising by such Person having become a party to, performed its obligations or received payments under, or enforced, any Loan Document), (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (a) above, (c) in the case of a Foreign Lender, any withholding tax imposed on amounts payable to or for the account of such Foreign Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Foreign Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 2.19(b)) or (ii) such Foreign Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.17(a), amounts with respect to such Taxes were payable either to such Foreign Lender’s assignor immediately before such Foreign Lender became a party hereto or to such Foreign Lender immediately before it changed its lending office; provided that this clause (c) shall be limited solely to U.S. federal withholding tax in respect of any amount payable by a “United States person” as defined in Section 7701(a)(30) of the Code, (d) any withholding tax that is attributable to a Lender’s failure to comply with Section 2.17(e) and (e) any taxes under FATCA.

“Existing Lender” has the meaning assigned to such term in Section 2.20.

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“Existing Letter of Credit” means each letter of credit previously issued for the account of the Borrower that (a) was outstanding on the Original Effective Date and (b) is listed on Schedule 2.05.

“Existing Subordinated Notes” means the Borrower’s 7-5/8% Senior Subordinated Notes due 2015.

“Extended Revolving Commitments” means revolving credit commitments established pursuant to Section 2.21 that are substantially identical to the Revolving Commitments or 2018 Extended Revolving Commitments except that such extended revolving commitments may have a later maturity date and different provisions with respect to interest rates and fees than those applicable to the Revolving Commitments or 2018 Extended Revolving Commitments, as applicable.

“Extended Term Loans” has the meaning provided in Section 2.21(a).

“Extending Term Lender” has the meaning provided in Section 2.21(c).

“Extension Election” has the meaning provided in Section 2.21(c).

“Extension Request” has the meaning provided in Section 2.21(a).

“Fair Market Value” means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress or necessity of either party, determined in good faith by the Board of Directors, chief executive officer or chief financial officer of the Borrower.

“FATCA” means Sections 1471 through 1474 of the Code as of the date hereof (and any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the current Code (or any amended or successor version described above) and any applicable law or regulation pursuant to an intergovernmental agreement entered into to implement the foregoing.

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.  In no event shall the Federal Funds Effective Rate be less than 0%.

“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower, in each case in his or her capacity as such.

“Financial Performance Covenant” means the covenant of the Borrower set forth in Section 6.13.

“First Lien Intercreditor Agreement” means an Intercreditor Agreement, substantially in the form of Exhibit G (with such changes thereto as are reasonably acceptable to the Administrative Agent), by and between the Administrative Agent and the collateral agent for one or more classes of Permitted Secured Notes that are intended to be secured by Liens ranking pari passu with the Liens securing the Obligations.

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“Flood Insurance Laws” means, collectively (i) the National Flood Insurance Act of 1968 as now or hereafter in effect or any successor statute thereto, (ii) the Flood Disaster Protection Act of 1973 as now or hereafter in effect or any successor statute thereto, (iii) the National Flood Insurance Reform Act of 1994 as now or hereafter in effect or any successor statute thereto and (iv) the Flood Insurance Reform Act of 2004 as now or hereafter in effect or any successor statute thereto.

“Foreign Lender” means any Lender that is not a United States person within the meaning of Section 7701(a)(30) of the Code.

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“GAAP” means generally accepted accounting principles in the United States of America, as in effect from time to time.

“Government Programs” means (i) the Medicare and Medicaid Programs, (ii) the United States Department of Defense Civilian Health Program for Uniformed Services and (iii) other similar foreign or domestic Federal, state or local reimbursement or governmental health care programs.

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party or applicant in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation, provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.  The amount of any Guarantee of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which the Guarantee is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee.

“Hazardous Materials” means all explosive, radioactive, infectious, chemical, biological, medical, hazardous or toxic materials, substances, wastes or other pollutants or contaminants, including petroleum or petroleum byproducts, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas and all other materials, substances or wastes of any nature regulated pursuant to any Environmental Law.

“Holdings” means (A) Select Medical Holdings Corporation, a Delaware corporation, or (B) any other entity (such entity, a “Succeeding Holdings”) that becomes the immediate parent of the Borrower.

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“Holdings Leverage Ratio” has the same meaning as “Leverage Ratio,” but for purposes of determining Total Indebtedness, substituting “Holdings” for “Borrower.”

“Inactive Subsidiary” means a Subsidiary that (a) conducts no business operations, (b) has total assets with a fair market value of not more than $500,000 individually and not more than $5,000,000 in the aggregate and (c) has no Indebtedness outstanding.

“Incremental Extensions of Credit” has the meaning set forth in Section 2.20.

“Incremental Facility Closing Date” has the meaning set forth in Section 2.20.

“Incremental Revolver Commitments” has the meaning set forth in Section 2.20.

“Incremental Term Loans” has the meaning set forth in Section 2.20.

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding trade accounts payable and accrued obligations incurred in the ordinary course of business), (f) all obligations of others secured by (or for which the holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, but limited, in the event such secured obligations are nonrecourse to such Person, to the fair value of such property, (g) all Guarantees by such Person of the obligations of any other Person, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party or applicant in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances.  The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.  Notwithstanding the foregoing, the term “Indebtedness” shall not include post-closing payment adjustments, earn-outs or non-compete payments to which the seller in any Permitted Acquisition is or may become entitled or amounts that any member of management, the employees or consultants of Holdings, the Borrower or any of the Subsidiaries may become entitled to under any cash incentive plan in existence from time to time.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Indemnitee” has the meaning set forth in Section 9.03(b).

“Information” has the meaning set forth in Section 9.12.

“Insurance Subsidiary” means a subsidiary of the Borrower established for the sole purpose of providing insurance benefits to the Borrower and its subsidiaries.

“Interest Election Request” means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.07, provided that a written Interest Election Request shall be substantially in the form of Exhibit F, or such other form as shall be approved by the Administrative Agent.

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“Interest Payment Date” means (a) with respect to any ABR Loan (including a Swingline Loan), the last day of each March, June, September and December and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period.

“Interest Period” means, with respect to any Eurodollar Borrowing, with respect to Revolving Loans, 2018 Extended Revolving Loans and Tranche B Term Loans, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter (or such other period as may be agreed by the Borrower, the Administrative Agent and all Lenders participating therein) and, in each case as the Borrower may elect, provided that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (b) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period.  For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

“Issuing Bank” means (a) JPMorgan Chase Bank, N.A. or such other Lender designated as an “Issuing Bank” pursuant to Section 2.05(k) and (b) with respect to the Existing Letters of Credit only, JPMorgan Chase Bank, N.A.  The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

“LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter of Credit.

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time.  The LC Exposure of any 2018 Extended Revolving Lender at any time shall be its Applicable Percentage of the aggregate LC Exposure at such time.

“Lenders” means each Person that was a lender on the Restatement Effective Date and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption or an Additional Credit Extension Amendment, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.  Unless the context otherwise requires, the term “Lenders” includes the Swingline Lender.

“Letter of Credit” means any letter of credit issued or deemed issued pursuant to this Agreement (including each Existing Letter of Credit).

“Leverage Ratio” means, on any date, the ratio of (a) Total Indebtedness on such date (minus up to $75,000,000 of unrestricted cash and Permitted Investments held, on such date, by the Borrower and the Subsidiary Loan Parties on such date) to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters of the Borrower ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter of the Borrower most recently ended prior to such date).

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“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute page) on such screen at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits in the London interbank market with a maturity comparable to such Interest Period.  In the event that such rate does not appear on such page (or on any successor or substitute page on such screen or otherwise on such screen), the “LIBO Rate” shall be determined by reference to such other comparable publicly available service for displaying interest rates for dollar deposits in the London interbank market as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.  Notwithstanding anything to the contrary set forth in the foregoing, (x) to the extent the LIBO Rate for any Interest Period for the Series E Tranche B Term Loans would be less than 1.00%, then the LIBO Rate for the Series E Tranche B Term Loans for such Interest Period shall instead be 1.00% and (y) to the extent the LIBO Rate for any Interest Period for any Loans would be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset or other arrangement to provide priority or preference with respect to such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party (other than customary rights of first refusal and tag, drag and similar rights in joint venture agreements (other than any such agreement in respect of any Subsidiary)) with respect to such securities.

“Limitation” means a revocation, suspension, termination, impairment, probation, limitation, nonrenewal, forfeiture, declaration of ineligibility, loss of status as a participating provider in any Third Party Payor Arrangement, and the loss of any other rights.

“Loan Document Obligations” means (a) the due and punctual payment by the Borrower of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower under this Agreement in respect of any Letter of Credit, when and as due, including payments in respect of reimbursement of disbursements, interest thereon (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) and obligations to provide cash collateral, and (iii) all other monetary obligations of the Borrower to any of the Secured Parties under this Agreement and each other Loan Document, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual performance of all other obligations of the Borrower under or pursuant to this Agreement and each other Loan Document, and (c) the due and punctual payment and performance in full of all the obligations of each other Loan Party under or pursuant to the Collateral Agreement and each other Loan Document.

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“Loan Documents” means this Agreement, the promissory notes, if any, executed and delivered pursuant to Section 2.09(e), any Additional Credit Extension Amendment, the Collateral Agreement and the other Security Documents.

“Loan Parties” means Holdings, the Borrower, the Subsidiary Loan Parties and each Permitted Joint Venture Loan Party.

“Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement or an Additional Credit Extension Amendment.

“Long-Term Indebtedness” means any Indebtedness that, in accordance with GAAP, constitutes (or, when incurred, constituted) a long-term liability.

“LTACH” means (a) a long-term hospital as defined in Volume 42, Section 412.23 of the Code of Federal Regulations (or any successor definition) or (b) any long-term hospital that is in development to achieve such status.

“Material Adverse Effect” means a material adverse effect on (a) the business, operations, assets, liabilities, financial condition or results of operations of Holdings, the Borrower and the Subsidiaries, taken as a whole, (b) the ability of any Loan Party to perform any obligation under any Loan Document or (c) the rights of or benefits available to the Lenders under any Loan Document.

“Material Disposition” means the sale by the Borrower or any Subsidiary of assets (including the capital stock of a Subsidiary or a business unit) for aggregate consideration (including amounts received in connection with post-closing payment adjustments, earn-outs and noncompete payments) of at least $35,000,000.

“Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, of any one or more of Holdings, the Borrower and the Subsidiaries in an aggregate principal amount exceeding $50,000,000.  For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower or any Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Swap Agreement were terminated at such time.

“Material Real Property” means a real property with a gross book value of at least $10,000,000, as reasonably determined by the Borrower in good faith.

“Maximum Rate” has the meaning set forth in Section 9.13.

“Medicare and Medicaid Programs” means the programs established under Title XVIII and XIX of the Social Security Act and any successor programs performing similar functions.

“Moody’s” means Moody’s Investors Service, Inc.

“Mortgage” means a mortgage, deed of trust, assignment of leases and rents, leasehold mortgage or other security document granting a Lien on any Mortgaged Property to secure the Obligations.  Each Mortgage shall be reasonably satisfactory in form and substance to the Collateral Agent.

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“Mortgaged Property” means, initially, each Material Real Property identified on Schedule 1.01 and includes each other Material Real Property with respect to which a Mortgage is granted pursuant to Section 5.12 or 5.13.

“MS-DRG” means a medical severity diagnosis related group.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Net Proceeds” means, with respect to any event, (a) the cash proceeds received in respect of such event including (i) any cash received in respect of any non-cash proceeds (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, but excluding any interest payments), but only as and when received, (ii) in the case of a casualty, insurance proceeds and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, net of (b) the sum of (i) all reasonable fees and out-of-pocket expenses paid to third parties (other than Affiliates) in connection with such event, (ii) in the case of a sale, transfer or other disposition of an asset (including pursuant to a sale and leaseback transaction or a casualty or a condemnation or similar proceeding), the amount of all payments required to be made as a result of such event to repay Indebtedness (other than Loans) secured by such asset or otherwise subject to mandatory prepayment as a result of such event and (iii) the amount of all taxes paid (or reasonably estimated to be payable) and the amount of any reserves established to fund liabilities reasonably estimated to be payable, in each case during the year that such event occurred or the next succeeding year and that are directly attributable to such event (as determined reasonably and in good faith by a Financial Officer), provided that no net proceeds calculated in accordance with the foregoing of less than $2,500,000 realized in a single transaction or series of related transactions shall constitute Net Proceeds.

“Net Working Capital” means, at any date, (a) the consolidated current assets of the Borrower and its subsidiaries as of such date (excluding cash and Permitted Investments) minus (b) the consolidated current liabilities of the Borrower and its subsidiaries as of such date (excluding current liabilities in respect of Indebtedness).  Net Working Capital at any date may be a positive or negative number.  Net Working Capital increases when it becomes more positive or less negative and decreases when it becomes less positive or more negative.

“Non-Consenting Lender” has the meaning set forth in Section 9.02(b).

“Obligations” means (a) Loan Document Obligations, (b) the due and punctual payment and performance in full of all obligations of each Loan Party under each Swap Agreement that (i) is in effect on the Original Effective Date with a counterparty that is a Lender or an Affiliate of a Lender as of the Original Effective Date or (ii) is entered into after the Original Effective Date with any counterparty that is a Lender or an Affiliate of a Lender at the time such Swap Agreement is entered into and (c) Cash Management Obligations; provided that the “Obligations” shall in no event include any Excluded Swap Obligations.

“Original Credit Agreement” has the meaning set forth in the preamble to this Agreement.

“Original Effective Date” means the date on which the conditions specified in Section 4.01 were satisfied (or waived), which date was June 1, 2011.

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“Other Taxes” means any and all present or future recording, stamp, documentary, excise, transfer, sales, property or similar taxes, charges or levies of the United States or any political subdivision thereof arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or from the filing or recording of or otherwise with respect to the exercise by the Administrative Agent or the Lenders of their rights under, any Loan Document.

“Otherwise Applied” means, with respect to any Net Proceeds, the amount of such Net Proceeds that was (i) required to prepay the Loans pursuant to Section 2.11 or (ii) otherwise previously applied under the Loan Documents.

“Parent” means any direct or indirect parent of which Holdings is a wholly owned subsidiary.

“Participant” has the meaning set forth in Section 9.04(c).

“Patriot Act” has the meaning set forth in Section 9.14.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“Perfection Certificate” means a certificate in the form of Exhibit D or any other form approved by the Collateral Agent.

“Permitted Acquisitions” means any acquisition by the Borrower or any Subsidiary Loan Party at least 80% of all outstanding Equity Interests (other than directors’ qualifying shares or shares issued to foreign nationals to the extent required by applicable law) in, all or substantially all the assets of, or all or substantially all the assets constituting a division or line of business of, a Person if (a) no Default has occurred and is continuing or would result therefrom, (b) after giving effect to such acquisition, the Borrower and the Subsidiary Loan Party shall have aggregate unused and available Revolving Commitments, 2018 Extended Revolving Commitments and unrestricted cash and Permitted Investments of not less than $40,000,000, (c) after giving effect to such acquisition, the aggregate Consolidated Tangible Assets acquired in all Permitted Acquisitions consummated since the Original Effective Date (excluding acquisitions resulting in a newly formed Domestic Subsidiary or otherwise related to assets substantially located in the United States of America) does not exceed 5% of Consolidated Tangible Assets, (d) such acquisition and all transactions related thereto are consummated in accordance in all material respects with all applicable laws, (e) all actions required to be taken with respect to such acquired or newly formed Subsidiary (if a Domestic Subsidiary) or assets (if held by a Domestic Subsidiary) to cause such Person to become a Loan Party under Sections 5.12 and 5.13 shall have been taken (or shall be taken promptly thereafter), (f) on a Pro Forma Basis the Leverage Ratio recomputed as of the last day of the most recently ended fiscal quarter of the Borrower for which financial statements are available does not exceed 5.75 to 1.00, and (g) the Borrower has delivered to the Administrative Agent an officer’s certificate to the effect set forth in clauses (a), (b), (c), (d), (e) and (f) above, together with all relevant financial information for the Person or assets to be acquired.

“Permitted Debt Securities” means any Indebtedness consisting of notes or loans under credit agreements, indentures or other similar agreements or instruments incurred or Guaranteed by Loan Parties following the Original Effective Date; provided that (i) such Indebtedness does not mature or have scheduled amortization or scheduled payments of principal and is not subject to mandatory redemption, repurchase, prepayment or sinking fund obligation (other than customary offers to repurchase upon a change of control, asset sale or casualty event and customary acceleration rights after an event of default) prior to the 181st day after the Tranche B Maturity Date, (ii) shall be unsecured, except as permitted by

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Section 6.02(xii), (iii) such Indebtedness is not incurred or guaranteed by any Subsidiaries that are not Loan Parties, and (iv) the other terms and conditions relating to such debt securities or loans (other than interest rates, call protection and other pricing terms) are not in the aggregate more restrictive to the Borrower and its Subsidiaries than the terms of this Agreement as determined in good faith by the Borrower.

“Permitted Encumbrances” means:

(a)Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.05;

(b)carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.05;

(c)pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations;

(d)deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature;

(e)judgment liens in respect of judgments that do not constitute an Event of Default under paragraph (k) of Section 7.01;

(f)easements, zoning restrictions, rights-of-way, minor defects or irregularities of title and other similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not either detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary, in each case in any material respect;

(g)landlords’ and lessors’ and other like Liens in respect of rent not in default;

(h)any Liens shown on the title insurance policies in favor of the Collateral Agent insuring the Liens of the Mortgages; and

(i)leases or subleases which are subordinate to the Lien of any Mortgage,

provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.

“Permitted Investments” means:

(a)direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

(b)investments in commercial paper maturing within 365 days from the date of acquisition thereof and having, at such date of acquisition, a credit rating from S&P or Moody’s of at least A2 or P2, respectively;

(c)investments in certificates of deposit, banker’s acceptances and time deposits maturing within 365 days from the date of acquisition thereof issued or guaranteed by or placed

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with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000;

(d)fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and

(e)investments in money market funds that comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, as amended, substantially all of whose assets are invested in investments of the type described in clauses (a) through (d) above.

“Permitted Investors” means (A) Welsh, Carson, Anderson & Stowe IX, L.P., WCAS Capital Partners IV, L.P., Thoma Cressey Fund VI, L.P., Thoma Cressey Fund VII, L.P., and their respective Sponsor Affiliates and (B) (i) Rocco A. Ortenzio, Robert A. Ortenzio and each of the other directors, officers and employees of the Borrower who owned capital stock of Holdings on the first date the Borrower became a wholly owned subsidiary of Holdings; (ii) the spouses, ancestors, siblings, descendants (including children or grandchildren by adoption) and the descendants of any of the siblings of the Persons referred to in clause (i); (iii) in the event of the incompetence or death of any of the Persons described in clauses (i) or (ii), such Person’s estate, executor, administrator, committee or other personal representative, in each case who at any particular date shall be the beneficial owner or have the right to acquire, directly or indirectly, capital stock of the Borrower or Holdings (or any other direct or indirect parent company of the Borrower); (iv) any trust created for the benefit of the Persons described in any of clauses (i) through (iii) or any trust for the benefit of any such trust; or (v) any Person Controlled by any of the Persons described in any of clauses (i) through (iv); or (C) any “group” within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act or any successor provision) of which any of the foregoing are members; provided that in the case of such “group” and without giving effect to the existence of such “group” or any other “group,” such Persons specified in clauses (A) or (B) above, collectively, have beneficial ownership, directly or indirectly of more than 50% of the total voting power of the voting Equity Interests of Holdings or any of its direct or indirect parent entities held by such “group.”

“Permitted Joint Venture” means any investment by which the Borrower or any Subsidiary Loan Party acquires at least 10% but not more than 99% of the Equity Interests of any Person, provided that the primary business of such Person is (x) to own, lease or operate facilities which provide health care related services including long-term acute care services or rehabilitation services or (y) to provide health care related services including long-term acute care services or rehabilitation services or any related services to a hospital or other health care facility.

“Permitted Joint Venture Loan Party” means any Permitted Joint Venture which (x) is a subsidiary of the Borrower or any Subsidiary Loan Party and (y) satisfies the terms of the Collateral and Guarantee Requirement.

“Permitted Liens” has the meaning set forth in Section 6.02.

“Permitted Real Estate Joint Venture” means any Permitted Joint Venture which is a subsidiary and owns real property used in the business of the Borrower or any Subsidiary, provided that such Permitted Real Estate Joint Venture is not engaged in any business or activity other than the ownership of such real property and activities incidental thereto.

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“Permitted Secured Notes” means (i) Refinancing Debt Securities and (ii) any Refinancing Indebtedness in respect of such Refinancing Debt Securities, in each case, that are secured by a Lien permitted by Section 6.02(xii).

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any “employee pension benefit plan” (as defined in Section 3(2) of ERISA) that is subject to the provisions of Title IV or Section 302 of ERISA or Section 412 of the Code, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Prepayment Event” means:

(a)any sale, transfer or other disposition (excluding pursuant to a sale and leaseback transaction permitted under Section 6.06) of any property or asset of Holdings, the Borrower or any Subsidiary in excess of $5,000,000 in any fiscal year, other than dispositions described in clauses (a), (b), (c) and (d) of Section 6.05; or

(b)any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of Holdings, the Borrower or any Subsidiary with a fair value immediately prior to such event equal to or greater than $2,500,000; or

(c)the incurrence by Holdings, the Borrower or any Subsidiary of (x) any Refinancing Indebtedness or (y) any Indebtedness not permitted under Section 6.01.

“Prime Rate” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A. as its prime rate in effect for dollars at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

“Pro Forma Basis” means, for purposes of calculating the Leverage Ratio, the Holdings Leverage Ratio or the Secured Leverage Ratio for any period, that any Specified Transaction that has been consummated in such period and the following transactions in connection therewith shall be deemed to have occurred as of the first day of such period:

(a)income statement items (whether positive or negative) attributable to the property or Person subject to such Specified Transaction, in the case of a Permitted Acquisition,

(b)any retirement of Indebtedness, and

(c)any Indebtedness incurred or assumed by Holdings, the Borrower or any of their subsidiaries in connection therewith (or in any Specified Transaction);

provided that the foregoing pro forma adjustments may be applied to any such test solely to the extent that such adjustments are consistent with the definition of “Consolidated EBITDA” and give effect to events (including cost savings) to the extent they (i) would be permitted to be reflected in pro forma financial information complying with the requirements of GAAP and Article XI of Regulation S-X under the Securities Act of 1933, as amended, as interpreted by the Staff of the SEC; (ii) were actually implemented by the business that was the subject of the applicable Permitted Acquisition or Material Disposition, as the

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case may be, within 12 months after the date of such transaction, and are supportable and quantifiable by the underlying accounting records of such business or (iii) for all purposes other than determining the “Applicable Rate,” relate to the business that is the subject of such Specified Transaction, and are reasonably determined by the Borrower to be probable based upon specifically identifiable actions to be taken within 12 months after the date of such Specified Transaction, and, in each case are certified by a Financial Officer (accompanied by reasonably detailed supporting evidence).

“Proposed Change” has the meaning set forth in Section 9.02(b).

“Qualified Holdings Discount Debt” means unsecured Indebtedness of Holdings or a Parent that (a) is not subject to any Guarantee by the Borrower or any Subsidiary Loan Party, (b) does not mature prior to the date that is 180 days after the Tranche B Maturity Date, (c) has no scheduled amortization or payments of principal prior to such 180th day (except to the extent required to prevent such Indebtedness from being treated as an “Applicable High Yield Discount Obligation” within the meaning of Section 163(i)(1) of the Internal Revenue Code of 1986, as amended; provided that any such payment obligation of Holdings shall be subordinated in right of payment to the Obligations), (d) does not require any payments in cash of interest or other amounts in respect of the principal thereof for at least four (4) years from the date of issuance or incurrence thereof and (e) has mandatory prepayment, repurchase or redemption, covenant, default and remedy provisions customary for senior discount notes of an issuer that is the parent of a borrower under senior secured credit facilities and in any event, with respect to default and remedy provisions customary for senior discount notes of a holding company.

“Qualified Preferred Stock” means preferred stock of Holdings that (a) does not require the payment of cash dividends (it being understood that cumulative dividends shall be permitted), (b) is not mandatorily redeemable pursuant to a sinking fund obligation or otherwise prior to the date that is 180 days after the Tranche B Maturity Date (other than upon an event of default or change in control, provided that any such payment is subordinated (whether by contract or pursuant to Holdings’ charter or the certificate of designations of such preferred stock) in right of payment to the Obligations on the terms set forth in the certificate of incorporation of Holdings in existence on the Original Effective Date or such other terms reasonably satisfactory to the Administrative Agent), (c) contains no maintenance covenants, other covenants materially adverse to the Lenders or remedies (other than voting rights) and (d) is convertible only into common equity of Holdings or securities that would constitute Qualified Preferred Stock.

“Refinanced Term Loans” has the meaning assigned to such term in Section 9.02.

“Refinancing Debt Securities” means any Permitted Debt Securities that are designated as “Refinancing Debt Securities” in a certificate of a Responsible Officer of the Borrower delivered to the Administrative Agent on or prior to the date such Permitted Debt Securities are incurred.

“Refinancing Indebtedness” means (i) any Refinancing Term Loans and (ii) any Refinancing Debt Securities.

“Refinancing Term Loans” means Incremental Term Loans that are designated by a Responsible Officer of the Borrower as “Refinancing Term Loans” in a certificate of a Responsible Officer of the Borrower delivered to the Administrative Agent on or prior to the date of incurrence.

“Register” has the meaning set forth in Section 9.04(b).

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“Reimbursement Approvals” means, with respect to all Government Programs, any and all certifications, provider numbers, provider agreements, participation agreements, accreditations and any other similar agreements with or approvals by any Governmental Authority or other Person.

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents, trustees and advisors of such Person and such Person’s Affiliates.

“Release” means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment or within, into or from any building, structure, facility or fixture.

“Replacement Term Loans” has the meaning assigned to such term in Section 9.02.

“Required 2018 Extended Revolving Lenders” means, at any time, Lenders having 2018 Extended Revolving Exposures and unused 2018 Extended Revolving Commitments representing more than 50% of the sum of the aggregate 2018 Extended Revolving Exposures and unused 2018 Extended Revolving Commitments at such time (disregarding any of the foregoing of a Defaulting Lender).

“Required Lenders” means, at any time, Lenders having Revolving Exposures, 2018 Extended Revolving Exposures, Tranche B Term Loans, Loans in respect of Incremental Extensions of Credit, if any, and unused Commitments representing more than 50% of the aggregate Revolving Exposures, 2018 Extended Revolving Exposures, outstanding Tranche B Term Loans, outstanding Loans in respect of Incremental Extensions of Credit, if any, and unused Commitments at such time (disregarding any of the foregoing of a Defaulting Lender).

“Required Revolving Lenders” means, at any time, Lenders having Revolving Exposures and unused Revolving Commitments representing more than 50% of the sum of the aggregate Revolving Exposures and unused Revolving Commitments at such time (disregarding any of the foregoing of a Defaulting Lender).

“Requirement of Law” means, with respect to any Person, (i) the charter, articles or certificate of organization or incorporation and bylaws or other organizational or governing documents of such Person and (ii) any statute, law, treaty, rule, regulation, order, decree, writ, injunction or determination of any arbitrator or court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Restatement Effective Date” means the Amendment No. 6 Effective Date.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in Holdings, the Borrower or any Subsidiary, or any payment thereon (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Equity Interests in Holdings, the Borrower or any Subsidiary or any option, warrant or other right to acquire any such Equity Interests in Holdings, the Borrower or any Subsidiary.

“Revolving Availability Period” means the period from and including the Original Effective Date to but excluding the earlier of (a) the Revolving Maturity Date and (b) the date of termination of the Revolving Commitments.

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“Revolving Commitment” means, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans hereunder, expressed as an amount representing the maximum possible aggregate amount of such Lender’s Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04.  The aggregate amount of the Lenders’ Revolving Commitments on the Restatement Effective Date is set forth on Schedule 2.01.

“Revolving Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Revolving Loans at such time.

“Revolving Lender” means a Lender with a Revolving Commitment or, if the Revolving Commitments have terminated or expired, a Lender with Revolving Exposure.

“Revolving Loan” means a Loan made pursuant to clause (b) of Section 2.01.

“Revolving Maturity Date” means June 1, 2016.

“S&P” means Standard & Poor’s Ratings Group, Inc.

“SEC” means the Securities and Exchange Commission or any Governmental Authority succeeding to any of its principal functions.

“Second Lien Intercreditor Agreement” means an Intercreditor Agreement, in form reasonably acceptable to the Administrative Agent, by and between the Administrative Agent and the collateral agent for one or more classes of Permitted Secured Notes that are intended to be secured by Liens ranking junior to the Liens securing the Obligations providing that, inter alia, (i) the Liens securing Obligations rank prior to the Liens securing the Permitted Secured Notes, (ii) all amounts received in connection with any enforcement action with respect to any Collateral or in connection with any United States or foreign bankruptcy, liquidation or insolvency proceeding shall first be applied to repay all Obligations (whether or not allowed in any such proceeding) prior to being applied to the obligations in respect of the Permitted Secured Notes and (iii) until the repayment of the Obligations in full and termination of commitments hereunder (subject to customary limitations with respect to contingent obligations and other customary qualifications) the Administrative Agent shall have the sole right to take enforcement actions with respect to the Collateral.

“Secured Indebtedness” at any date shall mean the aggregate principal amount of Total Indebtedness outstanding at such date that consists of Indebtedness that in each case is then secured by Liens on any property or assets of Borrower or its Subsidiaries.

“Secured Leverage Ratio” means, on any date, the ratio of (a) Secured Indebtedness (minus up to $175,000,000 of unrestricted cash and Permitted Investments held, on such date, by the Borrower and the Subsidiary Loan Parties on such date) on such date to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters of the Borrower ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter of the Borrower most recently ended prior to such date).

“Secured Parties” means (a) the Lenders, (b) the Collateral Agent, (c) the Administrative Agent, (d) the Issuing Bank, (e) each counterparty that is a Lender or an Affiliate of a Lender to any Swap Agreement with a Loan Party the obligations under which constitute Obligations, (f) each Cash Management Bank and (g) the successors and assigns of each of the foregoing.

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“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Security Documents” means the Collateral Agreement, the Mortgages and each other security agreement or other instrument or document executed and delivered pursuant to Section 5.12 or 5.13 to secure any of the Obligations.

“series” means, with respect to any Extended Term Loans, Incremental Term Loans or Replacement Term Loans, all such Term Loans that have the same maturity date, amortization and interest rate provisions and that are designated as part of such “series” pursuant to the applicable Additional Credit Extension Amendment.

“Series B Deadline” means the date that is six months after the Amendment No. 3 Effective Date.

“Series B Tranche B Term Loans” means the Incremental Term Loans made pursuant to the Additional Credit Extension Amendment attached as Annex I to Amendment No. 3; provided, for the avoidance of doubt, that there shall be only one incurrence of Series B Tranche B Term Loans.

“Series D Tranche B Maturity Date” means December 20, 2016.

“Series E Tranche B Maturity Date” means June 1, 2018.

“Series D Tranche B Term Loans” means the Tranche B Term Loans and outstanding under the Original Credit Agreement as of the Restatement Effective Date.

“Series E Tranche B Term Loans” means the Tranche B Term Loans  under the Original Credit Agreement as of the Restatement Effective Date and Series D Tranche B Term Loans that are converted to Series E Tranche B Term Loans on the Restatement Effective Date pursuant to Section 2.01.

“Specified Indebtedness” has the meaning set forth in Section 6.08(b).

“Specified Transactions” means (a) any Permitted Acquisition, (b) any Material Disposition and (c) any proposed incurrence of Indebtedness in respect of which the Leverage Ratio, the Secured Leverage Ratio or Holdings Leverage Ratio is by the terms of this Agreement required to be calculated on a Pro Forma Basis.

“Sponsor” means (A) Welsh, Carson, Anderson & Stowe IX, L.P. and (B) Thoma Cressey Equity Partners.

“Sponsor Affiliate” means (i) each Affiliate of the Sponsor that is neither an operating company nor a company controlled by an operating company, (ii) each partner, officer, director, principal or member of the Sponsor or any Sponsor Affiliate and (iii) any spouse, parent or lineal descendant (including by adoption) of any of the foregoing who are natural persons and any trust for the benefit of such persons.

“Startup Operating Losses” means any Consolidated EBITDA losses incurred at any inpatient rehabilitation or long-term acute care hospitals operated by Borrower or any of its subsidiaries prior to the date that is twelve months after the opening of such facility.

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“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the bank serving as the Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board).  Such reserve percentages shall include those imposed pursuant to such Regulation D.  Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation.  The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“Subordinated Indebtedness” means Indebtedness of Holdings, the Borrower or any Subsidiary that is contractually subordinated to the Obligations.

“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held.

“Subsidiary” means any subsidiary of the Borrower, other than any Permitted Joint Venture that is not a Permitted Joint Venture Loan Party.

“Subsidiary Loan Party” means any Domestic Subsidiary (other than (a) any Inactive Subsidiary for which the Borrower has not satisfied the Collateral and Guarantee Requirement, (b) any Consolidated Practice and (c) any Insurance Subsidiary).

“Succeeding Holdings” has the meaning set forth in the definition of “Holdings.”

“Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions, provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a Swap Agreement.

“Swap Obligation” means, with respect to any Loan Party, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.

“Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time.  The Swingline Exposure of any Lender at any time shall be its Applicable Percentage of the aggregate Swingline Exposure at such time.

“Swingline Lender” means JPMorgan Chase Bank, N.A., in its capacity as lender of Swingline Loans hereunder, together with its successors in such capacity.

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“Swingline Loan” means a Loan made pursuant to Section 2.04.

“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

“Term Loans” means the Tranche B Term Loans, the Incremental Term Loans of each series, the Extended Term Loans of each series, collectively.

“Third Party Payor” means any Government Program and any quasipublic agency, Blue Cross, Blue Shield and any managed care plans and organizations, including health maintenance organizations and preferred provider organizations and private commercial insurance companies and any similar third party arrangements, plans or programs for payment or reimbursement in connection with health care services, products or supplies.

“Third Party Payor Arrangement” means any arrangement, plan or program for payment or reimbursement by any Third Party Payor in connection with the provision of healthcare services, products or supplies.

“Total Indebtedness” means, as of any date, the aggregate principal amount of Indebtedness of the Borrower and the Subsidiaries outstanding as of such date, in the amount that would be reflected on a balance sheet prepared as of such date on a consolidated basis in accordance with GAAP.

“Tranche B Lender” means a Lender with a Tranche B Commitment or an outstanding Tranche B Term Loan.

“Tranche B Maturity Date” means the Series D Tranche B Maturity Date or the Series E Tranche B Maturity Date, as applicable.

“Tranche B Term Loan” means unless otherwise indicated, any Series D Tranche B Term Loan or Series E Tranche B Term Loan outstanding as of the Restatement Effective Date.

“Type,” when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

“wholly owned” means with respect to any Person, a subsidiary of such Person all the outstanding Equity Interests of which (other than (x) directors’ qualifying shares and (y) shares issued to foreign nationals to the extent required by applicable law) are owned by such Person and/or by one or more wholly owned subsidiaries of such Person.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in ERISA.

“Yield” for any Indebtedness on any date of determination will be determined by the Administrative Agent utilizing (a) if applicable, any “LIBOR floor” applicable to such Indebtedness on such date; (b) the interest margin for such Indebtedness on such date; and (c) the issue price of such Indebtedness (after giving effect to any original issue discount (with original issue discount being equated to interest based on an assumed four-year life to maturity) or upfront fees (which shall be deemed to constitute like amounts of original issue discount) paid to the market in respect of such Indebtedness but excluding customary arranger, underwriting and commitment fees not paid to the lenders providing such Indebtedness generally).

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SECTION 1.02.Classification of Loans and Borrowings.  For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a “Eurodollar Revolving Loan”).  Borrowings also may be classified and referred to by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar Borrowing”) or by Class and Type (e.g., a “Eurodollar Revolving Borrowing”).

SECTION 1.03.Terms Generally.  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented, amended and restated or otherwise modified (subject to any restrictions on such amendments, supplements, amendment and restatements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

SECTION 1.04.Accounting Terms; GAAP.  Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP as in effect from time to time, provided that if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision (including any definition) hereof to eliminate the effect of any change occurring after the Original Effective Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision (including any definition) hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.  In addition, notwithstanding any other provision contained herein, (i) the definitions set forth in the Loan Documents and any financial calculations required by the Loan Documents shall be computed to exclude any change to lease accounting rules from those in effect pursuant to Financial Accounting Standards Board Accounting Standards Codification 840 (Leases) and other related lease accounting guidance as in effect on the Original Effective Date and (ii) all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Financial Accounting Standards Board Accounting Standards Codification 825 (or any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Parent, the Borrower or any Subsidiary at “fair value,” as defined therein.

SECTION 1.05.Specified Transactions.  Notwithstanding anything to the contrary herein, solely for purposes of determining the Leverage Ratio, Secured Leverage Ratio and Holdings Leverage Ratio, with respect to any period during which any Specified Transaction occurs, such ratios shall be calculated with respect to such period and such Specified Transaction (and all other Specified Transactions that have been consummated during such period) on a Pro Forma Basis.

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SECTION 1.06.Effect of this Agreement on the Original Credit Agreement and the Other Existing Loan Documents.  Upon satisfaction of the conditions precedent to the effectiveness of this Agreement set forth in Amendment No. 6, this Agreement shall be binding on the Borrower, Holdings, the Agents, the Lenders and the other parties hereto regardless of the fact that any may not have signed this Agreement itself, and the Original Credit Agreement and the provisions thereof shall be replaced in their entirety by this Agreement and the provisions hereof; provided that for the avoidance of doubt (a) the Obligations (as defined in the Original Credit Agreement) of the Borrower, Holdings and the other Loan Parties under the Original Credit Agreement and the other Loan Documents that remain unpaid and outstanding as of the date of this Agreement shall continue to exist under and be evidenced by this Agreement and the other Loan Documents, (b) all Letters of Credit under and as defined in the Original Credit Agreement shall continue as Letters of Credit under this Agreement and (c) the Collateral and the Loan Documents shall continue to secure, guarantee, support and otherwise benefit the Obligations on the same terms as prior to the effectiveness hereof.  Upon the effectiveness of this Agreement, each Loan Document that was in effect immediately prior to the date of this Agreement shall continue to be effective on its terms unless otherwise expressly stated herein.

ARTICLE II

The Credits

SECTION 2.01.Commitments and Extension Requests.  Subject to the terms and conditions set forth herein, (x) each Lender agrees (a) to make Revolving Loans to the Borrower from time to time during the Revolving Availability Period in an aggregate principal amount that will not result in such Lender’s Revolving Exposure exceeding such Lender’s Revolving Commitment and (b) to make 2018 Extended Revolving Loans to the Borrower from time to time during the 2018 Extended Revolving Availability Period in an aggregate principal amount that will not result in such Lender’s 2018 Extended Revolving Exposure exceeding such Lender’s 2018 Extended Revolving Commitment and (y) each Converted Series D Tranche B Term Loan of each Amendment No. 6 Consenting Lender shall be converted into a Series E Tranche B Term Loan of such Lender as of the Amendment No. 6 Effective Date in a principal amount equal to the principal amount of such Lender’s Converted Series D Tranche B Term Loan immediately prior to such conversion.  For the avoidance of doubt, no such conversion shall constitute a novation of any interest owing to each Amendment No. 6 Consenting Lender and each Amendment No. 6 Consenting Lender shall continue to be entitled to receive all accrued and unpaid interest owing to it from the Borrower through but not including the Amendment No. 6 Effective Date with respect to its Converted Series D Tranche B Term Loans.  The Borrower shall designate in the relevant Borrowing Request whether each Borrowing will be maintained as a Eurodollar Loan or an ABR Loan and, if such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect thereto.  Amounts repaid or prepaid in respect of Tranche B Term Loans may not be reborrowed.

SECTION 2.02.Loans and Borrowings.

(a)Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class.  The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder, provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.

(b)Subject to Section 2.14, each Revolving Borrowing, 2018 Extended Revolving Borrowing and Tranche B Term Loan Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith.

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(c)At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $2,000,000.  At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $1,000,000.  Borrowings of more than one Type and Class may be outstanding at the same time.  There shall not at any time be more than a total of 20 Eurodollar Borrowings outstanding.  Notwithstanding anything to the contrary herein, (1) an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the aggregate Revolving Commitments, (2) an ABR 2018 Extended Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the aggregate 2018 Extended Revolving Commitments and (3) subject to Section 2.04(a), a Swingline Loan may be in an aggregate amount (i) that is equal to the entire unused balance of the aggregate 2018 Extended Revolving Commitments or (ii) that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e).

(d)Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Revolving Maturity Date, the 2018 Extended Revolving Maturity Date, the Series D Tranche B Maturity Date or the Series E Tranche B Maturity Date, as applicable.

SECTION 2.03.Requests for Borrowings.  To request a Revolving Borrowing, 2018 Extended Revolving Borrowing or Tranche B Term Loan Borrowing of a specified Class, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before the date of the proposed Borrowing, provided that any such notice of an ABR 2018 Extended Revolving Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.05(e) may be given not later than 10:00 a.m., New York City time, on the date of the proposed Borrowing.  Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request signed by the Borrower.  Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

(i)whether the requested Borrowing is to be a Revolving Borrowing, 2018 Extended Revolving Borrowing or a Tranche B Term Loan Borrowing of a specified Class;

(ii)the aggregate amount of such Borrowing;

(iii)the date of such Borrowing, which shall be a Business Day;

(iv)whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

(v)in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and

(vi)the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06.

Until the Revolving Maturity Date, each requested Revolving Borrowing and 2018 Extended Revolving Borrowing (other than any Swingline Loan Borrowing) shall be allocated ratably among the combined amount of outstanding Revolving Commitments and 2018 Extended Revolving Commitments, taken as a whole.

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If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing.  If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.  Promptly following receipt of a Borrowing Request in accordance with this Section 2.03, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

SECTION 2.04.Swingline Loans.

(a)Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Borrower from time to time during the 2018 Extended Revolving Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $25,000,000 or (ii) the aggregate 2018 Extended Revolving Exposures exceeding the aggregate 2018 Extended Revolving Commitments, provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan.  Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans.

(b)To request a Swingline Loan, the Borrower shall notify the Administrative Agent of such request by telephone (confirmed by telecopy), not later than 2:00 p.m., New York City time, on the day of a proposed Swingline Loan.  Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan.  The Administrative Agent will promptly advise the Swingline Lender of any such notice received from the Borrower.  The Swingline Lender shall make each Swingline Loan available to the Borrower by means of a credit to the general deposit account of the Borrower maintained with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e), by remittance to the Issuing Bank) by 3:00 p.m., New York City time, on the requested date of such Swingline Loan.

(c)The Swingline Lender may by written notice given to the Administrative Agent not later than 12:00 noon, New York City time, on any Business Day require the 2018 Extended Revolving Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding.  Such notice shall specify the aggregate amount of Swingline Loans in which 2018 Extended Revolving Lenders will participate.  Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each 2018 Extended Revolving Lender, specifying in such notice such Lender’s Applicable Percentage of such Swingline Loan or Swingline Loans.  Each 2018 Extended Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Lender’s Applicable Percentage of such Swingline Loan or Swingline Loans.  Each 2018 Extended Revolving Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the 2018 Extended Revolving Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.  Each 2018 Extended Revolving Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the 2018 Extended Revolving Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the 2018 Extended Revolving Lenders.  The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender.  Any amounts received by the Swingline

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Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the 2018 Extended Revolving Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear, provided that any such payment so remitted shall be repaid to the Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower for any reason.  The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.

SECTION 2.05.Letters of Credit.

(a)General.  Upon satisfaction of the conditions specified in Section 4.01 on the Original Effective Date, each Existing Letter of Credit will, automatically and without any action on the part of any Person, be deemed to be a Letter of Credit issued hereunder for all purposes of this Agreement and the other Loan Documents.  On and after the Amendment No. 4 Effective Date, each Letter of Credit then outstanding was, automatically and without any action on the part of any Person, deemed to be a Letter of Credit issued under the 2018 Extended Revolving Commitments hereunder for all purposes of this Agreement and the other Loan Documents.  In addition, subject to the terms and conditions set forth herein, the Borrower may request the issuance of additional Letters of Credit for its own account (or for the account of any of its subsidiaries so long as the Borrower is a co-applicant), in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the 2018 Extended Revolving Availability Period.  In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

(b)Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.  To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank (except that the Issuing Bank in respect of Existing Letters of Credit shall not issue additional Letters of Credit and shall not be required to renew or extend an Existing Letter of Credit unless agreed by it) and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section 2.05), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit.  If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form in connection with any request for a Letter of Credit.  A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension, the LC Exposure shall not exceed $75,000,000.

(c)Expiration Date.  Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date that is one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the 2018 Extended Revolving Maturity Date.

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(d)Participations.  (i) With respect to each Letter of Credit outstanding on the Amendment No. 4 Effective Date and (ii) by the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each 2018 Extended Revolving Lender, and each 2018 Extended Revolving Lender hereby acquires from the Issuing Bank, a participation in any such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under any such Letter of Credit.  In consideration and in furtherance of the foregoing, each 2018 Extended Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such 2018 Extended Revolving Lender’s Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section 2.05, or of any reimbursement payment required to be refunded to the Borrower for any reason.  Each 2018 Extended Revolving Lender acknowledges and agrees that its obligation to assume and acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.  For the avoidance of doubt, after the Amendment No. 4 Effective Date no Revolving Lender shall be considered to hold a participation pursuant to this paragraph in respect of any Letter of Credit.

(e)Reimbursement.  If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on (i) the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., New York City time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon, New York City time, on the Business Day that the Borrower receives such notice, if such notice is received prior to 10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that, if such LC Disbursement is not less than $2,000,000, the Borrower may, subject to the conditions to borrowing set forth herein, request (and, if the Borrower fails to reimburse such LC Disbursement when due, the Borrower shall be deemed to have requested) in accordance with Section 2.03 or 2.04 that such LC Disbursement be financed with an ABR 2018 Extended Revolving Borrowing or Swingline Loan in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR 2018 Extended Revolving Borrowing or Swingline Loan (and the time for reimbursement of such LC Disbursement shall automatically be extended to the Business Day following such request or deemed request).  If the Borrower fails to make such payment when due, the Administrative Agent shall notify each 2018 Extended Revolving Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such 2018 Extended Revolving Lender’s Applicable Percentage thereof.  Promptly following receipt of such notice, each 2018 Extended Revolving Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.06 with respect to Loans made by such 2018 Extended Revolving Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the 2018 Extended Revolving Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the 2018 Extended Revolving Lenders.  Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that 2018 Extended Revolving Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such 2018 Extended Revolving Lenders and the Issuing Bank as their interests may appear.  Any payment made by a 2018 Extended Revolving Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving Loans

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or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

(f)Obligations Absolute.  The Borrower’s obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section 2.05 shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.05, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder.  Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank, provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential or punitive damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof.  The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination.  In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented that appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

(g)Disbursement Procedures.  The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit.  The Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder, provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the 2018 Extended Revolving Lenders with respect to any such LC Disbursement in accordance with paragraph (e) of this Section 2.05.

(h)Interim Interest.  If the Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR 2018 Extended Revolving Loans, provided that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section 2.05, then Section 2.13(c) shall apply.  Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any 2018 Extended Revolving

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Lender pursuant to paragraph (e) of this Section 2.05 to reimburse the Issuing Bank shall be for the account of such 2018 Extended Revolving Lender to the extent of such payment.

(i)Replacement of the Issuing Bank.  The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent and the successor Issuing Bank.  The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank.  At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12(b).  From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require.  After the replacement of the Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

(j)Cash Collateralization.  If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, 2018 Extended Revolving Lenders with LC Exposure representing greater than 50% of the aggregate LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Collateral Agent, in the name of the Collateral Agent and for the benefit of the Lenders, an amount in cash equal to 105% the LC Exposure as of such date plus any accrued and unpaid interest thereon, provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in paragraph (h) or (i) of Section 7.01.  The Borrower also shall deposit cash collateral pursuant to this paragraph as and to the extent required by Section 2.11(b) and Section 2.22.  Each such deposit shall be held by the Collateral Agent as collateral for the payment and performance of the obligations of the Borrower under this Agreement.  The Collateral Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account.  Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest.  Interest or profits, if any, on such investments shall accumulate in such account.  Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of 2018 Extended Revolving Lenders with LC Exposure representing greater than 50% of the aggregate LC Exposure), be applied to satisfy other obligations of the Borrower under this Agreement.  If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived.

(k)Additional Issuing Banks.  The Borrower may at any time, and from time to time, designate one or more additional Lenders to act as an issuing bank under this Agreement with the consent of the Administrative Agent (which consent shall not be unreasonably withheld) and such Lender.  Any Lender designated as an issuing bank pursuant to this Section 2.05(k) shall be deemed to be and shall have all the rights and obligations of an “Issuing Bank” hereunder.

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SECTION 2.06.Funding of Borrowings.

(a)Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders, provided that Swingline Loans shall be made as provided in Section 2.04.  The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received in like funds, to an account of the Borrower maintained with the Administrative Agent in New York City and designated by the Borrower in the applicable Borrowing Request, provided that ABR 2018 Extended Revolving Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(e) shall be remitted by the Administrative Agent to the Issuing Bank.

(b)Unless the Administrative Agent shall have received notice from a Lender prior to the proposed Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section 2.06 and may, in reliance upon such assumption and in its sole discretion, make available to the Borrower a corresponding amount.  In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans.  If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.

SECTION 2.07.Interest Elections.

(a)Each Revolving Borrowing, 2018 Extended Revolving Borrowing and Tranche B Term Loan Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request or as designated by Section 2.03.  Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.07.  The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.  This Section 2.07 shall not apply to Swingline Borrowings, which may not be converted or continued.

(b)To make an election pursuant to this Section 2.07, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Revolving Borrowing or 2018 Extended Revolving Borrowing of the Type resulting from such election to be made on the effective date of such election.  Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request signed by the Borrower.

(c)Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:

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(i)the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

(ii)the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii)whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

(iv)if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period.”

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

(d)Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

(e)If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing.

(f)Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing, (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

SECTION 2.08.Termination and Reduction of Commitments.

(a)Unless previously terminated, (i) the Revolving Commitments shall terminate on the Revolving Maturity Date and (ii) the 2018 Extended Revolving Commitments shall terminate on the 2018 Extended Revolving Maturity Date.

(b)The Borrower may at any time terminate, or from time to time reduce, the Commitments of any Class, provided that (i) each reduction of the Commitments of any Class shall be in an amount that is an integral multiple of $500,000 and not less than $5,000,000, (ii) the Borrower shall not terminate or reduce the Revolving Commitments if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.11, the aggregate Revolving Exposures would exceed the aggregate Revolving Commitments and (iii) the Borrower shall not terminate or reduce the 2018 Extended Revolving Commitments if, after giving effect to any concurrent prepayment of the 2018 Extended Revolving Loans in accordance with Section 2.11, the aggregate 2018 Extended Revolving Exposures would exceed the aggregate 2018 Extended Revolving Commitments.

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(c)The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section 2.08 at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof.  Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof.  Each notice delivered by the Borrower pursuant to this Section 2.08 shall be irrevocable, provided that a notice of termination of the Revolving Commitments or 2018 Extended Revolving Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities or the closing of a refinancing transaction, a sale of all or substantially all of the assets of the Borrower and its Subsidiaries or a Change in Control, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied.  Any termination or reduction of the Commitments of any Class shall be permanent.  Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class.

SECTION 2.09.Repayment of Loans; Evidence of Debt.

(a)The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan of such Lender on the Revolving Maturity Date, (ii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each 2018 Extended Revolving Loan of such Lender on the 2018 Extended Revolving Maturity Date, (iii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Tranche B Term Loan of such Lender as provided in Section 2.10 and (iv) the then unpaid principal amount of each Swingline Loan on the earlier of the 2018 Extended Revolving Maturity Date and the first date after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least two Business Days after such Swingline Loan is made; provided that on each date that a 2018 Extended Revolving Borrowing is made, the Borrower shall repay all Swingline Loans then outstanding.

(b)Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(c)The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

(d)The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section 2.09 shall be prima facie evidence of the existence and amounts of the obligations recorded therein, provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.

(e)Any Lender may request that Loans of any Class made by it be evidenced by a promissory note.  In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent.  Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to

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Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

SECTION 2.10.Amortization of Tranche B Term Loans.

(a)Subject to adjustment pursuant to paragraph (c) of this Section 2.10, the Borrower shall repay Tranche B Term Loan Borrowings on each date set forth below in the aggregate principal amount set forth opposite such date (as adjusted from time to time pursuant to Section 2.10(c)):

Series D Tranche B Term Loans:

Amortization Date	Series D Tranche B Term Loan Installments
December 31, 2015	$0
March 31, 2016	$563,443.24
June 30, 2016	$563,443.24
September 30, 2016	$563,443.24
Series D Tranche B Maturity Date	Remaining Balance

Series E Tranche B Term Loans:

Amortization Date	Series E Tranche B Term Loan Installments
December 31, 2015	$0
March 31, 2016	$1,374,448.74
June 30, 2016	$1,374,448.74
September 30, 2016	$1,374,448.74
December 31, 2016	$1,374,448.74
March 31, 2017	$1,374,448.74
June 30, 2017	$1,374,448.74
September 30, 2017	$1,374,448.74
December 31, 2017	$1,374,448.74
March 31, 2018	$1,374,448.74
Series E Tranche B Maturity Date	Remaining Balance

(b)To the extent not previously paid, (x) all Series D Tranche B Term Loans shall be due and payable on the Series D Tranche B Maturity Date and (y) all Series E Tranche B Term Loans shall be due and payable on the Series E Tranche B Maturity Date.

(c)Any prepayment of a Tranche B Term Loan Borrowing pursuant to clause (c) or (d) of Section 2.11 shall be applied (i) first, to reduce, in the direct order of maturity, the scheduled repayments of the Tranche B Term Loan Borrowings to be made pursuant to this Section 2.10 on the four consecutive scheduled payment dates next following the date of such prepayment unless and until each such scheduled repayment has been eliminated as a result of reductions hereunder; and (ii) second, to reduce ratably the remaining scheduled repayments of the Tranche B Term Loan Borrowings.  Any prepayment of a Tranche B Term Loan Borrowing pursuant to Section 2.11(a) shall be applied to reduce scheduled repayment amounts of the Tranche B Term Loans as directed by the Borrower.

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SECTION 2.11.Prepayment of Loans.

(a)The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the requirements of this Section 2.11.  Any such prepayment (other than a prepayment of a Revolving Borrowing, a 2018 Extended Revolving Borrowing or a Swingline Borrowing) made when any Term Loan is outstanding shall be applied entirely to Term Loan Borrowings.  Until the Revolving Maturity Date, any prepayment of a Revolving Borrowing or 2018 Extended Revolving Borrowing shall be allocated ratably among the combined amount of outstanding Revolving Loans and 2018 Extended Revolving Loans, taken as a whole; provided, that, in connection with the Borrower’s termination of all outstanding Revolving Commitments, the Borrower may apply such prepayment to Revolving Borrowings only.

(b)In the event and on such occasion that (i) the aggregate Revolving Exposures exceed the aggregate Revolving Commitments, the Borrower shall prepay Revolving Borrowings or (ii) the aggregate 2018 Extended Revolving Exposures exceed the aggregate 2018 Extended Revolving Commitments, the Borrower shall prepay 2018 Extended Revolving Borrowings or Swingline Borrowings (or, if no such Borrowings are outstanding, deposit cash collateral in an account with the Collateral Agent pursuant to Section 2.05(j)) in an aggregate amount equal to such excess).

(c)In the event and on each occasion that any Net Proceeds are received by or on behalf of Holdings, the Borrower or any Subsidiary in respect of any Prepayment Event, the Borrower shall, promptly after such Net Proceeds are received by Holdings, the Borrower or such Subsidiary (and in any event not later than the fifth Business Day after such Net Proceeds are received), prepay Term Loan Borrowings in an amount equal to 100% of such Net Proceeds; provided that to the extent required by the terms of any Permitted Secured Notes that are secured by Liens subject to the First Lien Intercreditor Agreement, the Borrower may, in lieu of prepaying Term Loans with such portion of the Net Proceeds of any prepayment event described in clause (a) or clause (b) of the definition of “Prepayment Event,” apply a portion of such Net Proceeds (based on the respective principal amounts at such time of (A) such Permitted Secured Notes that are secured by Liens subject to the First Lien Intercreditor Agreement and (B) the Term Loans) to repurchase or redeem Permitted Secured Notes that are secured by Liens subject to the First Lien Intercreditor Agreement, provided further that in the case of any event described in clause (a) or (b) of the definition of the term “Prepayment Event,” if the Borrower shall deliver to the Administrative Agent a certificate of a Financial Officer to the effect that the Borrower and the Subsidiaries intend to apply the Net Proceeds from such event (or a portion thereof specified in such certificate), within 360 days after receipt of such Net Proceeds, to acquire or replace real property, equipment or other tangible assets (excluding inventory) to be used in the business of the Borrower and the Subsidiaries, and certifying that no Default has occurred and is continuing, then no prepayment shall be required pursuant to this paragraph in respect of the Net Proceeds specified in such certificate, except to the extent of any such Net Proceeds therefrom that have not been so applied or contractually committed in writing by the end of such 360-day period (and, if so contractually committed in writing but not applied prior to the end of such 360-day period, applied within 90 days of the end of such period), promptly after which time a prepayment shall be required in an amount equal to such Net Proceeds that have not been so applied.

(d)Following the end of each fiscal year of the Borrower, commencing with the fiscal year ending December 31, 2011, the Borrower shall prepay Term Loan Borrowings in an amount equal to:

(x)the excess of (A) 50% of Excess Cash Flow over (B) the amount of prepayments of Term Loans under Section 2.11(a) during such fiscal year for any fiscal year for which the Leverage Ratio at the end of such fiscal year is greater than 3.75 to 1.00,

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(y)the excess of (A) 25% of Excess Cash Flow over (B) the amount of prepayments of Term Loans under Section 2.11(a) during such fiscal year for any fiscal year for which the Leverage Ratio at the end of such fiscal year is less than or equal to 3.75 to 1.00 and greater than 3.25 to 1.00, and

(z)none of Excess Cash Flow for any fiscal year for which the Leverage Ratio at the end of such fiscal year is less than or equal to 3.25 to 1.00.

Each prepayment pursuant to this paragraph shall be made within five Business Days of the date on which financial statements are delivered pursuant to Section 5.01 with respect to the fiscal year for which Excess Cash Flow is being calculated (and in any event within 95 days after the end of such fiscal year).

(e)Prior to any optional or mandatory prepayment of Borrowings hereunder, the Borrower shall determine in accordance with Section 2.10(c) and clauses (a), (c) and (d) of this Section 2.11 the Borrowing or Borrowings to be prepaid and shall specify such determination in the notice of such prepayment pursuant to paragraph (f) of this Section 2.11.

(f)The Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 2:00 p.m., New York City time, on the date of prepayment.  Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment, provided that, (i) if a notice of optional prepayment is given in connection with a conditional notice of termination of the Revolving Commitments or 2018 Extended Revolving Commitments as contemplated by Section 2.08, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.08 and (ii) otherwise if a notice of optional prepayment is given under this Section 2.11, such notice of prepayment may be conditioned upon the effectiveness of other credit facilities or the closing of a refinancing transaction, a sale of all or substantially all of the assets of the Borrower and its Subsidiaries or a Change in Control and such notice of prepayment may be revoked if such condition is not satisfied.  Promptly following receipt of any such notice (other than a notice relating solely to Swingline Loans), the Administrative Agent shall advise the Lenders of the contents thereof.  Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment.  Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing.  Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13 but shall in no event include premium or penalty.

SECTION 2.12.Fees.

(a)The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the Applicable Rate on the average daily unused amount of each 2018 Extended Revolving Commitment of such Lender during the period from and including the Original Effective Date to but excluding the date on which the aggregate 2018 Extended Revolving Commitments terminate.  The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at the Applicable Rate on the average daily unused amount of each Revolving Commitment of such Lender during the period from and to but excluding the date on

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which the aggregate Revolving Commitments terminate.  Accrued commitment fees shall be payable in arrears in respect of the Revolving Commitments or 2018 Extended Revolving Commitments on the last Business Day of March, June, September and December of each year and on the date on which the Revolving Commitments or 2018 Extended Revolving Commitments terminate, as applicable.  All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).  For purposes of computing commitment fees with respect to Revolving Commitments, a Revolving Commitment of a Lender shall be deemed to be used to the extent of the outstanding Revolving Loans.  For purposes of computing commitment fees with respect to 2018 Extended Revolving Commitments, a 2018 Extended Revolving Commitment of a Lender shall be deemed to be used to the extent of the outstanding 2018 Extended Revolving Loans and LC Exposure of such Lender (and the Swingline Exposure of such Lender shall be disregarded for such purpose).

(b)The Borrower agrees to pay (i) to the Administrative Agent for the account of each 2018 Extended Revolving Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Rate used to determine the interest rate applicable to Eurodollar 2018 Extended Revolving Loans on the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the date of issuance of any Letter of Credit to but excluding the later of the date on which such Lender’s 2018 Extended Revolving Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at a rate equal to 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Original Effective Date to but excluding the later of the date of termination of the 2018 Extended Revolving Commitments and the date on which there ceases to be any LC Exposure, as well as the Issuing Bank’s standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder.  Participation fees and fronting fees shall be payable on the last Business Day of March, June, September and December of each year, commencing on the first such date to occur after the Original Effective Date, provided that all such fees shall be payable on the date on which the 2018 Extended Revolving Commitments terminate and any such fees accruing after the date on which the 2018 Extended Revolving Commitments terminate shall be payable on demand.  Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand.  All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(c)All prepayments of the Series D Tranche B Term Loans effected on or prior to June 11, 2016 with the proceeds of a substantially concurrent issuance or incurrence of new term loans (including with the proceeds of Refinancing Term Loans or Replacement Term Loans and excluding a refinancing of all the facilities outstanding under this Agreement in connection with another transaction not permitted by this Agreement (as determined prior to giving effect to any amendment or waiver of this Agreement being adopted in connection with such transaction)), shall be accompanied by a prepayment fee equal to 1.00% of the aggregate principal amount of such prepayments if the Yield applicable to such new term loans is less than the Yield applicable to the Series D Tranche B Term Loans on the Restatement Effective Date.  All prepayments of the Series E Tranche B Term Loans effected on or prior to June 11, 2016 with the proceeds of a substantially concurrent issuance or incurrence of new term loans (including with the proceeds of Refinancing Term Loans or Replacement Term Loans and excluding a refinancing of all the facilities outstanding under this Agreement in connection with another transaction not permitted by this Agreement (as determined prior to giving effect to any amendment or waiver of this Agreement being adopted in connection with such transaction)), shall be accompanied by a prepayment fee equal to 1.00% of the aggregate principal amount of such prepayments if the Yield applicable to such

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new term loans is less than the Yield applicable to the Series E Tranche B Term Loans on the Restatement Effective Date.

(d)The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent.

(e)All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Lenders entitled thereto.  Fees paid shall not be refundable under any circumstances.

SECTION 2.13.Interest.

(a)The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate.

(b)The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.

(c)Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section 2.13 or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Revolving Loans or ABR 2018 Extended Revolving Loans as provided in paragraph (a) of this Section 2.13.

(d)Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans and 2018 Extended Revolving Loans, upon termination of the Revolving Commitments and 2018 Extended Revolving Commitments, respectively, provided that (i) interest accrued pursuant to paragraph (c) of this Section 2.13 shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan or ABR 2018 Extended Revolving Loan prior to the end of the Revolving Availability Period or 2018 Extended Revolving Availability Period, as applicable), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(e)All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate or Federal Funds Effective Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day).  The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

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SECTION 2.14.Alternate Rate of Interest; Illegality.

(a)If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

(x)the Administrative Agent determines (which determination shall be conclusive absent manifest error) that (i) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Borrowing or (ii) adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or

(y)the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

(b)If any Lender determines that any law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender to make, maintain or fund Loans whose interest is determined by reference to the LIBO Rate, or to determine or charge interest rates based upon the LIBO Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, (i) any obligation of such Lender to make or continue Eurodollar Loans or to convert ABR Loans to Eurodollar Loans shall be suspended, and (ii) if such notice asserts the illegality of such Lender making or maintaining ABR Loans the interest rate on which is determined by reference to the Adjusted LIBO Rate component of the Alternate Base Rate, the interest rate on which ABR Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Adjusted LIBO Rate component of the Alternate Base Rate, in each case until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist.  Upon receipt of such notice, (x) the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Loans of such Lender to ABR Loans (the interest rate on which ABR Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Adjusted LIBO Rate component of the Alternate Base Rate), either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Loans and (y) if such notice asserts the illegality of such Lender determining or charging interest rates based upon the Adjusted LIBO Rate, the Administrative Agent shall during the period of such suspension compute the Alternate Base Rate applicable to such Lender without reference to the Adjusted LIBO Rate component thereof until the Administrative Agent is advised in writing by such Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon the LIBO Rate.  Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.

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SECTION 2.15.Increased Costs.

(a)If any Change in Law shall:

(i)impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank; or

(ii)impose on any Lender or the Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender or the Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as applicable, for such additional costs incurred or reduction suffered.

(b)If any Lender or the Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such reduction suffered.

(c)A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as applicable, as specified in paragraph (a) or (b) of this Section 2.15 shall be delivered to the Borrower and shall be conclusive absent manifest error.  The Borrower shall pay such Lender or the Issuing Bank, as applicable, the amount shown as due on any such certificate within 10 days after receipt thereof.

(d)Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section 2.15 shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section 2.15 for any increased costs or reductions incurred more than 270 days prior to the date that such Lender or the Issuing Bank, as applicable, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the Issuing Bank’s intention to claim compensation therefor, provided, further, that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.

SECTION 2.16.Break Funding Payments.  In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including

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as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan, 2018 Extended Revolving Loan or Tranche B Term Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.11(f) and is revoked in accordance therewith), or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.19, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event.  In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan (excluding any “floor” applicable pursuant to the definition of Adjusted LIBO Rate), for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate that such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market.  A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.16 shall be delivered to the Borrower and shall be conclusive absent manifest error.  The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.  Notwithstanding the foregoing, no additional amounts shall be due and payable pursuant to this Section 2.16 to the extent that on the relevant due date the Borrower deposits in a Prepayment Account an amount equal to any payment of Eurodollar Loans otherwise required to be made on a date that is not the last day of the applicable Interest Period; provided that on the last day of the applicable Interest Period, the Administrative Agent shall be authorized, without any further action by or notice to or from the Borrower or any other Loan Party, to apply such amount to the prepayment of such Eurodollar Loans.  For purposes of this Agreement, the term “Prepayment Account” shall mean a non-interest bearing account established by the Borrower with the Administrative Agent and over which the Administrative Agent shall have exclusive dominion and control, including the right of withdrawal for application in accordance with this Section 2.16.

SECTION 2.17.Taxes.

(a)Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes, provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.17) the Administrative Agent, Lender or Issuing Bank (as applicable) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b)In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c)The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within 30 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as applicable, on or with respect to any payment by or on account of any obligation of the Borrower hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.17) and any penalties, interest and reasonable expenses arising

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therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error.

(d)As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, if any, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(e)(i)  Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), on or prior to the Original Effective Date in the case of each Foreign Lender that is a signatory hereto, and on the date of assignment pursuant to which it becomes a Lender in the case of each other Lender and from time to time thereafter as reasonably requested by either of the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower (including any documentation demonstrating that such Lender or any Agent has complied with its obligations under FATCA) as will permit such payments to be made without withholding or at a reduced rate, provided that such Foreign Lender has received written notice from the Borrower advising it of the availability of such exemption or reduction and supplying all applicable documentation.

(ii)Without limiting the generality of the foregoing:

(A)each Lender that is a “United States person” within the meaning of Section 7701(a)(30) of the Code shall deliver to the requesting party two duly completed and executed original copies of Internal Revenue Service Form W-9;

(B)each Foreign Lender shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

(iii)duly completed and executed original copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party;

(iv)duly completed and executed original copies of Internal Revenue Service Form W-8ECI;

(v)in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code and (y) duly completed and executed original copies of Internal Revenue Service Form W-8BEN; or

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(vi)any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made.

(f)Each Lender shall promptly notify the Borrower (or, in the case of a Participant, the Lender granting the participation only), in writing, of any change in circumstances that, to the knowledge such Lender, would modify or render invalid any claimed exemption or reduction.

(g)If the Administrative Agent or a Lender determines, in its sole discretion, that it has received a refund (whether in cash or by offset against taxes otherwise due) of any Indemnified Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.17, it shall pay over such refund to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.17 with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority.  This Section 2.17 shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

SECTION 2.18.Payments Generally; Pro Rata Treatment; Sharing of Setoffs.

(a)The Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) at or prior to the time expressly required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 3:00 p.m., New York City time), on the date when due, in immediately available funds, without setoff or counterclaim.  Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon.  All such payments shall be made to the Administrative Agent at its offices at 1111 Fannin Street, 10th Floor, Houston, Texas 77002, except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein.  The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof.  If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension.  All payments under each Loan Document shall be made in dollars.

(b)If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.

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(c)If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans, 2018 Extended Revolving Loans, Tranche B Term Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans, 2018 Extended Revolving Loans, Tranche B Term Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans, 2018 Extended Revolving Loans, Tranche B Term Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans, 2018 Extended Revolving Loans, Tranche B Term Loans and participations in LC Disbursements and Swingline Loans, provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply).  The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

(d)Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption and in its sole discretion, distribute to the Lenders or the Issuing Bank, as applicable, the amount due.  In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Bank, as applicable, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

(e)If any Tranche B Lender, Revolving Lender or 2018 Extended Revolving Lender shall fail to make any payment required to be made by it pursuant to Section 2.06(a), 2.18(d) or 9.03(c), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.  If any Revolving Lender or 2018 Extended Revolving Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(c), 2.05(d) or (e), 2.06(a), 2.18(d) or 9.03(c), then the Administrative Agent may, in its discretion and notwithstanding any contrary provision hereof, (i) apply any amounts thereafter received by the Administrative Agent for the account of such Revolving Lender or 2018 Extended Revolving Lender and for the benefit of the Administrative Agent, the Swingline Lender or the Issuing Bank to satisfy such Revolving Lender or 2018 Extended Revolving Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid, and/or (ii) hold any such amounts in a segregated account as cash collateral for, and application to, any future funding obligations of such Revolving Lender or 2018 Extended Revolving Lender under such Sections; in the case of each of (i) and (ii) above, in any order as determined by the Administrative Agent in its discretion.

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SECTION 2.19.Mitigation Obligations; Replacement of Lenders.

(a)If any Lender requests compensation under Section 2.15, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as applicable, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender.  The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b)If any Lender is affected in the manner described in Section 2.14(b) and as a result thereof any of the actions described in such Section is required to be taken, or if any Lender requests compensation under Section 2.15, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a material reduction in such compensation or payments.  A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

SECTION 2.20.Incremental Extensions of Credit.  At any time during the 2018 Extended Revolving Availability Period, subject to the terms and conditions set forth herein, the Borrower may at any time and from time to time, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly deliver a copy to each of the Lenders), request to add additional term loans (the “Incremental Term Loans”) or additional Revolving Commitments, 2018 Extended Revolving Commitments or Extended Revolving Commitments (the “Incremental Revolver Commitments” and together with the Incremental Term Loans, the “Incremental Extensions of Credit”) in minimum principal amounts of $25,000,000; provided that such amount may be less than $25,000,000 if such amount represents all the remaining availability under the aggregate principal amount set forth below; provided, further, that (x) immediately prior to and after giving effect to any Additional Credit Extension Amendment (as defined below), no Default has occurred or is continuing or shall result therefrom, (y) the Borrower shall be in compliance on a Pro Forma Basis with the Financial Performance Covenant recomputed as of the last day of the most recently ended fiscal quarter of the Borrower for which financial statements are available and (z) other than with respect to the incurrence of Series B Tranche B Term Loans incurred prior to the Series B Deadline and other than with respect to Incremental Extensions of Credit incurred pursuant to subclause (a)(x) below, on a Pro Forma Basis after giving effect to any such Incremental Extension of Credit the Secured Leverage Ratio of Borrower would be less than or equal to 3.50 to 1.00 as of the last day of the most recent fiscal quarter of the Borrower for which financial statements have been delivered pursuant to Section 5.01(a) or (b).  The Incremental Extensions of Credit:

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(a)that are incurred on or after the Amendment No. 6 Effective Date shall be in aggregate principal amount not exceeding (x) $50,000,000 plus (y) $400,000,000 (in each case exclusive of (i) any Refinancing Term Loans and (ii) for the avoidance of doubt, Incremental Extensions of Credit incurred in the form of Tranche B Term Loans prior to the Amendment No. 6 Effective Date);

(b)shall rank pari passu in right of payment and right of security in respect of the Collateral with the Revolving Loans and Tranche B Term Loans, and

(c)(i) that are Incremental Term Loans, shall have the same terms as the Tranche B Term Loans existing immediately prior to the effectiveness of such Additional Credit Extension Amendment (the “Existing Term Loans”) (other than (x) amortization, pricing or maturity date terms and provisions, (y) terms and provisions (excluding the terms and provisions set forth in clause (x) and clause (z)) that are more favorable to the Lenders providing such Incremental Term Loans so long as such terms also apply to all Existing Term Loans, outstanding Tranche B Commitments, Commitments to provide Incremental Term Loans and Revolving Commitments and (z) mandatory prepayment terms and provisions that are more favorable to the Lenders providing such Incremental Term Loans so long as such mandatory prepayment terms also apply to all Existing Term Loans) and (ii) that are Incremental Revolver Commitments shall have the same terms as the Revolving Commitments, 2018 Extended Revolving Commitments or Extended Revolving Commitments existing immediately prior to the effectiveness of such Additional Credit Extension Amendment; provided that (i) if the Yield relating to any Incremental Term Loans (other than Refinancing Term Loans) exceeds the Yield relating to the Tranche B Term Loans, by more than 0.50%, the Applicable Rate relating to the Tranche B Term Loans shall be increased to the extent necessary so that the Yield of the Tranche B Term Loans is equal to the Yield of such Incremental Term Loans minus 0.50%, (ii) other than with respect to Series B Tranche B Term Loans incurred prior to the Series B Deadline, the Incremental Term Loans shall not have a final maturity date earlier than the Tranche B Maturity Date, (iii) other than with respect to Series B Tranche B Term Loans incurred prior to the Series B Deadline, the Incremental Term Loans shall not have a weighted average life to maturity that is shorter than that of the then-remaining weighted average life of the Tranche B Term Loans, and (iv) the Incremental Revolving Commitments shall not require any mandatory commitment reductions, mandatory prepayments or scheduled payments other than those applicable to the Revolving Loans and Revolving Commitments.  The Borrower shall by written notice offer each Lender providing Existing Extensions of Credit (an “Existing Lender”) the opportunity for no less than three (3) Business Days after delivery of the notice to commit to provide its pro rata portion (based on the amount of its outstanding Tranche B Term Loans or outstanding Revolving Loans or 2018 Extended Revolving Loans and unused Revolving Commitments or 2018 Extended Revolving Commitments, as applicable, on the date of such notice) of any requested Incremental Extension of Credit, provided that no Existing Lender shall be obligated to provide any Incremental Extension of Credit unless it so agrees.  Any additional bank, financial institution, Existing Lender or other Person that elects to extend Incremental Extensions of Credit shall be reasonably satisfactory to the Borrower and the Administrative Agent and, in the case of Incremental Extensions of Credit in the form of Incremental Revolving Commitments, the Issuing Bank (any such bank, financial institution, Existing Lender or other Person being called an “Additional Lender”) and shall become a Lender under this Agreement pursuant to an Additional Credit Extension Amendment giving effect to the modifications permitted by this Section 2.20 and, as appropriate, the other Loan Documents and executed by the Borrower, each Additional Lender and the Administrative Agent.  Commitments in respect of Incremental Extensions of Credit shall be Commitments under this Agreement.  An Additional Credit Extension Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate,

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in the opinion of the Administrative Agent, to effect the provisions of this Section 2.20 (including voting provisions applicable to the Additional Lenders comparable to the provisions of clause (B) of the second proviso of Section 9.02(b)).  The effectiveness of any Additional Credit Extension Amendment shall be subject to the satisfaction on the date thereof (each, an “Incremental Facility Closing Date”) of each of the conditions set forth in Section 4.02 (it being understood that all references to “the date of such Borrowing” in such Section 4.02 shall be deemed to refer to the Incremental Facility Closing Date).  The proceeds of the Incremental Extensions of Credit shall be used for working capital and general corporate purposes (including Permitted Acquisitions).  The provisions of this Section 2.20 shall override any provision of Section 9.02 to the contrary.

SECTION 2.21.Extended Term Loans and Extended Revolving Commitments.

(a)The Borrower may at any time and from time to time request that all or a portion of the Term Loans of any Class (an “Existing Term Loan Class”) be converted to extend the scheduled maturity date(s) of any payment of principal with respect to all or a portion of any principal amount of such Term Loans (any such Term Loans which have been so converted, “Extended Term Loans”) and to provide for other terms consistent with this Section 2.21.  In order to establish any Extended Term Loans, the Borrower shall provide a notice to the Administrative Agent (who shall provide a copy of such notice to each of the Lenders under the Existing Term Loan Class) (an “Extension Request”) setting forth the proposed terms of the Extended Term Loans to be established, which shall be consistent with the Term Loans under the Existing Term Loan Class from which such Extended Term Loans are to be converted except that:

(i)all or any of the scheduled amortization payments of principal of the Extended Term Loans may be delayed to later dates than the scheduled amortization payments of principal of the Term Loans of such Existing Term Loan Class to the extent provided in the applicable Additional Credit Extension Amendment;

(ii)the interest margins with respect to the Extended Term Loans may be different than the Applicable Rate for the Term Loans of such Existing Term Loan Class and upfront fees may be paid to the Extending Term Lenders to the extent provided in the applicable Additional Credit Extension Amendment; and

(iii)the Additional Credit Extension Amendment may provide for other covenants and terms that apply only after the Tranche B Maturity Date.

(b)Any Extended Term Loans converted pursuant to any Extension Request shall be designated a series of Extended Term Loans for all purposes of this Agreement; provided that, subject to the limitations set forth in clause (a) above, any Extended Term Loans converted from an Existing Term Loan Class may, to the extent provided in the applicable Additional Credit Extension Amendment and consistent with the requirements set forth above, be designated as an increase in any previously established Class of Term Loans.

(c)The Borrower shall provide the applicable Extension Request at least five (5) Business Days prior to the date on which Lenders under the applicable Existing Term Loan Class are requested to respond.  No Lender shall have any obligation to agree to have any of its Term Loans of any Existing Term Loan Class converted into Extended Term Loans pursuant to any Extension Request.  Any Lender wishing to have all or a portion of its Term Loans under the Existing Term Loan Class subject to such Extension Request (such Lender an “Extending Term Lender”) converted into Extended Term Loans shall notify the Administrative Agent (an “Extension Election”) on or prior to the date specified in such

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Extension Request of the amount of its Term Loans under the Existing Term Loan Class which it has elected to request be converted into Extended Term Loans (subject to any minimum denomination requirements reasonably imposed by the Administrative Agent and acceptable to the Borrower).  In the event that the aggregate amount of Term Loans under the Existing Term Loan Class subject to Extension Elections exceeds the amount of Extended Term Loans requested pursuant to an Extension Request, Term Loans of the Existing Term Loan Class subject to Extension Elections shall be converted to Extended Term Loans on a pro rata basis based on the amount of Term Loans included in each such Extension Election (subject to any minimum denomination requirements reasonably imposed by the Administrative Agent and acceptable to the Borrower).

(d)The Borrower may, with the consent of each Person providing an Extended Revolving Commitment, the Administrative Agent and any Person acting as swingline lender or issuing bank under such Extended Revolving Commitments, amend this Agreement pursuant to an Additional Credit Extension Amendment to provide for Extended Revolving Commitments and to incorporate the terms of such Extended Revolving Commitments into this Agreement on substantially the same basis as provided with respect to the Revolving Commitments or the 2018 Extended Revolving Commitments; provided that (i) the establishment of any such Extended Revolving Commitments shall be accompanied by a corresponding reduction in the Revolving Commitments or 2018 Extended Revolving Commitments, as applicable, and (ii) any reduction in the Revolving Commitments or 2018 Extended Revolving Commitments, as applicable, may, at the option of the Borrower, be directed to a disproportional reduction of the Revolving Commitments or 2018 Extended Revolving Commitments of any Lender providing an Extended Revolving Commitment.

(e)Extended Term Loans and Extended Revolving Commitments shall be established pursuant to an Additional Credit Extension Amendment to this Agreement among the Borrower, the Administrative Agent and each Extending Term Lender or Lender providing an Extended Revolving Commitment which shall be consistent with the provisions set forth above (but which shall not require the consent of any other Lender other than those consents provided in this Section 2.21).  Each Additional Credit Extension Amendment shall be binding on the Lenders, the Loan Parties and the other parties hereto.  In connection with any Additional Credit Extension Amendment, the Loan Parties and the Administrative Agent shall enter into such amendments to the Collateral Documents as may be reasonably requested by the Administrative Agent (which shall not require any consent from any Lender other than those consents provided pursuant to this Agreement) in order to ensure that the Extended Term Loans or Extended Revolving Commitments are provided with the benefit of the applicable Collateral Documents and shall deliver such other documents, certificates and opinions of counsel in connection therewith as may be reasonably requested by the Administrative Agent.

(f)The provisions of this Section 2.21 shall override any provision of Section 9.02 to the contrary.

SECTION 2.22.Defaulting Lenders.

(a)Notwithstanding any provision of this Agreement to the contrary, if any Revolving Lender or 2018 Extended Revolving Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:

(i)fees shall cease to accrue on the unfunded portion of the Revolving Commitment or 2018 Extended Revolving Commitment of such Defaulting Lender pursuant to Section 2.12(a);

(ii)the Revolving Commitment, 2018 Extended Revolving Commitments, Revolving Exposure, 2018 Extended Revolving Exposure, LC Exposure or Swingline Exposure of such Defaulting

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Lender shall not be included in determining whether the Required Lenders have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification pursuant to Section 9.02); provided that this clause (ii) shall not apply to the vote of a Defaulting Lender, except to the extent the consent of such Lender would be required under clause (i), (ii), (iii) or (iv) in the proviso to the first sentence of Section 9.02(b);

(iii)if any Swingline Exposure or LC Exposure exists at the time such Lender becomes a Defaulting Lender then:

(1)so long as no Event of Default has occurred and is continuing as to which the Administrative Agent has received written notice from the Borrower or a 2018 Extended Revolving Lender, all or any part of the Swingline Exposure and LC Exposure of such Defaulting Lender shall be reallocated among the non-Defaulting Lenders in accordance with their respective Applicable Percentages but only to the extent that the sum of all non-Defaulting Lenders’ Revolving Credit Exposures and 2018 Extended Revolving Exposure plus such Defaulting Lender’s Swingline Exposure and LC Exposure does not exceed the total of all non-Defaulting Lenders’ Revolving Commitments and 2018 Extended Revolving Commitments;

(2)if the reallocation described in clause (1) above cannot, or can only partially, be effected, the Borrower shall within one Business Day following notice by the Administrative Agent (x) first, prepay such Swingline Exposure and (y) second, cash collateralize, for the benefit of the Issuing Bank only, the Borrower’s obligations corresponding to such Defaulting Lender’s LC Exposure (after giving effect to any partial reallocation pursuant to clause (1) above) in accordance with the procedures set forth in Section 2.05(j) for so long as such LC Exposure is outstanding;

(3)if the Borrower cash collateralizes any portion of such Defaulting Lender’s LC Exposure pursuant to clause (2) above, the Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.12(b) with respect to such Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s LC Exposure is cash collateralized;

(4)if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to clause (1) above, then the fees payable to the Lenders pursuant to Section 2.12(a) and Section 2.12(b) shall be adjusted in accordance with such non-Defaulting Lenders’ Applicable Percentages; and

(5)if all or any portion of such Defaulting Lender’s LC Exposure is neither reallocated nor cash collateralized pursuant to clause (1) or (2) above, then, without prejudice to any rights or remedies of the Issuing Bank or any other Lender hereunder, all fees that otherwise would have been payable to such Defaulting Lender (solely with respect to the portion of such Defaulting Lender’s 2018 Extended Revolving Commitment that was utilized by such LC Exposure) and letter of credit fees payable under Section 2.12(b) with respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing Bank until and to the extent that such LC Exposure is reallocated and/or cash collateralized; and

(iv)so long as such Lender is a Defaulting Lender, the Swingline Lender shall not be required to fund any Swingline Loan and the Issuing Bank shall not be required to issue, amend or increase any Letter of Credit, unless it is satisfied that the related exposure and the Defaulting

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Lender’s then outstanding LC Exposure will be 100% covered by the Commitments of the non-Defaulting Lenders and/or cash collateral will be provided by the Borrower in accordance with Section 2.22(a)(iii), and participating interests in any newly made Swingline Loan or any newly issued or increased Letter of Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.22(a)(iii)(1) (and such Defaulting Lender shall not participate therein).

(b)If (i) a Bankruptcy Event with respect to a parent entity of any Lender shall occur following the Original Effective Date and for so long as such event shall continue or (ii) the Swingline Lender or the Issuing Bank has a good faith belief that any Lender has defaulted in fulfilling its obligations under one or more other agreements in which such Lender commits to extend credit, the Swingline Lender shall not be required to fund any Swingline Loan and the Issuing Bank shall not be required to issue, amend or increase any Letter of Credit, unless the Swingline Lender or the Issuing Bank, as the case may be, shall have entered into arrangements with the Borrower or such Lender, satisfactory to the Swingline Lender or the Issuing Bank, as the case may be, to defease any risk to it in respect of such Lender hereunder.

(c)In the event that the Administrative Agent, the Borrower, the Swingline Lender and the Issuing Bank each agrees that a Defaulting Lender that is a 2018 Extended Revolving Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the Swingline Exposure and LC Exposure of the 2018 Extended Revolving Lenders shall be readjusted to reflect the inclusion of such Lender’s 2018 Extended Revolving Commitment and on such date such Lender shall purchase at par such of the 2018 Extended Revolving Loans of the other 2018 Extended Revolving Lenders as the Administrative Agent shall determine may be necessary in order for such Lender to hold 2018 Extended Revolving Loans in accordance with its Applicable Percentage (whereupon such Lender shall cease to be a Defaulting Lender).

ARTICLE III

Representations and Warranties

The Borrower represents and warrants to the Lenders that:

SECTION 3.01.Organization; Power.  Each of Holdings, the Borrower and the Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority and all governmental rights, qualifications, approvals, authorizations, permits, accreditations, Reimbursement Approvals, licenses and franchises material to the business of the Borrower and the Subsidiaries taken as a whole that are necessary to own its assets, to carry on its business as now conducted and as proposed to be conducted and to execute, deliver and perform its obligations under each Loan Document to which it is a party and (c) except where the failure to do so, individually or in the aggregate, is not reasonably likely to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

SECTION 3.02.Authorization; Enforceability  This Agreement has been duly executed and delivered by each of Holdings and the Borrower and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will constitute, a legal, valid and binding obligation of Holdings, the Borrower or such Loan Party, as applicable, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

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SECTION 3.03.Governmental Approvals; No Conflicts.  The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party and the use of proceeds of the Loans hereunder and the issuance of Letters of Credit hereunder (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect and except filings necessary to perfect Liens created under the Loan Documents, (b) will not violate any Requirement of Law applicable to Holdings, the Borrower or any of the Subsidiaries, as applicable, (c) will not violate or result in a default under any indenture or other material agreement or instrument binding upon Holdings, the Borrower or any of the Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by Holdings, the Borrower or any of the Subsidiaries or give rise to a right of, or result in, termination, cancellation or acceleration of any material obligation thereunder, (d) will not result in a Limitation on any right, qualification, approval, permit, accreditation, authorization, Reimbursement Approval, license or franchise or authorization granted by any Governmental Authority, Third Party Payor or other Person applicable to the business, operations or assets of the Borrower or any of the Subsidiaries or adversely affect the ability of the Borrower or any of the Subsidiaries to participate in any Third Party Payor Arrangement except for Limitations, individually or in the aggregate, that are not material to the business of the Borrower and the Subsidiaries, taken as a whole, and (e) will not result in the creation or imposition of any Lien on any asset of Holdings, the Borrower or any of the Subsidiaries, except Liens created under the Loan Documents.  There is no pending or, to the knowledge of the Borrower, threatened Limitation by any Governmental Authority, Third Party Payor or any other Person of any right, qualification, approval, permit, authorization, accreditation, Reimbursement Approval, license or franchise of the Borrower, or any Subsidiary, except for such Limitations, individually or in the aggregate, as are not reasonably likely to result in a Material Adverse Effect.  No certifications by any Governmental Authority or any Third Party Payor are required for operation of the business of the Borrower and the Subsidiaries that are not in place, except for such certifications or agreements, the absence of which do not materially and adversely affect the operation of the business.

SECTION 3.04.Financial Condition; No Material Adverse Change.

(a)The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and consolidated statements of operations and comprehensive income, stockholders’ equity and cash flows as of and for the fiscal years ended December 31, 2008, December 31, 2009, and December 31, 2010, reported on by PricewaterhouseCoopers LLP, independent public accountants.  Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and the Subsidiaries as of such dates and for such periods in accordance with GAAP consistently applied.

(b)[Reserved].

(c)Except as disclosed in the financial statements referred to above or the notes thereto, after giving effect to the borrowing of the Loans and the debt repayment that occurred on the Original Effective Date, none of the Borrower or its Subsidiaries has, as of the Original Effective Date, any material direct or contingent liabilities.

(d)No event, change or condition has occurred that has had, or is reasonably likely to have, a material adverse effect on the business, operations, assets, liabilities, financial condition or results of operations of Holdings, the Borrower and the Subsidiaries, taken as a whole, since December 31, 2010.

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SECTION 3.05.Properties.

(a)Each of Holdings, the Borrower and the Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property material to its business (including its Mortgaged Properties), free and clear of all Liens, except for Permitted Liens and minor defects in title that do not interfere in any material respect with its ability to conduct its business or to utilize such properties for their intended purposes.

(b)Each of Holdings, the Borrower and the Subsidiaries owns, licenses or possesses the right to use all trademarks, trade names, copyrights, patents and other intellectual property material to its business.  The conduct of the businesses of Holdings, the Borrower and the Subsidiaries does not infringe upon the intellectual property rights of any other Person, except for any such infringements that, individually or in the aggregate, are not reasonably likely to result in a Material Adverse Effect.

(c)Schedule 3.05 sets forth the address of each real property that is owned or leased by Holdings, the Borrower or any of the Subsidiaries as of the Original Effective Date.

(d)As of the Original Effective Date, neither Holdings or the Borrower nor any of the Subsidiaries has received written notice of, or has knowledge of, any pending or contemplated condemnation proceeding affecting any Mortgaged Property or any sale or disposition thereof in lieu of condemnation.  As of the Original Effective Date, except as set forth on Schedule 3.05, neither any Mortgaged Property nor any interest therein is subject to any right of first refusal, option or other contractual right to purchase such Mortgaged Property or interest therein.

SECTION 3.06.Litigation and Environmental Matters.

(a)Except as set forth on Schedule 3.06, there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of Holdings, the Borrower or any Subsidiary, threatened against or affecting Holdings, the Borrower or any Subsidiary, including any relating to any Environmental Law, that are reasonably likely to (i) have a Material Adverse Effect or (ii) adversely affect in any material respect the ability of the Loan Parties to consummate the transactions contemplated hereby.

(b)Except with respect to any other matters that, individually or in the aggregate, are not reasonably likely to result in a Material Adverse Effect, (A) neither Holdings, the Borrower nor any Subsidiary (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) knows of any basis for any Environmental Liability or (iv) has received any written claim or notice of violation or of potential responsibility regarding any alleged violation of or liability under any Environmental Law; and (B)(i) there has been no Release of Hazardous Materials at, on, under or from any property currently, or to the knowledge of Holdings, the Borrower or any of the Subsidiaries, formerly owned, leased or operated by any of them which could reasonably be expected to result in liability under any Environmental Law on the part of any of them, and (ii) all Hazardous Materials generated, used or stored at, or transported for treatment or disposal from, any properties currently, or to the knowledge of Holdings, Borrower and the Subsidiaries, formerly owned, leased or operated by Holdings, the Borrower or any of the Subsidiaries have been disposed of in a manner that could not reasonably be expected to result in liability under any Environmental Law on the part of any of them.

SECTION 3.07.Compliance with Laws and Agreements.  Except with respect to any matters that, individually or in the aggregate, are not material to the business of the Borrower and the Subsidiaries, taken as a whole, each of Holdings, the Borrower and the Subsidiaries is in compliance with

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all material Requirements of Law applicable to it or its property or operations and all material indentures, agreements and other instruments binding upon it or its property.

SECTION 3.08.Investment and Holding Company Status.  Neither Holdings, the Borrower nor any Subsidiary is (a) an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended or (b) a “holding company” as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935, as amended.

SECTION 3.09.Taxes.  Each of Holdings, the Borrower and the Subsidiaries has timely filed or caused to be filed all Federal and other material Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) any Taxes that are being contested in good faith by appropriate proceedings and for which Holdings, the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP or (b) to the extent that the failure to do so is not reasonably likely to result in a Material Adverse Effect.

SECTION 3.10.ERISA.  No ERISA Event has occurred or is reasonably likely to occur that, when taken together with all other such ERISA Events for which liability is reasonably likely to occur, is reasonably likely to result in a Material Adverse Effect.  The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair value of the assets of such Plan, except as would not reasonably be likely to result in a Material Adverse Effect.

SECTION 3.11.Disclosure.  None of the reports, financial statements, certificates or other information furnished by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided that the foregoing shall not apply to any projected financial information, and with respect to such projected financial information, Holdings and the Borrower represent only that such information was prepared in good faith based upon assumptions believed by them to be reasonable at the time delivered and as of the Original Effective Date.

SECTION 3.12.Subsidiaries.  Holdings does not have any subsidiaries other than the Borrower and the Subsidiaries, Permitted Joint Ventures and Inactive Subsidiaries listed on Schedule 3.12.  Schedule 3.12 sets forth the name of, and the ownership or beneficial interest of Holdings in, each subsidiary, including the Borrower, and identifies each Subsidiary that is a Subsidiary Loan Party, in each case as of the Original Effective Date.

SECTION 3.13.Insurance.  Schedule 3.13 sets forth a description of all insurance maintained by or on behalf of Holdings, the Borrower and the Subsidiaries as of the Original Effective Date.  As of the Original Effective Date, all premiums in respect of such insurance have been paid.  Holdings and the Borrower believe that the insurance maintained by or on behalf of the Borrower and the Subsidiaries is adequate.

SECTION 3.14.Labor Matters.  As of the Original Effective Date, there are no strikes, lockouts or slowdowns against Holdings, the Borrower or any Subsidiary pending or, to the knowledge of Holdings or the Borrower, threatened.  The hours worked by and payments made to employees of the Borrower and the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law dealing with such matters.  All payments due from Holdings,

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the Borrower or any Subsidiary, or for which any claim may be made against Holdings, the Borrower or any Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of Holdings, the Borrower or such Subsidiary.  The borrowing of the Loans and the debt repayment that occurred on the Original Effective Date will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which Holdings, the Borrower or any Subsidiary is bound.

SECTION 3.15.Solvency.  As of the Restatement Effective Date, (a) the fair value of the assets of each Loan Party, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise, (b) the present fair saleable value of the property of each Loan Party will be greater than the amount that will be required to pay the probable liability of its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured, (c) each Loan Party will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, and (d) no Loan Party will have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following the Restatement Effective Date, in each case after giving effect to any rights of indemnification, contribution or subrogation arising among the Subsidiary Loan Parties pursuant to the Collateral Agreement or by law.

SECTION 3.16.Federal Reserve Regulations.  No part of the proceeds of any Loan have been used or will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X.  Neither Holdings nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying margin stock (as defined in Regulation U).

SECTION 3.17.Reimbursement from Third Party Payors.  The accounts receivable of Holdings, the Borrower and the Subsidiaries have been and will continue to be adjusted to reflect the reimbursement policies required by all applicable Requirements of Law and other Third Party Payor Arrangements to which Holdings, the Borrower or such Subsidiary is subject, and do not exceed in any material respect amounts the Borrower or such Subsidiary is entitled to receive under any capitation arrangement, fee schedule, discount formula, cost-based reimbursement or other adjustment or limitation to usual charges.  All billings by Holdings, the Borrower and each Subsidiary pursuant to any Third Party Payor Arrangements have been made in compliance with all applicable Requirements of Law, except where failure to comply would not, individually or in the aggregate, be reasonably likely to have a Material Adverse Effect.  There has been no intentional or material over-billing or over-collection by the Borrower or any Subsidiary pursuant to any Third Party Payor Arrangements, other than as created by routine adjustments and disallowances made in the ordinary course of business by the Third Party Payors with respect to such billings.

SECTION 3.18.Fraud and Abuse.  None of Holdings, the Borrower or any Subsidiary, nor any of their respective partners, members, stockholders, officers or directors, acting on behalf of Holdings, the Borrower or any Subsidiary, have engaged on behalf of Holdings, the Borrower or any Subsidiary in any activities that are prohibited under 42 U.S.C. § 1320a-7, 42 U.S.C. § 1320a-7a, 42 U.S.C. § 1320a-7b, 42 U.S.C. § 1395nn, 31 U.S.C. § 3729 et seq., or the regulations promulgated thereunder, or related Requirements of Law, or under any similar state law or regulation, or that are prohibited by binding rules of professional conduct, including to the extent prohibited by such laws (a) knowingly and willfully making or causing to be made a false statement or misrepresentation of a material fact in any application for any benefit or payment, (b) knowingly and willfully making or causing to be made any false statement or misrepresentation of a material fact for use in determining rights to any benefit or payment, (c) failing to disclose knowledge by a claimant of the occurrence of any event affecting the initial or continued right to any benefit or payment on its own behalf or on behalf of another, with intent to secure such

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benefit or payment fraudulently, (d) knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, or offering to pay or receive such remuneration (i) in return for referring an individual to a Person for the furnishing or arranging for the furnishing of any item or service for which payment may be made, in whole or in part, pursuant to any Third Party Payor Arrangement to which the foregoing rules and regulations apply or (ii) in return for purchasing, leasing or ordering or arranging for or recommending purchasing, leasing or ordering any good, facility, service or item for which payment may be made, in whole or in part, pursuant to any Third Party Payor Arrangement to which the foregoing rules and regulations apply and (e) making any prohibited referral for designated health services, or presenting or causing to be presented a claim or bill to any individual, Third Party Payor or other entity for designated health services furnished pursuant to a prohibited referral.  Neither Holdings, the Borrower nor any Subsidiary shall be considered to be in breach of this Section 3.18 so long as (a) it shall have taken such actions (including implementation of appropriate internal controls) as may be reasonably necessary to prevent such prohibited actions and (b) such prohibited actions as have occurred, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect.

SECTION 3.19.USA PATRIOT Act, Etc.  Holdings and each of its Subsidiaries is in compliance, in all material respects, with (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 C.F.R. Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto and (ii) the USA PATRIOT Act.  No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

ARTICLE IV

Conditions

SECTION 4.01.[Reserved].

SECTION 4.02.Each Credit Event.  The obligation of each Lender to make any Loan and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit is subject to receipt of the request therefor in accordance herewith and to the satisfaction of the following conditions:

(a)The representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects (except to the extent any such representation or warranty is qualified by “materially,” “Material Adverse Effect” or a similar term, in which case such representation and warranty shall be true and correct in all respects) on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct (or true and correct in all material respects, as the case may be) as of such earlier date).

(b)At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing.

Each Borrowing (provided that a conversion or continuation of a Borrowing shall not constitute a “Borrowing” for purposes of this Section 4.02) and each issuance, amendment, renewal or extension of a Letter

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of Credit shall be deemed to constitute a representation and warranty by Holdings and the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section 4.02.

ARTICLE V

Affirmative Covenants

Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees, expenses and other amounts payable under any Loan Document shall have been paid in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, each of Holdings and the Borrower covenants and agrees with the Lenders that:

SECTION 5.01.Financial Statements and Other Information.  The Borrower will furnish to the Administrative Agent (for distribution to each Lender):

(a)within 90 days (or such shorter period as the SEC shall specify for the filing of annual reports on Form 10-K) after the end of each fiscal year of Holdings commencing with the fiscal year ended December 31, 2011, (i) its audited consolidated balance sheet and consolidated statements of operations and comprehensive income, stockholders’ equity and cash flows as of the end of and for such fiscal year, and the related notes thereto, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by independent public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of Holdings and the Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, and (ii) if at any time Holdings is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that describes the financial condition and results of operations of Holdings and its consolidated Subsidiaries;

(b)within 45 days (or such shorter period as the SEC shall specify for the filing of quarterly reports on Form 10-Q) after the end of each of the first three fiscal quarters of each fiscal year of Holdings commencing with the fiscal quarter ending June 30, 2011, its consolidated balance sheet and consolidated statements of operations and comprehensive income, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and the then-elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by a Financial Officer as presenting fairly in all material respects the financial condition and results of operations of Holdings and the Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;

(c)concurrently with any delivery of financial statements under paragraph (a) or (b) above, a certificate of a Financial Officer (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth (A) reasonably detailed calculations demonstrating compliance with Sections 6.13 and 6.14 (including (x) any prepayment of the Loans as set forth in the definition of “Leverage Ratio” and (y) any exercise of the rights set forth in Section 7.02) and (B) in the case of financial statements delivered under paragraph (a) above beginning in 2012 with respect to fiscal year 2011, reasonably detailed calculations of Excess Cash Flow, (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the

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Borrower’s audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate, and (iv) certifying as to the calculation of Consolidated EBITDA on a Pro Forma Basis for the four fiscal quarter period ending on the date of such financial statements and accompanied by reasonably detailed supporting evidence, it being understood that each of the calculations described in this paragraph (c) shall provide a reconciliation to the financial statements delivered under paragraphs (a) and (b) above;

(d)commencing with the delivery of audited financial statements of Holdings for the fiscal year ended December 31, 2011, concurrently with any delivery of financial statements under paragraph (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default and, if such knowledge has been obtained, describing such Default (which certificate may be limited to the extent required by accounting rules or guidelines);

(e)concurrently with the issuance of any Indebtedness permitted by Sections 6.01(a)(xii), or a Restricted Payment permitted by Section 6.08(a)(x), a certificate of a Financial Officer certifying as to (i) the Holdings Leverage Ratio or Leverage Ratio, as the case may be, accompanied by reasonably detailed supporting evidence, (ii) the use of proceeds from such issuance and (iii) whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, it being understood that each of the calculations described in this paragraph (e) shall provide a reconciliation to the financial statements delivered under paragraphs (a) and (b) above;

(f)within 30 days after the commencement of each fiscal year of Holdings, a detailed consolidated budget for such fiscal year (including a projected consolidated balance sheet and consolidated statements of projected operations and cash flows as of the end of and for such fiscal year) and, promptly when available, any significant revisions of such budget;

(g)promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the SEC or with any national securities exchange, as applicable; and

(h)promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of Holdings, the Borrower or any Subsidiary or any Plan, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request.

Documents required to be delivered pursuant to subsection 5.01(a), (b), (d) or (g) may at the Borrower’s option be delivered electronically and, if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s (or Holdings’ or any Parent’s) website on the Internet at the website address previously provided to the Administrative Agent in writing (or such other website address as the Borrower may specify by written notice to the Administrative Agent from time to time); or (ii) on which such documents are posted on the Borrower’s (or Holdings’ or any Parent’s) behalf on an Internet or intranet website to which each Lender, the Administrative Agent and the Collateral Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that (i) upon the reasonable request of the Administrative Agent or the Collateral Agent with respect to any specific document so delivered electronically, the Borrower shall promptly deliver a physical copy of such document and (ii) the Borrower shall notify (which notice may be by facsimile or electronic mail) the Administrative Agent of the posting by

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the Borrower of any such documents on any such website (other than a website maintained for or sponsored by the Administrative Agent) and the electronic location at which such documents may be accessed.

SECTION 5.02.Notices of Material Events.  Holdings and the Borrower will furnish to the Administrative Agent (for distribution to each Lender), through the Administrative Agent, written notice of the following promptly after obtaining knowledge thereof:

(a)the occurrence of any Default;

(b)the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting Holdings, the Borrower or any Subsidiary that, if adversely determined, is reasonably likely to result in a Material Adverse Effect;

(c)the occurrence of any ERISA Event that alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and the Subsidiaries in an aggregate amount exceeding $20,000,000;

(d)the receipt by Holdings, the Borrower or any Subsidiary of (i) any notice of any loss of (A) accreditation from the Joint Commission on Accreditation of Healthcare Organizations or (B) any governmental right, qualification, permit, accreditation, approval, authorization, Reimbursement Approval, license or franchise or (ii) any notice, compliance order or adverse report issued by any Governmental Authority or Third Party Payor that, if not promptly complied with or cured, could result in (A) the suspension or forfeiture of any material governmental right, qualification, permit, accreditation, approval, authorization, Reimbursement Approval, license or franchise necessary for the Borrower or any Subsidiary to carry on its business as now conducted or as proposed to be conducted or (B) any other material Limitation imposed upon the Borrower or any Subsidiary;

(e)any Change in Law of the type described in clause (a) or (b) of such definition relating to any Third Party Payor Arrangement that could reasonably be expected to have a material and adverse effect on the ability of the Borrower or any Subsidiary to carry on its business as now conducted or as proposed to be conducted; and

(f)any other development that results in, or is reasonably likely to result in, a Material Adverse Effect.

Each notice delivered under this Section 5.02 shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

SECTION 5.03.Information Regarding Collateral.

(a)The Borrower will furnish to the Collateral Agent prompt written notice (but in no event later than 90 days) of any change (i) in any Loan Party’s corporate name, (ii) in the jurisdiction of incorporation or organization of any Loan Party or (iii) in any Loan Party’s organizational identification number.  The Borrower agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral.  The Borrower also agrees promptly to notify the Collateral Agent if any material portion of the Collateral is damaged or destroyed.

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(b)Each year, at the time of delivery of annual financial statements pursuant to Section 5.01(a), the Borrower shall deliver to the Collateral Agent a certificate executed by a Financial Officer and the chief legal officer of the Borrower setting forth the information required pursuant to the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Original Effective Date or the date of the most recent certificate delivered pursuant to this Section.

SECTION 5.04.Existence; Conduct of Business.  Each of Holdings and the Borrower will, and will cause each of the Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, qualifications, permits, approvals, accreditations, authorizations, Reimbursement Approvals, licenses, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03.

SECTION 5.05.Payment of Obligations.  Each of Holdings and the Borrower will, and will cause each of the Subsidiaries to, pay its Tax liabilities, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) Holdings, the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (c) such contest effectively suspends the enforcement of any Lien securing such obligation and (d) the failure to make payment pending such contest is not reasonably likely to result in a Material Adverse Effect.

SECTION 5.06.Maintenance of Properties.  Each of Holdings and the Borrower will, and will cause each of the Subsidiaries to, keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted.

SECTION 5.07.Insurance.

(i)Each of Holdings and the Borrower will, and will cause each of the Subsidiaries to, maintain, with financially sound and reputable insurance companies (which may include self-insurance), (a) insurance in such amounts (with no greater risk retention) and against such risks as are customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations and (b) all insurance required to be maintained pursuant to the Security Documents.  The Borrower will furnish to the Lenders, upon request of the Administrative Agent, information in reasonable detail as to the insurance so maintained.

(ii)If any portion of any Mortgaged Property is at any time located in an area identified by the Federal Emergency Management Agency (or any successor agency) as a special flood hazard area with respect to which flood insurance has been made available under the National Flood Insurance Act of 1968 (as now or hereafter in effect or any successor statute thereto), then Holdings and the Borrower shall, or shall cause each Loan Party to (x) maintain, or cause to be maintained, with a financially sound and reputable insurer, flood insurance in an amount and otherwise sufficient to comply with all applicable rules and regulations promulgated pursuant to the Flood Insurance Laws and (y) deliver to the Administrative Agent evidence of such compliance in form and substance reasonably acceptable to the Administrative Agent.

SECTION 5.08.Casualty and Condemnation.  The Borrower (a) will furnish to the Administrative Agent and the Lenders prompt written notice of any casualty or other insured damage to any material portion of the Collateral or the commencement of any action or proceeding for the taking of any material portion of the Collateral or interest therein under power of eminent domain or by condemnation or similar proceeding and (b) will ensure that the Net Proceeds of any such event (whether in the

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form of insurance proceeds, condemnation awards or otherwise) are collected and applied in accordance with the applicable provisions of this Agreement and the Security Documents.

SECTION 5.09.Books and Records; Inspection and Audit Rights.  Each of Holdings and the Borrower will, and will cause each of the Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities.  Each of Holdings and the Borrower will, and will cause each of the Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties during normal business hours, to examine and make extracts from its books and records, including environment assessment reports and Phase I or Phase II studies, and to discuss its affairs, finances and condition with its officers and independent accountants (provided that the Borrower shall be provided the opportunity to participate in any such discussions with its independent accountants), all at such reasonable times and as often as reasonably requested.

SECTION 5.10.Compliance with Laws.  Each of Holdings and the Borrower will cause each of the Subsidiaries to comply with all Requirements of Law, including Environmental Laws, applicable to it or its property, except where the failure to do so, individually or in the aggregate, is not reasonably likely to result in a Material Adverse Effect.

SECTION 5.11.Use of Proceeds and Letters of Credit.  The proceeds of Revolving Loans or 2018 Extended Revolving Loans, Swingline Loans and Letters of Credit will be used by the Borrower for working capital and general corporate purposes (including Permitted Acquisitions).  No part of the proceeds of any Loan and no Letter of Credit will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X.

SECTION 5.12.Additional Subsidiaries; Succeeding Holdings.

(a)If any additional Subsidiary (other than a Consolidated Practice) is formed or acquired after the Original Effective Date (or if (x) any Inactive Subsidiary that is not a Subsidiary Loan Party ceases to qualify as an Inactive Subsidiary or (y) a Permitted Joint Venture that is not otherwise a Permitted Joint Venture Loan Party becomes a wholly owned Subsidiary of the Borrower), the Borrower will, promptly after such Subsidiary is formed or acquired, notify the Collateral Agent and the Lenders (through the Administrative Agent) thereof and promptly cause the Collateral and Guarantee Requirement to be satisfied with respect to such Subsidiary (if it is a Subsidiary Loan Party) and with respect to any Equity Interest in or Indebtedness of such Subsidiary owned by or on behalf of any Loan Party.

(b)Upon the addition of a Succeeding Holdings, the Borrower will notify the Collateral Agent and the Lenders (through the Administrative Agent) thereof and promptly cause the Collateral and Guarantee Requirement to be satisfied with respect to the Succeeding Holdings.

SECTION 5.13.Further Assurances.

(a)Each of Holdings, each Succeeding Holdings and the Borrower will, and will cause each Subsidiary Loan Party to, execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents), which may be required under any applicable law, or which the Administrative Agent or the Required Lenders may reasonably request, to cause the Collateral and Guarantee Requirement to be and remain satisfied, all at the expense of the Loan Parties.  Each of Holdings and the Borrower also agrees to provide to the Collateral Agent, from time to time upon reasonable request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents.

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(b)If any material assets (including any real property (other than any leased real property) which constitutes a Material Real Property) are acquired by the Borrower or any Subsidiary Loan Party after the Original Effective Date (other than assets constituting Collateral under the Collateral Agreement that become subject to the Lien in favor of the Collateral Agreement upon acquisition thereof), the Borrower will notify the Administrative Agent and the Lenders thereof and, if requested by the Administrative Agent or the Required Lenders, the Borrower will cause such assets to be subjected to a Lien securing the Obligations and will take, and cause the Subsidiary Loan Parties to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to grant and perfect such Liens, including actions described in paragraph (a) of this Section 5.13, all at the expense of the Loan Parties, provided that the Collateral Agent may, in its reasonable judgment, grant extensions of time for compliance or exceptions with the provisions of this paragraph by any Loan Party.

SECTION 5.14.Post-Closing Matters.  Execute and deliver the documents and complete the tasks set forth on Schedule 5.14, in each case within the time limits specified on such schedule; provided that the Administrative Agent or Collateral Agent, as applicable, may in its reasonable judgment, grant extensions of time for compliance or exceptions with the provisions of this paragraph.

ARTICLE VI

Negative Covenants

Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees, expenses and other amounts payable under any Loan Document have been paid in full and all Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed, each of Holdings and the Borrower covenants and agrees with the Lenders that:

SECTION 6.01.Indebtedness; Certain Equity Securities.

(a)Neither Holdings nor the Borrower will, nor will they permit any Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except:

(i)Indebtedness created under the Loan Documents;

(ii)[reserved];

(iii)[reserved];

(iv)Indebtedness existing on the Original Effective Date and set forth in Schedule 6.01 and extensions, renewals and replacements of any such Indebtedness, provided that such extending, renewal or replacement Indebtedness (A) shall not be in a principal amount that exceeds the principal amount of the Indebtedness being extended, renewed or replaced (plus accrued interest and premium thereon), (B) shall not have an earlier maturity date or a decreased weighted average life than the Indebtedness being extended, renewed or replaced, (C) shall be subordinated to the Obligations on the same terms (or, from a Lender’s perspective, better terms) as the Indebtedness being extended, renewed or replaced and (D) there is no obligor of such Indebtedness that is not either (x) an obligor of such Indebtedness on the Original Effective Date or (y) otherwise permitted to incur such Indebtedness by another clause of this Section 6.01;

(v)Indebtedness of the Borrower owed to any Subsidiary and of any Subsidiary owed to the Borrower or any other Subsidiary, provided that Indebtedness of the Borrower owed to any Subsidiary and Indebtedness of any Subsidiary Loan Party owed to the Borrower or any

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other Subsidiary shall be subordinated to the Obligations on terms reasonably satisfactory to the Administrative Agent; provided further that, (A) Indebtedness owed to any Insurance Subsidiary by the Borrower or any other Subsidiary shall be limited in principal amount to the aggregate amount of Investments made in such Insurance Subsidiary pursuant to Section 6.04(xx) and (B) notwithstanding the first proviso above, such Indebtedness shall only be subordinated to the extent permitted by applicable laws or regulations;

(vi)Guarantees by the Borrower of Indebtedness of any Subsidiary and by any Subsidiary of Indebtedness of the Borrower or any other Subsidiary, provided that (A) the Indebtedness so Guaranteed is permitted by this Section 6.01, (B) Guarantees permitted under this clause (vi) shall be subordinated to the Obligations of the Borrower or the applicable Subsidiary to the same extent and on the same terms as the Indebtedness so Guaranteed is subordinated to the Obligations and (C) except in the case of Foreign Subsidiaries that provide Guarantees of Indebtedness of other Foreign Subsidiaries, no Subsidiary shall Guarantee any Indebtedness unless it is a Subsidiary Loan Party;

(vii)Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations, and any Indebtedness assumed by the Borrower or any Subsidiary in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (including the principal and any accrued but unpaid interest or premium in respect thereof), provided that (A) such Indebtedness is incurred prior to or within 120 days after such acquisition or the completion of such construction or improvement and (B) the aggregate principal amount of Indebtedness permitted by this clause (vii) shall not exceed at any time outstanding the greater of (x) $60,000,000 and (y) 6.0% of Consolidated Tangible Assets as of the end of the immediately preceding fiscal quarter;

(viii)(A) Indebtedness of any Person that becomes a Subsidiary after the Original Effective Date, provided that (1) such Indebtedness exists at the time such Person becomes a Subsidiary and is not created in contemplation of or in connection with such Person becoming a Subsidiary and (2) the aggregate amount of Indebtedness permitted by this clause (viii) (including subclause (B)) shall not exceed $50,000,000 at any time outstanding, and (B) any refinancings, renewals and replacements of any such Indebtedness pursuant to the preceding clause (A) that do not increase the outstanding principal amount (plus accrued interest and premium) thereof;

(ix)Indebtedness owed to any Person (including obligations in respect of letters of credit for the benefit of such Person) providing workers’ compensation, health, disability or other employee benefits or property, casualty or liability insurance pursuant to reimbursement or indemnification obligations to such Person, in each case incurred in the ordinary course of business;

(x)Indebtedness of the Borrower or any Subsidiary in respect of performance bonds, bid bonds, appeal bonds, surety bonds, performance and completion guarantees and similar obligations, in each case provided in the ordinary course of business;

(xi)Indebtedness of any Loan Party pursuant to Swap Agreements permitted by Section 6.07;

(xii)with respect to Holdings, Qualified Holdings Discount Debt; provided that other than with respect to any additional principal amounts resulting from the accrual of pay-in-kind interest, (A) such Indebtedness may only be issued or incurred to the extent that after giving effect

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to the incurrence of such additional Indebtedness on a Pro Forma Basis, the Holdings Leverage Ratio would be less than 5.50 to 1.00 and (B) no Default has occurred and is continuing or would result therefrom;

(xiii)[reserved];

(xiv)Indebtedness representing deferred compensation to employees of the Borrower and the Subsidiaries incurred in the ordinary course of business;

(xv)Indebtedness in respect of promissory notes issued to physicians, consultants, employees or directors or former employees, consultants or directors in connection with repurchases of Equity Interests permitted by Section 6.08(a)(iii);

(xvi)Indebtedness of any Foreign Subsidiary or any Subsidiary of the Borrower that is not a Loan Party in an amount not to exceed $50,000,000 at any time outstanding;

(xvii)(x) Permitted Debt Securities so long as no Default or Event of Default has occurred and is continuing or would arise after giving effect thereto and, except in the case of Refinancing Debt Securities, on a Pro Forma Basis the Leverage Ratio is less than or equal to 5.25 to 1.00 as of the last day of the most recent fiscal quarter for which financial statements have been delivered pursuant to Section 5.01(a) or (b) prior to the incurrence of such Permitted Debt Securities and (y) any Refinancing Indebtedness in respect of Indebtedness permitted by this clause 6.09(a)(xvii);

(xviii)other Indebtedness of the Borrower or any Subsidiary in an aggregate principal amount not exceeding $200,000,000 at any time outstanding;

(xix)[reserved]; and

(xx)Cash Management Obligations.

(b)The Borrower will not, and Holdings and the Borrower will not permit any Subsidiary to, issue any preferred Equity Interests.

(c)Holdings will not issue any preferred Equity Interests other than Qualified Preferred Stock.

SECTION 6.02.Liens.  Neither Holdings nor the Borrower will, nor will they permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except (collectively, “Permitted Liens”):

(i)Liens created by the Loan Documents;

(ii)Permitted Encumbrances;

(iii)any Lien on any property or asset of the Borrower or any Subsidiary existing on the Original Effective Date and set forth in Schedule 6.02; provided that (A) such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary and (B) such Lien shall secure only those obligations which it secures on the Original Effective Date and extensions, renewals

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and replacements thereof that do not increase the outstanding principal amount thereof (plus accrued interest and premium thereon);

(iv)any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the Original Effective Date prior to the time such Person becomes a Subsidiary, provided that (A) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as applicable, (B) such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary and (C) such Lien shall secure only those obligations that it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as applicable, and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof (plus accrued interest and premium thereon);

(v)Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Subsidiary, provided that (A) such security interests secure Indebtedness permitted by clause (vii) of Section 6.01(a), (B) such security interests and the Indebtedness secured thereby are incurred prior to or within 120 days after such acquisition or the completion of such construction or improvement, (C) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets and (D) such security interests shall not apply to any other property or assets of the Borrower or any Subsidiary;

(vi)Liens of a collecting bank arising in the ordinary course of business under Section 4-208 of the Uniform Commercial Code in effect in the relevant jurisdiction covering only the items being collected upon;

(vii)Liens arising out of sale and leaseback transactions permitted by Section 6.06;

(viii)Liens granted by a Subsidiary that is not a Loan Party in favor of the Borrower or another Loan Party in respect of Indebtedness owed by such Subsidiary;

(ix)licenses, sublicenses, leases or subleases granted to others not interfering in any material respect with the business of the Borrower or any Subsidiary;

(x)Liens on assets of any Foreign Subsidiary securing Indebtedness (and related obligations) permitted by Section 6.01(a)(xvi);

(xi)Liens on assets of the Borrower or the Subsidiaries not otherwise permitted by this Section 6.02, so long as neither (i) the aggregate outstanding principal amount of the obligations secured thereby nor (ii) the aggregate fair value (determined as of the date such Lien is incurred) of the assets subject thereto exceeds $25,000,000 at any time outstanding, provided that in no event shall Holdings, the Borrower or any Subsidiary create, incur, assume or permit to exist any Lien on any Equity Interests of the Borrower or any Subsidiary; and

(xii)Liens on the Collateral securing Permitted Secured Notes; provided that the holders thereof (or the collateral agent for such holders) shall have entered into the First Lien Intercreditor Agreement or the Second Lien Intercreditor Agreement, as applicable.

SECTION 6.03.Fundamental Changes.

(a)Neither Holdings nor the Borrower will, nor will they permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate

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with it, or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing, (i) any Person may merge into the Borrower in a transaction in which the surviving entity is a Person organized or existing under the laws of the United States of America, any State thereof or the District of Columbia and, if such surviving entity is not the Borrower, such Person expressly assumes, in writing, all the obligations the Borrower under the Loan Documents, (ii) any Person may merge into any Subsidiary in a transaction in which the surviving entity is a Subsidiary and, if any party to such merger is a Subsidiary Loan Party, is or becomes a Subsidiary Loan Party concurrently with such merger, (iii) any Subsidiary (other than a Subsidiary Loan Party) may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders and (iv) any asset sale permitted by Section 6.05(g) may be effected through the merger of a subsidiary of the Borrower with a third party, provided that any such merger referred to in clauses (i), (ii) or (iv) above involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.04.

(b)The Borrower will not, and Holdings and the Borrower will not permit any Subsidiary to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and the Subsidiaries on the Original Effective Date and businesses reasonably related or incidental thereto.

(c)Holdings will not engage in any business or activity other than the ownership of all the outstanding shares of capital stock of the Borrower and engaging in corporate and administrative functions and other activities incidental thereto.  Holdings will not own or acquire any assets (other than Equity Interests of the Borrower and the cash proceeds of any Restricted Payments permitted by Section 6.08 or proceeds of any issuance of Indebtedness or Equity Interests permitted by this Agreement pending application as required by this Agreement) or incur any liabilities (other than liabilities under and permitted to be incurred under the Loan Documents and liabilities reasonably incurred in connection with its maintenance of its existence and activities incidental thereto).  Notwithstanding the foregoing, Holdings shall be permitted to enter into transactions, engage in activities and maintain assets or incur liabilities in respect of Swap Agreements related to Indebtedness of Holdings permitted hereunder.

SECTION 6.04.Investments, Loans, Advances, Guarantees and Acquisitions.  Neither Holdings nor the Borrower will, nor will they permit any Subsidiary to, purchase or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to such merger) any Equity Interests in or evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make any loans or advances to, Guarantee any obligations of, or make any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit (collectively, “Investments”), except:

(i)Permitted Acquisitions;

(ii)Permitted Investments;

(iii)Investments set forth on Schedule 6.04;

(iv)Investments by Holdings in the Borrower and by the Borrower and the Subsidiaries in Equity Interests in their respective Subsidiaries, provided that (A) any such Equity Interests held by a Loan Party shall be pledged pursuant to the Collateral Agreement (subject to the limitations applicable to common stock of a Foreign Subsidiary referred to in the definition of “Collateral and Guarantee Requirement”) and (B) the aggregate amount of investments (other than investments

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set forth on Schedule 6.04) by Loan Parties in Subsidiaries that are not Loan Parties (together with outstanding intercompany loans permitted under clause (B) to the proviso to Section 6.04(v) and outstanding Guarantees permitted to be incurred under clause (B) to the proviso to Section 6.04(vi)) shall not exceed $15,000,000 at any time outstanding (in each case determined without regard to any write-downs or write-offs);

(v)loans or advances made by the Borrower to any Subsidiary and made by any Subsidiary to the Borrower or any other Subsidiary, provided that (A) any such loans and advances made by a Loan Party shall be evidenced by a promissory note pledged pursuant to the Collateral Agreement and (B) the amount of such loans and advances made by Loan Parties to Subsidiaries that are not Loan Parties (together with outstanding investments permitted under clause (B) to the proviso to Section 6.04(iv) and outstanding Guarantees permitted under clause (B) to the proviso to Section 6.04(vi)) shall not exceed $15,000,000 at any time outstanding (in each case determined without regard to any write-downs or write-offs);

(vi)Guarantees constituting Indebtedness permitted by Section 6.01, provided that (and without limiting the foregoing) the aggregate principal amount of Indebtedness of Subsidiaries that are not Loan Parties that is Guaranteed by any Loan Party (together with outstanding investments permitted under clause (B) to the proviso to Section 6.04(iv) and outstanding intercompany loans permitted under clause (B) to the proviso to Section 6.04(v)) shall not exceed $15,000,000 at any time outstanding (in each case determined without regard to any write-downs or write-offs);

(vii)receivables or other trade payables owing to the Borrower or any Subsidiary if created or acquired in the ordinary course of business consistent with past practice and payable or dischargeable in accordance with customary trade terms, provided that such trade terms may include such concessionary trade terms as the Borrower or any such Subsidiary deems reasonable under the circumstances;

(viii)Investments consisting of Equity Interests, obligations, securities or other property received in settlement of delinquent accounts of and disputes with customers and suppliers in the ordinary course of business and owing to the Borrower or any Subsidiary or in satisfaction of judgments;

(ix)Investments by the Borrower or any Subsidiary in payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business;

(x)loans or advances by the Borrower or any Subsidiary to employees and other individual service providers made in the ordinary course of business (including travel, entertainment and relocation expenses) of the Borrower or any Subsidiary not exceeding $2,500,000 in the aggregate at any time outstanding (determined without regard to any write-downs or write-offs of such loans or advances);

(xi)Investments in the form of Swap Agreements permitted by Section 6.07;

(xii)Investments of any Person existing at the time such Person becomes a Subsidiary of the Borrower or consolidates or merges with the Borrower or any of the Subsidiaries (including in connection with a Permitted Acquisition) so long as such investments were not made in contemplation of such Person becoming a Subsidiary or of such consolidation or merger;

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(xiii)Investments received in connection with the dispositions of assets permitted by Section 6.05;

(xiv)Investments constituting deposits described in clauses (c) and (d) of the definition of the term “Permitted Encumbrances”;

(xv)Investments in Permitted Joint Ventures; provided that, if at the time of any such Investment pursuant to this Section 6.04(xv), on a Pro Forma Basis, the Secured Leverage Ratio of the Borrower equals or exceeds 2.50 to 1.00, the aggregate amount of Investments in Permitted Joint Ventures (together with the aggregate amount of Investments in Permitted Real Estate Joint Ventures permitted under Section 6.04(xvi)) shall not exceed $250,000,000 outstanding at any time plus an amount equal to any returns (including dividends, interest, distributions, returns of principal and profits on sale) actually received in cash in respect of any such Investments (which amount shall not exceed the amount of such Investment valued at cost at the time such Investment was made);

(xvi)Investments in Permitted Real Estate Joint Ventures; provided that, if at the time of any such Investment pursuant to this Section 6.04(xvi), on a Pro Forma Basis, the Secured Leverage Ratio of the Borrower equals or exceeds 2.50 to 1.00, the aggregate amount of Investments in Permitted Real Estate Joint Ventures (together with the aggregate amount of Investments in Permitted Joint Ventures permitted under Section 6.04(xv)) shall not exceed $250,000,000 outstanding at any time plus an amount equal to any returns (including dividends, interest, distributions, returns of principal and profits on sale) actually received in cash in respect of any such Investments (which amount shall not exceed the amount of such Investment valued at cost at the time such Investment was made);

(xvii)payments, loans, advances to, and investments in, Consolidated Practices in the ordinary course of business and consistent with past practice in satisfaction of their obligations under any management services agreements;

(xviii)Investments by the Borrower or any Subsidiary (including Investments in Permitted Joint Ventures) in an aggregate amount, as valued at cost at the time each such Investment is made and including all related commitments for future advances, not exceeding the Available Amount immediately prior to the time of the making of any such Investment;

(xix)Investments by the Borrower or any Subsidiary (including Investments in Permitted Joint Ventures) in an aggregate amount not to exceed the sum of (A) $100,000,000 and (B) an amount equal to any returns (including dividends, interest, distributions, returns of principal and profits on sale) actually theretofore received in cash in respect of any such investment, loan or advance (which amount shall not exceed the amount of such Investment valued at cost at the time such Investment was made); and

(xx)Investments, loans and advances by the Borrower or any Subsidiary to any Insurance Subsidiary in an amount equal to (A) the capital required under the applicable laws or regulations of the jurisdiction in which such Insurance Subsidiary is formed or determined by independent actuaries as prudent and necessary capital to operate such Insurance Subsidiary plus (B) any reasonable general corporate and overhead expenses of such Insurance Subsidiary.

SECTION 6.05.Asset Sales.  Neither Holdings nor the Borrower will, nor will they permit any Subsidiary to, sell, transfer, lease or otherwise dispose of any asset, including any Equity Interest owned by it, nor will the Borrower permit any Subsidiary to issue any additional Equity Interest in

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such Subsidiary (other than to the Borrower or another Subsidiary in compliance with Section 6.04), except:

(a)sales, transfers and dispositions of (i) inventory in the ordinary course of business and (ii) used, obsolete, worn out or surplus equipment or property in the ordinary course of business;

(b)sales, transfers and dispositions to the Borrower or any Subsidiary, provided that any such sales, transfers or dispositions involving a Subsidiary that is not a Loan Party shall be made in compliance with Section 6.09;

(c)sales, transfers and dispositions of accounts receivable in connection with the compromise, settlement or collection thereof consistent with past practice;

(d)sales, transfers and dispositions of property to the extent such property constitutes an investment permitted by clauses (ii), (viii), (xii) and (xiv) of Section 6.04;

(e)sale and leaseback transactions permitted by Section 6.06;

(f)dispositions resulting from any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of the Borrower or any Subsidiary;

(g)sales, transfers and other dispositions of assets (other than Equity Interests in a Subsidiary unless all Equity Interests in such Subsidiary are sold) that are not permitted by any other paragraph of this Section 6.05, provided that the aggregate fair value of all assets sold, transferred or otherwise disposed of in reliance upon this paragraph (g) shall not exceed $200,000,000 during the term of this Agreement (excluding any single transaction or series of related transactions that involves assets having a Fair Market Value of less than $2,500,000);

(h)exchanges of property for similar replacement property for fair value; and

(i)assets set forth on Schedule 6.05;

provided that all sales, transfers, leases and other dispositions permitted hereby (other than those permitted by paragraphs (b), (c) and (f) above) shall be made for fair value and (other than those permitted by paragraphs (b), (d) and (h) above) for at least 75% cash consideration; plus (for all such sales, transfers, leases and other dispositions permitted hereby) an aggregate additional amount of non-cash consideration in the amount of $35,000,000 (it being understood that for purposes of paragraph (a) above, accounts receivable received in the ordinary course and any property received in exchange for used, obsolete, worn out or surplus equipment or property and any non-cash consideration that was actually converted into cash within 6 months following the applicable sale, transfer, lease or other disposition by the Borrower or any of its Subsidiaries shall be deemed to constitute cash consideration).

SECTION 6.06.Sale and Leaseback Transactions.  Neither Holdings nor the Borrower will, nor will they permit any Subsidiary to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred, except for (x) any such sale of any fixed or capital assets by the Borrower or any Subsidiary that is made for cash consideration in an amount not less than the fair value of such fixed or capital asset and is consummated within 120 days after

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the Borrower or such Subsidiary acquires or completes the construction of such fixed or capital asset or (y) sale and leaseback transactions with respect to properties acquired after the Original Effective Date, where the Fair Market Value of such properties in the aggregate does not to exceed $50,000,000.

SECTION 6.07.Swap Agreements.  Neither Holdings nor the Borrower will, nor will they permit any Subsidiary to, enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge or mitigate risks to which the Borrower or any Subsidiary has actual exposure (other than those in respect of Equity Interests of the Borrower or any of the Subsidiaries) and (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of Holdings, the Borrower or any Subsidiary.

SECTION 6.08.Restricted Payments; Certain Payments of Indebtedness.

(a)Neither Holdings nor the Borrower will, nor will they permit any Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except:

(i)each of Holdings and the Borrower may declare and pay dividends with respect to its common stock payable solely in additional shares of its common stock, and, with respect to its preferred stock, payable solely in additional shares of such preferred stock or in shares of its common stock;

(ii)Subsidiaries may declare and pay dividends ratably with respect to their capital stock, membership or partnership interests or other similar Equity Interests;

(iii)Holdings may (or may make Restricted Payments to allow a Parent to) purchase or redeem (and the Borrower may declare and pay dividends or make other distributions to Holdings, the proceeds of which are used by Holdings or a Parent to purchase or redeem) Equity Interests of Holdings or a Parent (x) acquired by employees, consultants or directors of Holdings, the Borrower or any Subsidiary upon such Person’s death, disability, retirement or termination of employment, provided that the aggregate amount of such purchases or redemptions under this clause (iii)(x) shall not exceed $15,000,000 in any fiscal year (and, to the extent that the aggregate amount of purchases or redemptions made in any fiscal year pursuant to this clause (iii)(x) is less than $15,000,000, the amount of such difference may be carried forward and used for such purpose in the following fiscal year) and $40,000,000 in the aggregate and (y) in connection with Holdings’ stock repurchase program announced prior to the Original Effective Date authorizing the repurchase shares of Holdings’ common stock for aggregate consideration not to exceed $55,000,000;

(iv)the Borrower may make Restricted Payments to Holdings to be used by Holdings solely to pay (or to make Restricted Payments to allow a Parent to pay) its franchise taxes and other fees required to maintain its corporate existence and to pay for general corporate and overhead expenses (including salaries and other compensation of employees) and other expenses in its capacity as the parent of Borrower incurred by Holdings or a Parent in the ordinary course of its business, provided that such Restricted Payments shall not exceed $5,000,000 in any fiscal year;

(v)the Borrower may make Restricted Payments to Holdings in an amount necessary to enable Holdings to pay (or make Restricted Payments to allow a Parent to pay) the Taxes directly attributable to (or arising as a result of) the operations of a Parent, Holdings, the Borrower and the Subsidiaries, provided that (A) the amount of any such Restricted Payments pursuant to

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this clause (v) shall not exceed the amount of such Taxes that Borrower and/or its Subsidiaries, as applicable, would have paid had Borrower and/or its Subsidiaries, as applicable, been a stand-alone taxpayer (or a stand-alone group) and (B) all Restricted Payments made to Holdings or a Parent pursuant to this clause (v) are used by Holdings or a Parent for the purposes specified herein within 90 days of the receipt thereof;

(vi)cashless repurchases of Equity Interests of Holdings deemed to occur upon exercise of stock options or warrants or upon vesting of common stock, if such Equity Interests represent a portion of the exercise price or withholding obligations of such options, warrants or common stock;

(vii)[reserved];

(viii)the Borrower may make Restricted Payments to Holdings to pay management, consulting and advisory fees to any Sponsor or Sponsor Affiliate to the extent permitted by Section 6.09;

(ix)the Borrower may make Restricted Payments to Holdings in an amount necessary to permit Holdings to pay (or to make Restricted Payments to allow a Parent to pay) interest in cash (including interest previously paid “in kind” or added to the principal amount thereof) and, with respect to subclause (x) of this Section 6.08(a)(ix) only, principal in cash on (x) [reserved] or (y) additional Qualified Holdings Discount Debt, but, in the case of this clause (y), only to the extent the proceeds (together with a pro rata portion of related transaction expenses paid from such proceeds) of such additional Qualified Holdings Discount Debt were used to make Capital Expenditures (without giving effect to the proviso in the definition of the term “Capital Expenditures”), prepay Tranche B Term Loans, make Investments pursuant to Section 6.04(xvii) or repay, redeem, defease or otherwise refinance any Qualified Holdings Discount Debt previously issued hereunder or were Otherwise Applied, provided that (A) no Default has occurred and is continuing or would result therefrom and (B) all Restricted Payments made pursuant to this clause (ix) are used by Holdings or a Parent for the purposes specified herein within 20 days of receipt thereof;

(x)the Borrower and the Subsidiaries may make additional Restricted Payments (and Holdings may make Restricted Payments with such amounts received from the Borrower) in an aggregate amount not exceeding the Available Amount immediately prior to the time of the making of such Restricted Payment; provided that (A) immediately prior to and after giving effect to such Restricted Payment, the Borrower is in compliance with the Financial Performance Covenant and (B) no Default has occurred and is continuing or would result therefrom;

(xi)the Borrower may make Restricted Payments to Holdings to pay any non-recurring fees, cash charges and cost expenses incurred in connection with the issuance of Equity Interests or Indebtedness, in each case only to the extent that such transaction is not consummated;

(xii)the Borrower and its Subsidiaries may make additional Restricted Payments (and Holdings may make Restricted Payments with such amounts received from the Borrower) in an aggregate amount not to exceed $50,000,000; provided that no Default or Event of Default has occurred and is continuing or would result therefrom;

(xiii)Holdings may make Restricted Payments with the Net Proceeds received by Holdings from any issuance of any Equity Interests (or capital contribution in respect thereof) or

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Qualified Holdings Discount Debt to the extent such Net Proceeds are not contributed or otherwise received by the Borrower or any of the Subsidiaries; provided that no Default or Event of Default has occurred and is continuing or would result therefrom; and

(xiv)the Borrower and its Subsidiaries may make additional Restricted Payments (and Holdings may make Restricted Payments with such amounts received from the Borrower); provided that (x) no Default or Event of Default has occurred and is continuing or would result therefrom and (y) on a Pro Forma Basis, after giving effect to any such Restricted Payment pursuant to this clause (xiv), the Leverage Ratio does not exceed 2.75 to 1.00.

(b)The Borrower will not nor will it permit any Subsidiary to, make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of, any Subordinated Indebtedness (other than intercompany loans among Subsidiaries and the Borrower) or Permitted Debt Securities issued pursuant to Section 6.01(xvii) (other than Permitted Secured Notes (x) that are secured by Liens subject to the First Lien Intercreditor Agreement or (y) the proceeds of which are used to repay Term Loans) (“Specified Indebtedness”), except:

(i)payment of regularly scheduled interest and principal payments as and when due in respect of any Indebtedness, other than, in the case of Subordinated Indebtedness, as prohibited by the subordination provisions thereof;

(ii)the conversion or exchange of any Specified Indebtedness into, or redemption, repurchase, prepayment, defeasance or other retirement of any such Indebtedness with the Net Proceeds of the issuance by Holdings or a Parent of, (A) Equity Interests (or capital contributions in respect thereof) of Holdings or a Parent after the Original Effective Date to the extent not Otherwise Applied or (B) Qualified Holdings Discount Debt, plus any fees and expenses in connection with such conversion, exchange, redemption, repurchase, prepayment, defeasance or other retirement;

(iii)so long as no Default or Event of Default has occurred and is continuing or would result therefrom, the prepayment, redemption, defeasance, repurchase or other retirement of Specified Indebtedness for an aggregate purchase price not to exceed the Available Amount; and

(iv)refinancings of Indebtedness to the extent the Indebtedness being incurred in connection with such refinancing is permitted by Section 6.01.

SECTION 6.09.Transactions with Affiliates.  Neither Holdings nor the Borrower will, nor will they permit any Subsidiary to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except

(a)transactions that are at prices and on terms and conditions not less favorable to Holdings, the Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties,

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(b)(i) transactions between or among the Borrower and the Subsidiary Loan Parties, and (ii) transactions between or among the Borrower and its Subsidiaries in the ordinary course of business,

(c)any investment permitted under Section 6.04(iv), 6.04(v), 6.04(vii) or 6.04(xiii),

(d)any Indebtedness permitted under Section 6.01(a)(v) and Section 6.01(a)(xii),

(e)any Restricted Payment permitted under Section 6.08,

(f)loans or advances to employees permitted under Section 6.04,

(g)any lease entered into between the Borrower or any Subsidiary, as lessee, and any of the Affiliates (as of the Original Effective Date) of the Borrower or entity controlled by such Affiliates, as lessor, which is approved in good faith by a majority of the disinterested members of the Board of Directors of the Borrower,

(h)so long as no Default described in Section 7.01(b) and no Event of Default has occurred and is continuing, the Borrower may pay, or may pay cash dividends to enable Holdings to pay, (A) customary management, consulting, monitoring or advisory fees to the Sponsor or any Sponsor Affiliates in an aggregate amount not greater than $2,500,000 during any fiscal year (plus any unpaid management, consulting, monitoring or advisory fees within such amount accrued in any prior year) and (B) fees in respect of any financings, acquisitions or dispositions with respect to which the Sponsor or any Sponsor Affiliate acts as an adviser to Holdings, the Borrower or any Subsidiary in an amount not to exceed 2.0% of the value of any such transaction,

(i)any contribution to the capital of Holdings directly or indirectly by the Permitted Investors or any purchase of Equity Interests of Holdings by the Permitted Investors not prohibited by this Agreement,

(j)the payment of reasonable fees to directors of Holdings, the Borrower or any Subsidiary who are not employees of Holdings, the Borrower or any Subsidiary, and compensation and employee benefit arrangements paid to, and indemnities provided for the benefit of, directors, officers or employees of Holdings, the Borrower or any Subsidiary in the ordinary course of business,

(k)any issuances of securities or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment agreements, stock options and stock ownership plans approved by the Borrower’s or Holdings’ Board of Directors (or a committee thereof),

(l)transactions pursuant to agreements set forth on Schedule 6.09 and any amendments thereto to the extent such amendments are not materially less favorable to the Borrower or such Subsidiary Loan Party than those provided for in the original agreements,

(m)employment, change in control and severance arrangements entered into in the ordinary course of business and approved by the Borrower’s or Holdings’ Board of Directors (or a committee thereof) between a Parent, Holdings, the Borrower or any Subsidiary and any employee thereof, and

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(n)payments by the Borrower or any of its Subsidiaries of reasonable insurance premiums to, and any borrowings or dividends received from, any Insurance Subsidiary.

SECTION 6.10.Restrictive Agreements.

(a)Subject to clauses (b) through (d) below, neither Holdings nor the Borrower will, nor will they permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (i) the ability of Holdings, the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets or (ii) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary.

(b)The foregoing clause (a) shall not apply to restrictions and conditions (i) imposed by law or by any Loan Document, Qualified Holdings Discount Debt or documentation governing any Permitted Debt Securities, or Indebtedness of a Foreign Subsidiary permitted to be incurred under this Agreement (provided that such restrictions shall apply only to such Foreign Subsidiary), (ii) existing on the Original Effective Date identified on Schedule 6.10 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (iii) contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iv) imposed on any Consolidated Practice by (and for the benefit of) any Loan Party and (v) imposed by any customary provisions restricting assignment of any agreement entered into the ordinary course of business.

(c)The foregoing clause (a)(i) shall not apply to restrictions or conditions (i) imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (ii) imposed by customary provisions in leases restricting the assignment thereof.

(d)The foregoing clause (a)(ii) shall not apply to customary provisions in joint venture agreements relating to purchase options, rights of first refusal or call or similar rights of a third party that owns Equity Interests in such joint venture.

SECTION 6.11.Amendment of Material Documents.  Neither Holdings nor the Borrower will, nor will they permit any Subsidiary to, amend, modify or waive any of its rights under (a) [reserved], (b) the documentation governing any Permitted Debt Securities or (c) its certificate of incorporation, by-laws or other organizational documents, in each case to the extent such amendment, modification or waiver would be materially adverse to the Lenders.

SECTION 6.12.[Reserved].

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SECTION 6.13.Leverage Ratio.  The Borrower will not permit the Leverage Ratio as of any date set forth below to exceed the ratio set forth opposite such date:

Date	Ratio
June 30, 2011	6.00 to 1.00
September 30, 2011	6.00 to 1.00
December 31, 2011	5.75 to 1.00
March 31, 2012	5.50 to 1.00
June 30, 2012	5.25 to 1.00
September 30, 2012	5.00 to 1.00
December 31, 2012	4.75 to 1.00
March 31, 2013	4.50 to 1.00
June 30, 2013	4.50 to 1.00
September 30, 2013	4.50 to 1.00
December 31, 2013	4.50 to 1.00
March 31, 2014	5.00 to 1.00
June 30, 2014	5.00 to 1.00
September 30, 2014	5.00 to 1.00
December 31, 2014	5.00 to 1.00
March 31, 2015	5.00 to 1.00
June 30, 2015	5.00 to 1.00
September 30, 2015	5.00 to 1.00
December 31, 2015	5.75 to 1.00
March 31, 2016	5.75 to 1.00
June 30, 2016	5.75 to 1.00
September 30, 2016	5.75 to 1.00
December 31, 2016	5.75 to 1.00

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Date	Ratio
March 31, 2017	5.75 to 1.00
June 30, 2017	5.75 to 1.00
September 30, 2017	5.75 to 1.00
December 31, 2017	5.75 to 1.00
March 31, 2018	5.75 to 1.00

SECTION 6.14.Maximum Capital Expenditures.

(a)The Borrower will not, nor will it permit any Subsidiary to, incur or make any Capital Expenditures except and as set forth below:

Fiscal Year	Maximum Capital Expenditures
2011	$125.0 million
2012	$125.0 million
2013	$125.0 million
2014	$125.0 million
2015	$125.0 million
2016	$125.0 million
2017	$125.0 million
2018	$125.0 million

; provided that if the aggregate amount of Capital Expenditures made in any fiscal year shall be less than the maximum amount of Capital Expenditures permitted under this Section 6.14 for such fiscal year (including any carryover), then an amount of such shortfall not exceeding 50% of such maximum amount (not including any carryover) may be added to the amount of Capital Expenditures permitted under this Section 6.14 for the immediately succeeding (but not any other) fiscal year.

ARTICLE VII

Events of Default

SECTION 7.01.Events of Default.  If any of the following events (any such event, an “Event of Default”) shall occur:

(a)the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

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(b)the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in paragraph (a) of this Section 7.01) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three Business Days;

(c)any representation or warranty made or deemed made by or on behalf of Holdings, the Borrower or any Subsidiary in or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect in any material respect (except to the extent any such representation or warranty is qualified by “materially,” “Material Adverse Effect” or a similar term, in which case such representation or warranty shall prove to have been incorrect in any respect) when made or deemed made;

(d)Holdings or the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.03, 5.04 (with respect to the existence of Holdings and the Borrower), 5.11 or in Article VI;

(e)Holdings, the Borrower or any Subsidiary Loan Party shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in paragraph (a), (b) or (d) of this Section 7.01), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender);

(f)Holdings, the Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable (after giving effect to any applicable grace period);

(g)any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity, provided that this paragraph (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets (to the extent not prohibited under this Agreement) securing such Indebtedness;

(h)an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of Holdings, the Borrower or any Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

(i)Holdings, the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding

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or petition described in paragraph (h) of this Section 7.01, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any formal action for the purpose of effecting any of the foregoing;

(j)Holdings, the Borrower or any Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;

(k)one or more judgments for the payment of money (to the extent not paid or covered by insurance provided by a carrier that has acknowledged its obligation to pay such claim in writing and that has a credit rating of at least “A” by A.M. Best Company, Inc.) in an aggregate amount in excess of $50,000,000 shall be rendered against Holdings, the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of Holdings, the Borrower or any Subsidiary to enforce any such judgment;

(l)an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and the Subsidiaries in an aggregate amount exceeding $50,000,000 for all periods;

(m)any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party not to be, a valid and perfected Lien on any Collateral with a fair value in excess of $5,000,000, with the priority required by the applicable Security Document, except (i) as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents or (ii) as a result of the Administrative Agent’s failure to maintain possession of any stock certificates, promissory notes or other instruments delivered to it under the Collateral Agreement;

(n)any Loan Document shall for any reason be asserted by any Loan Party not to be a legal, valid and binding obligation of any party thereto;

(o)the Guarantees of the Obligations by Holdings and the Subsidiary Loan Parties pursuant to the Collateral Agreement shall cease to be in full force and effect (other than in accordance with the terms of the Loan Documents) or shall be asserted by Holdings, the Borrower or any Subsidiary Loan Party not to be in effect or not to be legal, valid and binding obligations; or

(p)a Change in Control shall occur;

then, and in every such event (other than an event with respect to the Borrower described in paragraph (h) or (i) of this Section 7.01), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times:  (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower

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accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in paragraph (h) or (i) of this Section 7.01, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

SECTION 7.02.Borrower’s Right to Cure.

(a)Notwithstanding anything to the contrary contained in Section 7.01, in the event that the Borrower fails to comply with the requirements of the Financial Performance Covenant for any Fiscal Quarter, from the first day of such Fiscal Quarter until the date that is ten days subsequent to the date on which financial statements with respect to the fiscal period for such Financial Performance Covenant is being measured are required to be delivered pursuant to Section 5.01, Holdings shall have the right to issue Permitted Securities, the proceeds of which Holdings will contribute in cash to the Borrower as common equity (collectively, the “Cure Right”); provided that at the Borrower’s option, the Borrower may elect to exercise such Cure Right prior to the date of the delivery of the applicable financial statements if the Borrower reasonably determines that it will fail to comply with the requirements of the Financial Performance Covenant upon the delivery of such financial statements, and upon the receipt by the Borrower of such cash (the “Cure Amount”) pursuant to the exercise by the Borrower of such Cure Right the Financial Performance Covenant shall be recalculated giving effect to the following pro forma adjustments:

(i)Consolidated EBITDA shall be increased, solely for the purpose of measuring the Financial Performance Covenant at the end of the applicable Fiscal Quarter and applicable subsequent periods which include such Fiscal Quarter and not for any other purpose under this Agreement, by an amount equal to the Cure Amount; and

(ii)if, after giving effect to the foregoing recalculations, the Borrower shall then be in compliance with the requirements of the Financial Performance Covenant, the Borrower shall be deemed to have satisfied the requirements of the Financial Performance Covenant as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or default of the Financial Performance Covenant that had occurred shall be deemed cured for the purposes of this Agreement.

(b)Notwithstanding anything herein to the contrary, (a) in each four-Fiscal-Quarter period there shall be at least two Fiscal Quarters in which the Cure Right is not exercised and no more than five Cure Rights shall be exercised during the term of this Agreement, (b) the Cure Amount shall be no greater than the amount required for purposes of complying with the Financial Performance Covenant and (c) the Cure Amount shall be set forth in an Officer’s Certificate delivered to the Administrative Agent.

SECTION 7.03.Exclusion of Immaterial Subsidiaries.  Solely for the purposes of determining whether a Default has occurred under clause (h) or (i) of Section 7.01, any reference in any such clause to any Subsidiary shall be deemed not to include any Subsidiary affected by any event or circumstance referred to in any such clause that did not, as of the last day of the fiscal quarter of the Borrower most recently ended, have assets with a value in excess of 5% of the consolidated total assets of the Borrower and the Subsidiaries or 5% of the total revenues of the Borrower and the Subsidiaries as of such date; provided that if it is necessary to exclude more than one Subsidiary from clause (h) or (i) of Section 7.01 pursuant to this Section 7.03 in order to avoid an Event of Default thereunder, all excluded Subsidiaries

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shall be considered to be a single consolidated Subsidiary for purposes of determining whether the condition specified above is satisfied.

ARTICLE VIII

The Agents

SECTION 8.01.The Agents.  Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto.  For purposes of this Article VIII, all references to the Administrative Agent shall be deemed to be references to both the Administrative Agent and the Collateral Agent.

The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.

The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents.  Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 2.05(j) and Section 9.02), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Holdings, the Borrower or any of the Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity.  The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or willful misconduct.  The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by Holdings, the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person.  The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon.  The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other

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experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more subagents appointed by the Administrative Agent.  The Administrative Agent and any such subagent may perform any and all its duties and exercise its rights and powers through their respective Related Parties.  The exculpatory provisions of the preceding paragraphs shall apply to any such subagent and to the Related Parties of each Administrative Agent and any such subagent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

The Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower.  Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor.  If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank.  Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder.  The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor.  After the Administrative Agent’s resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its subagents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or related agreement or any document furnished hereunder or thereunder.  The Lenders identified in this Agreement as a Syndication Agent and a Documentation Agent shall not have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders.  Without limiting the foregoing, no Syndication Agent nor any Documentation Agent shall have or be deemed to have a fiduciary relationship with any Lender.

Each Lender irrevocably agrees that the Administrative Agent may enter into the First Lien Intercreditor Agreement and the Second Lien Intercreditor agreement, without any further consent from any Secured Party, in connection with any incurrence by the Borrower of Permitted Debt Securities and bind the Secured Parties thereby.

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ARTICLE IX

Miscellaneous

SECTION 9.01.Notices.

(a)Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

(i)if to the Borrower, to Select Medical Corporation, 4716 Old Gettysburg Road, P.O. Box 2034, Mechanicsburg, PA 17055, Attention:  Michael E. Tarvin (Telecopy No. (717) 975-9981);

(ii)if to the Administrative Agent, to JPMorgan Chase Bank, N.A., 270 Park Avenue, 4th Floor, New York, New York 10017, Attention of Dawn Lee Lum (Telecopy No. (212) 270-2472), with a copy to JPMorgan Chase Bank, N.A., Loan and Agency Services, 1111 Fannin Street, 10th Floor, Houston, TX 77002, Attention:  John Ngo (Telecopy No. (713) 750-2931);

(iii)if to the Issuing Bank, to JPMorgan Chase Bank, N.A., Loan and Agency Services, 1111 Fannin Street, 10th Floor, Houston, TX 77002, Attention:  John Ngo (Telecopy No. (713) 750-2931);

(iv)if to the Swingline Lender, to JPMorgan Chase Bank, N.A., Loan and Agency Services, 1111 Fannin Street, 10th Floor, Houston, TX 77002, Attention:  John Ngo (Telecopy No. (713) 750-2931);

(v)if to the Collateral Agent, to JPMorgan Chase Bank, N.A., Loan and Agency Services, 1111 Fannin Street, 10th Floor, Houston, TX 77002, Attention:  John Ngo (Telecopy No. (713) 750-2931); and

(vi)if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

(b)Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender.  The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.

(c)Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the Administrative Agent (and, in the case of the Administrative Agent, by written notice to the Borrower).  All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

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SECTION 9.02.Waivers; Amendments.

(a)No failure or delay by the Administrative Agent, the Issuing Bank, the Collateral Agent, the Swingline Lender or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power.  The rights and remedies of the Administrative Agent, the Issuing Bank, the Collateral Agent, the Swingline Lender and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have.  No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 9.02, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender, the Collateral Agent, the Swingline Lender or the Issuing Bank may have had notice or knowledge of such Default at the time.

(b)Except as provided in Section 2.20 with respect to an Additional Credit Extension Amendment (or to give effect to any restatement of this Agreement, the substantive terms of which are otherwise permitted hereby), neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by Holdings, the Borrower and the Required Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Loan Party or Loan Parties that are parties thereto, in each case with the consent of the Required Lenders; provided that no such agreement shall

(i)increase the Commitment of any Lender without the written consent of such Lender,

(ii)reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby,

(iii)postpone the maturity of any Loan, or any scheduled date of payment of the principal amount of any Tranche B Term Loan under Section 2.10, the required date of reimbursement of any LC Disbursement, or any date for the payment of any interest or fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby,

(iv)change Section 2.18(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender adversely affected thereby,

(v)change any of the provisions of this Section 9.02 or the percentage set forth in the definition of “Required Lenders,” “Required Revolving Lenders,” “Required 2018 Extended Revolving Lenders” or any other provision of any Loan Document specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Lender (or each Lender of such Class, as applicable),

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(vi)release Holdings or any Subsidiary Loan Party from its Guarantee under the Collateral Agreement (except as provided in Section 9.15 or in the Collateral Agreement) or limit its liability in respect of such Guarantee, without the written consent of each Lender,

(vii)release all or substantially all the Collateral from the Liens of the Security Documents (except as provided in Section 9.15 or in the Collateral Agreement), without the written consent of each Lender,

(viii)change any provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of any Class differently than those holding Loans of any other Class, without the written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each adversely affected Class, or

(ix)expressly change or waive any condition precedent in Section 4.02 to any Revolving Borrowing or 2018 Extended Revolving Borrowing, including, without limitation, the related defined terms therein to the extent applicable to such section, without the written consent of the Required Revolving Lenders or Required 2018 Extended Revolving Lenders, as applicable,

provided, further, that (A) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Issuing Bank or the Swingline Lender without the prior written consent of the Administrative Agent, the Issuing Bank or the Swingline Lender, as applicable, and (B) any waiver, amendment or modification of this Agreement that by its terms affects the rights or duties under this Agreement of the Revolving Lenders or the 2018 Extended Revolving Lenders (but not the Tranche B Lenders) or the Tranche B Lenders (but not the Revolving Lenders or 2018 Extended Revolving Lenders) or the Revolving Lenders (but not the 2018 Extended Revolving Lenders or Tranche B Lenders) or the 2018 Extended Revolving Lenders (but not the Revolving Lenders or the Tranche B Lenders) may be effected by an agreement or agreements in writing entered into by Holdings, the Borrower and requisite percentage in interest of the affected Class of Lenders that would be required to consent thereto under this Section 9.02(b) if such Class of Lenders were the only Class of Lenders hereunder at the time.  In connection with any proposed amendment, modification, waiver or termination (a “Proposed Change”) requiring the consent of all affected Lenders, if the consent of the Required Lenders to such Proposed Change is obtained, but the consent to such Proposed Change of other Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained as described in this Section 9.02(b) being referred to as a “Non-Consenting Lender”), then, so long as the Lender that is acting as the Administrative Agent is not a Non-Consenting Lender, at the Borrower’s request, any assignee that is acceptable to the Administrative Agent shall have the right, with the Administrative Agent’s consent, to purchase from such Non-Consenting Lender, and such Non-Consenting Lender agrees that it shall, upon the Borrower’s request, sell and assign to such assignee, at no expense to such Non-Consenting Lender, all the Commitments, Tranche B Term Loans and Revolving Exposure or 2018 Extended Revolving Exposure of such Non-Consenting Lender for an amount equal to the principal balance of all Tranche B Term Loans and Revolving Loans or 2018 Extended Revolving Loans (and funded participations in Swingline Loans and unreimbursed LC Disbursements) held by such Non-Consenting Lender and all accrued interest and fees with respect thereto through the date of sale (including amounts under Sections 2.15, 2.16 and 2.17), such purchase and sale to be consummated pursuant to an executed Assignment and Assumption in accordance with Section 9.04(b) (which Assignment and Assumption need not be signed by such Non-Consenting Lender).

(c)Notwithstanding the provisions of clause (b), this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent, Holdings and the Borrower (i) to add one or more additional credit facilities to this Agreement and to

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permit the extensions of credit from time to time thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Tranche B Term Loans, the Revolving Loans and the 2018 Extended Revolving Loans and the accrued interest and fees in respect thereof, and (ii) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders.  In addition, this Agreement may be amended with the written consent of the Administrative Agent, Holdings, the Borrower and the Lenders providing the relevant Replacement Term Loans (as defined below) to permit the refinancing of all outstanding Tranche B Term Loans (the “Refinanced Term Loans”) with a replacement term loan tranche hereunder (the “Replacement Term Loans”); provided that (i) the aggregate principal amount of such Replacement Term Loans shall not exceed the aggregate principal amount of such Refinanced Term Loans, (ii) the Applicable Rate for such Replacement Term Loans shall not be higher than the Applicable Rate for such Refinanced Term Loans, (iii) the weighted average life to maturity of such Replacement Term Loans shall not be shorter than the weighted average life to maturity of such Refinanced Term Loans at the time of such refinancing (except to the extent of nominal amortization for periods where amortization has been eliminated as a result of prepayment of the Tranche B Term Loans) and (iv) all other terms applicable to such Replacement Term Loans shall be substantially identical to, or less favorable to the Lenders providing such Replacement Term Loans than, those applicable to such Refinanced Term Loans, except to the extent necessary to provide for covenants and other terms applicable to any period after the latest final maturity of the Tranche B Term Loans in effect immediately prior to such refinancing.

(d)Notwithstanding anything in this Section 9.02 to the contrary, (a) technical and conforming modifications to the Loan Documents may be made with the consent of the Borrower and the Administrative Agent to the extent necessary (i) to integrate any Incremental Term Loans, any Incremental Revolving Commitments, any Extended Term Loans or any Extended Revolving Commitments or (ii) to cure any ambiguity, omission, defect or inconsistency and (b) without the consent of any Lender or Issuing Bank, the Loan Parties and the Administrative Agent or any collateral agent may (in their respective sole discretion, or shall, to the extent required by any Loan Document) enter into (x) any amendment, modification or waiver of any Loan Document, or enter into any new agreement or instrument, to effect the granting, perfection, protection, expansion or enhancement of any security interest in any Collateral or additional property to become Collateral for the benefit of the Secured Parties or as required by local law to give effect to, or protect any security interest for benefit of the Secured Parties, in any property or so that the security interests therein comply with applicable law or this Agreement or in each case to otherwise enhance the rights or benefits of any Lender under any Loan Document or (y) any First Lien Intercreditor Agreement and/or Second Lien Intercreditor Agreement with the holders of Permitted Debt Securities (or any amendment or supplement thereto with respect to additional Permitted Debt Securities).

(e)In the event that this Agreement is amended at any time on or prior to June 11, 2016 and such amendment to this Agreement reduces the Yield applicable to the Series D Tranche B Term Loans on the Restatement Effective Date, the Borrower agrees to pay to the Administrative Agent for the account of each Lender (whether or not such Lender consents to such amendment) a fee in an amount equal to 1.00% of such Lender’s Series D Tranche B Term Loans outstanding on the effective date of such amendment; provided that no such fee shall be payable if a prepayment fee is payable in accordance with Section 2.12(c) related to such amendment.  In the event that this Agreement is amended at any time on or prior to June 11, 2016 and such amendment to this Agreement reduces the Yield applicable to the Series E Tranche B Term Loans on the Restatement Effective Date, the Borrower agrees to pay to the Administrative Agent for the account of each Lender (whether or not such Lender consents to such amendment) a fee in an amount equal to 1.00% of such Lender’s Series E Tranche B Term Loans outstanding on the effective date of such amendment; provided that no such fee shall be payable if a prepayment fee is payable in accordance with Section 2.12(c) related to such amendment.  Notwithstanding the provisions of Section 9.02, this Section 9.02(e) shall not be waived, amended or modified without the written consent of each Lender adversely affected thereby.

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SECTION 9.03.Expenses; Indemnity; Damage Waiver.

(a)The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Agents and their respective Affiliates, including the reasonable fees, charges and disbursements of counsel for the Agents, in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or any Lender, including the reasonable fees, charges and disbursements of any counsel for the Administrative Agent, the Issuing Bank or any Lender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section 9.03, or in connection with the Loans made or Letters of Credit issued hereunder, including all such reasonable out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

(b)The Borrower shall indemnify the Administrative Agent, the Issuing Bank and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”), and hold each Indemnitee harmless, from and against any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any other agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or Release or threat of Release of Hazardous Materials on, at, under or from any Mortgaged Property or any other property currently or formerly owned, leased or operated by the Borrower or any of its Subsidiaries, or any actual or alleged Environmental Liability related in any way to the Borrower or any of its Subsidiaries or their respective properties or operations, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto, provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are finally judicially determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee.

(c)To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent, the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this Section 9.03, each Lender severally agrees to pay to the Administrative Agent, the Issuing Bank or the Swingline Lender, as applicable, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as applicable, was incurred by or asserted against the Administrative Agent, the Issuing Bank or the Swingline Lender in its capacity as such.  For purposes hereof, a Lender’s “pro rata share” shall be determined based upon its share of the aggregate Revolving Exposures, 2018 Extended Revolving Exposures, outstanding Tranche B Term Loans and unused Commitments at the time.

(d)To the extent permitted by applicable law, neither Holdings nor the Borrower shall assert, and each hereby waives, any claim against any Indemnitee, on any theory of liability, for special,

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indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, any Loan or Letter of Credit or the use of the proceeds thereof.

(e)All amounts due under this Section 9.03 shall be payable not later than three days after written demand therefor.

SECTION 9.04.Successors and Assigns.

(a)The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section.  Nothing in this Agreement, express or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section 9.04) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b)(i)  Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:

(1)the Borrower; provided that the Borrower shall be deemed to have consented to an assignment unless it shall have objected thereto by written notice to the Administrative Agent within ten (10) Business Days after having received notice thereof; provided further that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund (as defined below) or, if an Event of Default has occurred and is continuing, any other assignee;

(2)the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment of all or any portion of a Tranche B Term Loan to a Lender, an Affiliate of a Lender or an Approved Fund; and

(3)the Issuing Bank, provided that no consent of the Issuing Bank shall be required for an assignment of all or any portion of a Tranche B Term Loan.

(ii)Assignments shall be subject to the following conditions:

(1)except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans of any Class, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 or, in the case of a Tranche B Term Loan, $1,000,000, unless each of the Borrower and the Administrative Agent otherwise consents; provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing;

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(2)each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement; provided that this clause shall not be construed to prohibit assignment of a proportionate part of all the assigning Lender’s rights and obligations in respect of one Class of Commitments or Loans;

(3)the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and

(4)the assignee, if it is not already a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

For purposes of this Section 9.04(b):

“Approved Fund” means (a) a CLO and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

“CLO” means any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course and is administered or managed by a Lender or an Affiliate of such Lender.

(iii)Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section 9.04, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.03).  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section 9.04.

(iv)The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount and stated interest of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, the Issuing Banks and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by the Borrower, the Issuing Banks and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(v)Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section 9.04 and any written consent to such assignment required by paragraph (b) of this

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Section 9.04, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register.  No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

(c)(i)  Any Lender may, without the consent of the Borrower, the Administrative Agent, the Issuing Banks or the Swingline Lender, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it), provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Administrative Agent, the Issuing Banks and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement, provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant.

(ii)Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and related interest amounts) of each participant’s interest in the Loans or other obligations under this Agreement (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register to any Person (including the identity of any participant or any information relating to a participant’s interest in any Commitments, Loans or its other obligations under this Agreement) except to the extent that the relevant parties, acting reasonably and in good faith, determine that such disclosure is necessary to establish that such Commitment, Loan or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.  Unless otherwise required by the Internal Revenue Service (“IRS”), any disclosure required by the foregoing sentence shall be made by the relevant Lender directly and solely to the IRS.  The entries in the Participant Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent and each Lender shall treat each person whose name is recorded in the Participant Register as the owner of the participation in question for all purposes of this Agreement notwithstanding any notice to the contrary.

(iii)Subject to paragraph (c)(ii) of this Section 9.04, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section 9.04; provided that a Participant shall not be entitled to receive any greater payment under Section 2.15 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent.  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender.  A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.17(e) as though it were a Lender.

(iv)Any Lender may at any time pledge, assign or grant a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge, assignment or grant to secure obligations to a Federal Reserve Bank, and this Section 9.04 shall not apply to any such pledge, assignment or grant of a security interest, provided that no such pledge, assignment or

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grant of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledge or assignee for such Lender as a party hereto.

(v)Notwithstanding any other provision of this Agreement, no Lender will assign its rights and obligations under this Agreement, or sell participations in its rights and/or obligations under this Agreement, to any Person who is (i) listed on the Specially Designated Nationals and Blocked Persons List maintained by the U.S. Department of Treasury Office of Foreign Assets Control (“OFAC”) and/or on any other similar list maintained by OFAC pursuant to any authorizing statute, executive order or regulation or (ii) either (A) included within the term “designated national” as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515 or (B) designated under Section 1(a), 1(b), 1(c) or 1(d) of Executive Order No. 13224, 66 Fed. Reg. 49079 (published September 25, 2001) or similarly designated under any related enabling legislation or any other similar executive orders.

SECTION 9.05.Survival.  All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall have independent significance and be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated.  The provisions of Sections 2.15, 2.16, 2.17 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.

SECTION 9.06.Counterparts; Integration; Effectiveness.  This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 9.07.Severability.  Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 9.08.Right of Setoff.  If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or

98

demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured.  The applicable Lender shall notify the Borrower and the Administrative Agent of such setoff or application, provided that any failure to give or any delay in giving such notice shall not affect the validity of any such setoff or application under this Section 9.08.  The rights of each Lender under this Section 9.08 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

SECTION 9.09.Governing Law; Jurisdiction; Consent to Service of Process.

(a)This Agreement shall be construed in accordance with and governed by the law of the State of New York.

(b)Each of Holdings and the Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against Holdings, the Borrower or their respective properties in the courts of any jurisdiction.

(c)Each of Holdings and the Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section 9.09.  Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d)Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01.  Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 9.10.WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT

99

BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10.

SECTION 9.11.Headings.  Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 9.12.Confidentiality.  Each of the Administrative Agent, the Issuing Banks and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority or self-regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 9.12, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 9.12 or (ii) becomes available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis from a source other than Holdings or the Borrower, provided that such source is not actually known by such disclosing party to be bound by an agreement containing provisions substantially the same as those contained in this Section 9.12.  For the purposes of this Section 9.12, the term “Information” means all information received from Holdings or the Borrower relating to Holdings or the Borrower or its business, other than any such information that is available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by Holdings or the Borrower, provided that, in the case of information received from Holdings, the Borrower or any Subsidiary after the Original Effective Date, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section 9.12 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

SECTION 9.13.Interest Rate Limitation.  Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts that are treated as interest on such Loan under applicable law (collectively, the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section 9.13 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

SECTION 9.14.USA Patriot Act.  Each Lender hereby notifies each Loan Party that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies the

100

Borrower, which information includes the name and address of each Loan Party and other information that will allow such Lender to identify such Loan Party in accordance with the Patriot Act.

SECTION 9.15.Release of Collateral.

(a)Upon any sale or other transfer by any Loan Party of any Collateral that is permitted under this Agreement, or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 9.02 of this Agreement, the security interest in such Collateral shall be automatically released.

(b)Upon the addition of a Succeeding Holdings and satisfaction by such Succeeding Holdings of the Collateral and Guarantee Requirement, the prior Holdings shall be automatically released from all of its obligations under the Security Documents.

SECTION 9.16.No Fiduciary Duty.  In connection with all aspects of each transaction contemplated by this Agreement, the Borrower acknowledges and agrees, and acknowledges the other Loan Parties’ understanding, that (i) each transaction contemplated by this Agreement is an arm’s-length commercial transaction between the Loan Parties, on the one hand, and the Administrative Agent and the Lenders, on the other hand, (ii) in connection with each such transaction and the process leading thereto, the Administrative Agent and the Lenders will act solely as principals and not as agents or fiduciaries of the Loan Parties or any of their stockholders, affiliates, creditors, employees or any other party, (iii) neither the Administrative Agent nor any Lender will assume an advisory or fiduciary responsibility in favor of the Borrower or any of its Affiliates with respect to any of the transactions contemplated hereby or the process leading thereto (irrespective of whether the Administrative Agent or any Lender has advised or is currently advising any Loan Party on other matters) and neither the Administrative Agent nor any Lender will have any obligation to any Loan Party or any of its Affiliates with respect to the transactions contemplated in this Agreement except the obligations expressly set forth herein, (iv) the Administrative Agent and each Lender may be engaged in a broad range of transactions that involve interests that differ from those of the Loan Parties and their affiliates, and (v) neither the Administrative Agent nor any Lender has provided or will provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby and the Loan Parties have consulted and will consult their own legal, accounting, regulatory, and tax advisors to the extent it deems appropriate.  The matters set forth in this Agreement and the other Loan Documents reflect an arm’s-length commercial transaction between the Loan Parties, on the one hand, and the Administrative Agent and the Lenders, on the other hand.  The Borrower agrees that the Loan Parties shall not assert any claims that any Loan Party may have against the Administrative Agent or any Lender based on any breach or alleged breach of fiduciary duty.

101

EX-10.82

Exhibit 10.82

Executive Park West II

4720 Gettysburg Road

Mechanicsburg, PA 17055

First Amendment to Lease Agreement

This First Amendment is made as of this 24th day of February, 2016 by and between Old Gettysburg Associates II, LP (“Landlord”), and Select Medical Corporation (“Tenant”).

BACKGROUND:

A.Landlord and Tenant are parties to that certain Office Lease Agreement dated November 1, 2012 with an effective Commencement date of January 1, 2013 thereto, pursuant to which Landlord leased to Tenant, and Tenant leased from Landlord, approximately 28,048 rentable square feet of space known as Suites 101, 102, 103, 104, 201A, 202, 301, 303, 304 and 401 in the building located at 4720 Gettysburg Road, Mechanicsburg, Pennsylvania.  All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Lease.

B.Landlord and Tenant now desire to amend the Lease as hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and intending to be legally bound hereby, Landlord and Tenant agree as follows:

Effective April 1, 2016 the following terms contained in the Basic Lease shall be amended as follows:

1.Landlord and Tenant hereby agree that Tenant shall add to the Master Lease and occupy an additional 4,926 RSF of space known as Suite 203.

2.The first month’s rent for this space will commence as of April 1, 2016 and will expire on December 31, 2022.

3.The rental rate for Suite 203 shall be the same as the rental rate for the Master Lease.

4.All of the Lease terms and conditions of the existing Master Lease shall be applicable to Suite 203.

All other terms and conditions contained in the Lease and not amended hereby remain in full force and effect.

Landlord and Tenant have caused this First Amendment to be duly executed.

Landlord:			Old Gettysburg Associates II, LP
By:	/s/ John M. Ortenzio
	John M. Ortenzio, Manager of the General Partner
Date: February 24, 2016
Tenant:		Select Medical Corporation
By:	/s/ Michael E. Tarvin
	Michael E. Tarvin
Title:	Executive Vice President, General Counsel and Secretary
Date: February 24, 2016

EX-12

Exhibit 12

Select Medical Holdings Corporation

Ratio of Earnings to Fixed Charges

(unaudited)

	For the Year Ended December 31,
	2011		2012		2013		2014		2015
Pre-tax income from operations before adjustments for non-controlling interests in consolidated subsidiaries or earnings (loss) from equity investees	$	180,807	$	235,845	$	195,325	$	196,753	$	191,621
Fixed charges:
Interest expense and amortization of debt discount and premium on all indebtedness	99,216		94,950		87,364		85,446		112,816
Capitalized interest	304		153		242		381		2,434
Rentals:
Buildings - 33% (A)	39,070		40,973		40,815		42,460		55,428
Office and other equipment - 33% (A)	15,010		14,577		13,513		13,341		14,832
Total fixed charges	$	153,600	$	150,653	$	141,934	$	141,628	$	185,510
Pre-tax income from operations before adjustment for non-controlling interests in consolidated subsidiaries or earnings (loss) from equity investees plus fixed charges, less preferred stock dividend requirements of consolidated subsidiaries less capitalized interest	$	334,103	$	386,345	$	337,017	$	338,000	$	374,697
Ratio of earnings to fixed charges	2.18		2.56		2.37		2.39		2.02

(A)  The Company uses 33% to estimate the interest on its rentals.   This percentage is a reasonable approximation of the interest factor.

EX-21.1

Exhibit 21.1

SUBSIDIARIES

NAME	Jurisdiction of Organization
ACC Capital, LLC	Delaware
Advantage Rehabilitation Clinics, Inc.	Massachusetts
Allevant Solutions, LLC	Delaware
Ambulatory Care Solutions of Arkansas LLC	Arkansas
Ambulatory Care Solutions of Ohio LLC	Ohio
Ambulatory Care Solutions, LLC	Indiana
American Current Care of Arizona, P.A.	Arizona
American Current Care of Arkansas, P.A.	Arkansas
American Current Care of California, A Medical Corporation	California
American Current Care of Delaware, P.A.	Delaware
American Current Care of Hawaii, Prof. Corp.	Hawaii
American Current Care of Illinois, P.C.	Illinois
American Current Care Of Kansas, P.A.	Kansas
American Current Care of Massachusetts, P.C.	Massachusetts
American Current Care of Michigan, P.C.	Michigan
American Current Care of Missouri, P.C.	Missouri
American Current Care of Nebraska, P.C.	Nebraska
American Current Care of New Jersey PA	New Jersey
American Current Care of North Carolina, P.C.	North Carolina
American Current Care of Ohio, P.A., Co.	Ohio
American Current Care, P.A.	Texas
American Transitional Hospitals, LLC	Delaware
Argosy Health, LLC	Delaware
Baseline Rehabilitation, Inc.	Florida
California Rehabilitation Institute, LLC	Delaware
Caritas Rehab Services, LLC	Kentucky
Cleveland Clinic Rehabilitation Hospitals, LLC	Delaware
CM Occupational Health, Limited Liability Company	Maine
Community Rehab Centers of Massachusetts, Inc.	Massachusetts
Concentra Akron, L.L.C.	Delaware
Concentra Arkansas, L.L.C.	Delaware
Concentra Group Holdings, LLC	Delaware
Concentra Health Services, Inc.	Delaware
Concentra Holdings, Inc.	Delaware
Concentra Inc.	Delaware
Concentra Integrated Services, Inc.	Massachusetts
Concentra Laboratory, L.L.C.	Delaware
Concentra Occupational Health Research Institute	Texas

Concentra Occupational Healthcare Harrisburg, L.P.	Pennsylvania
Concentra Operating Corporation	Delaware
Concentra Primary Care of New Jersey PA	New Jersey
Concentra Primary Care of Ohio, P.A., Co.	Ohio
Concentra Primary Care, P.A.	Texas
Concentra Solutions, Inc.	Delaware
Concentra South Carolina, L.L.C.	Delaware
Concentra St. Louis, L.L.C.	Delaware
Concentramark, Inc.	Delaware
Concentra-UPMC, L.L.C.	Delaware
CRI ES, Inc.	Delaware
Crowley Physical Therapy Clinic, Inc.	Louisiana
Douglas Avery & Associates, Ltd.	Virginia
Eagle Rehab Corporation	Delaware
ES LTACH, LLC	Georgia
FC Select, LLC	Delaware
FC Select II, LLC	Delaware
Fine, Bryant & Wah, Inc.	Maryland
Garrett Rehab Services, LLC	Maryland
GH General, LLC	Texas
GH General-San Antonio, LLC	Texas
GlobalRehab — Fort Worth, LP	Texas
GlobalRehab — San Antonio, LP	Texas
GlobalRehab, LP	Texas
GP Therapy, L.L.C.	Georgia
GR General-Scottsdale, LLC	Texas
Great Lakes Specialty Hospital—Hackley, LLC	Delaware
Great Lakes Specialty Hospital—Oak, LLC	Delaware
GRSH ES, Inc.	Delaware
Gulf Breeze Physical Therapy, Inc.	Florida
Hospital Holdings Corporation	Delaware
Indianapolis Physical Therapy and Sports Medicine, Inc.	Indiana
Intensiva Healthcare Corporation	Delaware
Intensiva Hospital of Greater St. Louis, Inc.	Missouri
Jeffersontown Physical Therapy, LLC	Kentucky
Johnson Physical Therapy, Inc.	Ohio
Joyner Sportsmedicine Institute, Inc.	Pennsylvania
Kentucky Orthopedic Rehabilitation, LLC	Delaware
Kentucky Rehabilitation Services, Inc.	Kentucky
Kessler Institute for Rehabilitation, Inc.	New Jersey
Kessler Orthotic & Prosthetic Services, Inc.	Delaware

Kessler Professional Services, LLC	Delaware
Kessler Rehab Centers, Inc.	Delaware
Kessler Rehabilitation Corporation	Delaware
Kessler Rehabilitation Services, Inc.	New Jersey
KORT Rehabilitation at Home, LLC	Delaware
Madison Rehabilitation Center, Inc.	Connecticut
Metro Rehabilitation Services, Inc.	Michigan
Metro Therapy, Inc.	New York
MJ Acquisition Corporation	Delaware
National Healthcare Resources, Inc.	Delaware
NovaCare Occupational Health Services, Inc.	Delaware
NovaCare Outpatient Rehabilitation East, Inc.	Delaware
NovaCare Outpatient Rehabilitation, Inc.	Kansas
NovaCare Rehabilitation of Ohio, Inc.	Ohio
NovaCare Rehabilitation, Inc.	Minnesota
Occspecialists Corp., A Medical Corporation	California
Occupational Health + Rehabilitation LLC	Delaware
Occupational Health Centers of Arkansas, P.A.	Arkansas
Occupational Health Centers of California, A Medical Corporation	California
Occupational Health Centers of Delaware, P.A.	Delaware
Occupational Health Centers of Georgia, P.C.	Georgia
Occupational Health Centers of Illinois, P.C.	Illinois
Occupational Health Centers Of Kansas, P.A.	Kansas
Occupational Health Centers of Louisiana, A Professional Corporation	Louisiana
Occupational Health Centers of Michigan, P.C.	Michigan
Occupational Health Centers of Nebraska, P.C.	Nebraska
Occupational Health Centers of New Jersey, P.A.	New Jersey
Occupational Health Centers of New York, P.A.	New York
Occupational Health Centers of North Carolina, P.C.	North Carolina
Occupational Health Centers of Ohio, P.A., Co.	Ohio
Occupational Health Centers of The Southwest, P.A. (AZ)	Arizona
Occupational Health Centers of The Southwest, P.A. (TX)	Texas
OHC of Hawaii, Inc.	Hawaii
OHR/Baystate, LLC	Massachusetts
OHR/MMC, Limited Liability Company	Maine
OHRH ES, Inc.	Delaware
OMP Insurance Company, Ltd.	Cayman Islands
OnSite OccMed, P.A.	Texas
Orange County Rehabilitation, LLC	Delaware
OSR Louisiana, LLC	Delaware
Penn State Hershey Rehabilitation, LLC	Delaware

Philadelphia Occupational Health, P.C.	Pennsylvania
PHS Physical Therapy, LLC	Delaware
Pinnacle Health Select Rehabilitation, LLC	Delaware
PR Acquisition Corporation	California
Pro Active Therapy of North Carolina, Inc.	North Carolina
Pro Active Therapy of South Carolina, Inc.	South Carolina
Pro Active Therapy of Virginia, Inc.	Virginia
Pro Active Therapy, Inc.	North Carolina
Professional Sports Care Management, Inc.	Delaware
Professional Therapeutic Services, Inc.	Ohio
Professional Therapy Systems, Inc.	Tennessee
PSHR Physical Therapy, LLC	Delaware
PTSMA, Inc.	Connecticut
RCI (Michigan), Inc.	Delaware
RCI (WRS), Inc.	Delaware
Regency Hospital Company of Macon, LLC	Delaware
Regency Hospital Company of Meridian, L.L.C.	Delaware
Regency Hospital Company of South Atlanta, L.L.C.	Delaware
Regency Hospital Company of South Carolina, L.L.C.	Delaware
Regency Hospital Company, L.L.C.	Delaware
Regency Hospital of Cincinnati, LLC	Delaware
Regency Hospital of Columbus, LLC	Delaware
Regency Hospital of Fort Worth Holdings, LLC	Delaware
Regency Hospital of Fort Worth, LLLP	Delaware
Regency Hospital of Greenville, LLC	Delaware
Regency Hospital of Jackson, LLC	Delaware
Regency Hospital of Minneapolis, LLC	Delaware
Regency Hospital of North Central Ohio, LLC	Delaware
Regency Hospital of Northwest Arkansas, LLC	Delaware
Regency Hospital of Northwest Indiana, LLC	Delaware
Regency Hospital of Southern Mississippi, LLC	Delaware
Regency Hospital of Toledo, LLC	Delaware
Regency Hospitals, LLC	Delaware
Regency Management Company, Inc.	Delaware
Rehab Provider Network of Colorado, Inc.	Colorado
Rehab Provider Network of Florida, Inc.	Florida
Rehab Provider Network of New Mexico, Inc.	New Mexico
Rehab Provider Network of North Carolina, Inc.	North Carolina
Rehab Provider Network of South Carolina, Inc.	Delaware
Rehab Provider Network of Texas, Inc.	Texas
Rehab Provider Network of Virginia, Inc.	Virginia

Rehab Provider Network—East I, Inc.	Delaware
Rehab Provider Network—East II, Inc.	Maryland
Rehab Provider Network—Indiana, Inc.	Indiana
Rehab Provider Network—Michigan, Inc.	Michigan
Rehab Provider Network—New Jersey, Inc.	New Jersey
Rehab Provider Network—Ohio, Inc.	Ohio
Rehab Provider Network—Pennsylvania, Inc.	Pennsylvania
RehabClinics (GALAXY), Inc.	Illinois
RehabClinics (PTA), Inc.	Delaware
RehabClinics (SPT), Inc.	Delaware
RehabClinics, Inc.	Delaware
Rehabilitation Center of Washington, D.C., Inc.	Delaware
Rehabilitation Institute of Denton, LLC	Delaware
RPN of NC, Inc.	Delaware
S.T.A.R.T., Inc.	Massachusetts
Saco Bay Orthopedic and Sports Physical Therapy, Inc.	Maine
Select Employment Services, Inc.	Delaware
Select Hospital Investors, Inc.	Delaware
Select LifeCare Western Michigan, LLC	Delaware
Select Medical International Limited	Cypus
Select Medical of Kentucky, Inc.	Delaware
Select Medical of Maryland, Inc.	Delaware
Select Medical of New York, Inc.	Delaware
Select Medical Property Ventures, LLC	Delaware
Select Medical Rehabilitation Clinics, Inc.	Delaware
Select Medical Rehabilitation Services, Inc.	Delaware
Select NovaCare—KOP, Inc.	Nevada
Select NovaCare—PBG, Inc.	New York
Select NovaCare—PIT, Inc.	Arizona
Select Physical Therapy Holdings, Inc.	Delaware
Select Physical Therapy Network Services, Inc.	Delaware
Select Physical Therapy of Albuquerque, Ltd.	Alabama
Select Physical Therapy of Chicago, Inc.	Illinois
Select Physical Therapy of Colorado Springs Limited Partnership	Alabama
Select Physical Therapy of Connecticut Limited Partnership	Alabama
Select Physical Therapy of Denver, Ltd.	Alabama
Select Physical Therapy of Illinois Limited Partnership	Alabama
Select Physical Therapy of Kendall, Ltd.	Alabama
Select Physical Therapy of Las Vegas Limited Partnership	Alabama
Select Physical Therapy of Lorain Limited Partnership	Alabama
Select Physical Therapy of Louisville, Ltd.	Alabama

Select Physical Therapy of Ohio Limited Partnership	Alabama
Select Physical Therapy of Portola Valley Limited Partnership	Alabama
Select Physical Therapy of Scottsdale Limited Partnership	Alabama
Select Physical Therapy of St. Louis Limited Partnership	Alabama
Select Physical Therapy of West Denver Limited Partnership	Alabama
Select Physical Therapy Orthopedic Services, Inc.	Delaware
Select Physical Therapy Texas Limited Partnership	Alabama
Select Provider Networks, Inc.	Delaware
Select Rehabilitation Hospital—Hershey, Inc.	Delaware
Select Software Ventures, LLC	Delaware
Select Specialty Hospital — Daytona Beach, Inc.	Delaware
Select Specialty Hospital—Akron, LLC	Delaware
Select Specialty Hospital—Ann Arbor, Inc.	Missouri
Select Specialty Hospital—Arizona, Inc.	Delaware
Select Specialty Hospital—Augusta, Inc.	Delaware
Select Specialty Hospital—Beech Grove, Inc.	Missouri
Select Specialty Hospital—Central Pennsylvania, L.P.	Delaware
Select Specialty Hospital—Charleston, Inc.	Delaware
Select Specialty Hospital—Cincinnati, Inc.	Missouri
Select Specialty Hospital—Colorado Springs, Inc.	Delaware
Select Specialty Hospital—Columbus, Inc.	Delaware
Select Specialty Hospital—Dallas, Inc.	Delaware
Select Specialty Hospital—Danville, Inc.	Delaware
Select Specialty Hospital—Denver, Inc.	Delaware
Select Specialty Hospital—Des Moines, Inc.	Delaware
Select Specialty Hospital—Durham, Inc.	Delaware
Select Specialty Hospital—Erie, Inc.	Delaware
Select Specialty Hospital—Evansville, Inc.	Missouri
Select Specialty Hospital—Evansville, LLC	Delaware
Select Specialty Hospital—Flint, Inc.	Missouri
Select Specialty Hospital—Fort Smith, Inc.	Missouri
Select Specialty Hospital—Fort Wayne, Inc.	Missouri
Select Specialty Hospital—Gainesville, Inc.	Delaware
Select Specialty Hospital—Greensboro, Inc.	Delaware
Select Specialty Hospital—Grosse Pointe, Inc.	Delaware
Select Specialty Hospital—Gulf Coast, Inc.	Missouri
Select Specialty Hospital—Houston, L.P.	Delaware
Select Specialty Hospital—Jackson, Inc.	Delaware
Select Specialty Hospital—Johnstown, Inc.	Missouri
Select Specialty Hospital—Kalamazoo, Inc.	Delaware
Select Specialty Hospital—Kansas City, Inc.	Missouri

Select Specialty Hospital—Knoxville, Inc.	Delaware
Select Specialty Hospital—Laurel Highlands, Inc.	Delaware
Select Specialty Hospital—Lexington, Inc.	Delaware
Select Specialty Hospital—Lincoln, Inc.	Delaware
Select Specialty Hospital—Little Rock, Inc.	Delaware
Select Specialty Hospital—Longview, Inc.	Delaware
Select Specialty Hospital—Macomb County, Inc.	Missouri
Select Specialty Hospital—Madison, Inc.	Delaware
Select Specialty Hospital—McKeesport, Inc.	Delaware
Select Specialty Hospital—Memphis, Inc.	Delaware
Select Specialty Hospital—Milwaukee, Inc.	Delaware
Select Specialty Hospital—Nashville, Inc.	Delaware
Select Specialty Hospital—North Knoxville, Inc.	Missouri
Select Specialty Hospital—Northeast New Jersey, Inc.	Delaware
Select Specialty Hospital—Northeast Ohio, Inc.	Missouri
Select Specialty Hospital—Northern Kentucky, LLC	Delaware
Select Specialty Hospital—Northwest Detroit, Inc.	Delaware
Select Specialty Hospital—Oklahoma City, Inc.	Delaware
Select Specialty Hospital—Omaha, Inc.	Missouri
Select Specialty Hospital—Orlando, Inc.	Delaware
Select Specialty Hospital—Palm Beach, Inc.	Delaware
Select Specialty Hospital—Panama City, Inc.	Delaware
Select Specialty Hospital—Pensacola, Inc.	Delaware
Select Specialty Hospital—Phoenix, Inc.	Delaware
Select Specialty Hospital—Pittsburgh/UPMC, Inc.	Delaware
Select Specialty Hospital—Pontiac, Inc.	Missouri
Select Specialty Hospital—Quad Cities, Inc.	Delaware
Select Specialty Hospitals, Inc.	Delaware
Select Specialty Hospital—Saginaw, Inc.	Delaware
Select Specialty Hospital—San Antonio, Inc.	Delaware
Select Specialty Hospital—Savannah, Inc.	Delaware
Select Specialty Hospital—Sioux Falls, Inc.	Missouri
Select Specialty Hospital—South Dallas, Inc.	Delaware
Select Specialty Hospital—Springfield, Inc.	Delaware
Select Specialty Hospital—Tallahassee, Inc.	Delaware
Select Specialty Hospital—Topeka, Inc.	Missouri
Select Specialty Hospital—TriCities, Inc.	Delaware
Select Specialty Hospital—Tulsa, Inc.	Delaware
Select Specialty Hospital—Tulsa/Midtown, LLC	Delaware
Select Specialty Hospital—Western Michigan, Inc.	Missouri
Select Specialty Hospital—Western Missouri, Inc.	Delaware

Select Specialty Hospital—Wichita, Inc.	Missouri
Select Specialty Hospital—Wilmington, Inc.	Missouri
Select Specialty Hospital—Winston-Salem, Inc.	Delaware
Select Specialty Hospital—Youngstown, Inc.	Missouri
Select Specialty Hospital—Zanesville, Inc.	Delaware
Select Specialty—Downriver, LLC	Delaware
Select Subsidiaries, Inc.	Pennsylvania
Select Synergos, Inc.	Delaware
Select Transport, Inc.	Delaware
Select Unit Management, Inc.	Delaware
SelectMark, Inc.	Delaware
SemperCare, Inc.	Delaware
SLMC Finance Corporation	Delaware
SSM Select Rehab St. Louis, LLC	Delaware
St. Mary’s Medical Park Pharmacy, Inc.	Arizona
The Rehab Group, Inc.	Tennessee
The Rehab Group-Murfreesboro, LLC	Tennessee
Therapy Centers of South Carolina, P.A.	South Carolina
Therapy Centers of The Southwest I, P.A.	Texas
TheraWorks, Inc.	Texas
TJ Corporation I, LLC	Delaware
TriHealth Rehabilitation, LLC	Delaware
U.S. Medgroup of Arkansas, P.A.	Arkansas
U.S. Medgroup of Delaware, P.A.	Delaware
U.S. Medgroup of Illinois, P.C.	Illinois
U.S. Medgroup Of Kansas, P.A.	Kansas
U.S. Medgroup of Massachusetts, P.C.	Massachusetts
U.S. Medgroup of Michigan, P.C.	Michigan
U.S. Medgroup of New Jersey, P.A.	New Jersey
U.S. Medgroup of North Carolina, P.C.	North Caroline
U.S. Medgroup of Ohio, P.A., Co.	Ohio
U.S. Medgroup, P.A. (AZ)	Arizona
U.S. Medgroup, P.A. (TX)	Texas
U.S. Regional Occupational Health II of NJ, P.C.	New Jersey
U.S. Regional Occupational Health II, P.C.	Pennsylvania
Valor Healthcare, Inc.	Delaware
Victoria Healthcare, Inc.	Florida
West Gables Rehabilitation Hospital, LLC	Delaware
WWLTACH, LLC	Delaware

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Nos. 333-162407 and 333-174393) of Select Medical Holdings Corporation of our report dated February 26, 2016, relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. We also consent to the reference to us under the heading “Selected Financial Data” in this Form 10-K.

/s/PricewaterhouseCoopers LLP

Philadelphia, PA

February 26, 2016

PricewaterhouseCoopers LLP, 2001 Market Street, Suite 1800, Philadelphia, PA 19103

T: (267) 330 3000 , F: (267) 330 3300, www.pwc.com/us

EX-31.1

EXHIBIT 31.1

SELECT MEDICAL HOLDINGS CORPORATION AND
SELECT MEDICAL CORPORATION
CERTIFICATIONS PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, David S. Chernow, certify that:

1.I have reviewed this annual report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 26, 2016	/s/ David S. Chernow
	David S. Chernow
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

SELECT MEDICAL HOLDINGS CORPORATION AND
SELECT MEDICAL CORPORATION
CERTIFICATIONS PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Martin F. Jackson, certify that:

1.I have reviewed this annual report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 26, 2016	/s/ Martin F. Jackson
	Martin F. Jackson
	Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Select Medical Holdings Corporation and Select Medical Corporation (the “Company”) for the period ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, David S. Chernow and Martin F. Jackson, Chief Executive Officer and Chief Financial Officer, respectively, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

February 26, 2016

/s/David S. Chernow

David S. Chernow

President and Chief Executive Officer

/s/ Martin F. Jackson

Martin F. Jackson

Executive Vice President and Chief Financial Officer

XML

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2015	Feb. 01, 2016	Jun. 30, 2015
Document and Entity Information
Entity Registrant Name	SELECT MEDICAL HOLDINGS CORP
Entity Central Index Key	0001320414
Document Type	10-K
Document Period End Date	Dec. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 1,723,794,194
Entity Common Stock, Shares Outstanding		131,282,798
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	FY

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Current Assets:
Cash and cash equivalents	$ 14,435	$ 3,354
Accounts receivable, net of allowance for doubtful accounts of $46,425 and $61,133 at 2014 and 2015, respectively	603,558	444,269
Current deferred tax asset	28,688	15,991
Prepaid income taxes	16,694	17,888
Other current assets	85,779	46,142
Total Current Assets	749,154	527,644
Property and equipment, net	864,124	542,310
Goodwill	2,314,624	1,642,083
Other identifiable intangibles, net	318,675	72,519
Other assets	180,089	140,253
Total Assets	4,426,666	2,924,809
Current Liabilities:
Bank overdrafts	28,615	21,746
Current portion of long-term debt and notes payable	233,570	10,874
Accounts payable	137,409	108,532
Accrued payroll	120,989	97,090
Accrued vacation	73,977	63,132
Accrued interest	9,401	10,674
Accrued other	133,728	82,376
Total Current Liabilities	737,689	394,424
Long-term debt, net of current portion	2,190,314	1,542,102
Non-current deferred tax liability	218,705	109,203
Other non-current liabilities	133,220	92,855
Total Liabilities	$ 3,279,928	$ 2,138,584
Commitments and contingencies (Note 15)
Redeemable non-controlling interests	$ 238,221	$ 10,985
Stockholders' Equity:
Common stock of Holdings, $0.001 par value, 700,000,000 shares authorized, 131,233,308 and 131,282,798 shares issued and outstanding at 2014 and 2015, respectively	131	131
Common stock of Select, $0.01 par value, 100 shares issued and outstanding	131	131
Capital in excess of par	424,506	413,706
Retained earnings (accumulated deficit)	434,616	325,678
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity	859,253	739,515
Non-controlling interests	49,264	35,725
Total Equity	908,517	775,240
Total Liabilities and Equity	4,426,666	2,924,809
Select
Current Assets:
Cash and cash equivalents	14,435	3,354
Accounts receivable, net of allowance for doubtful accounts of $46,425 and $61,133 at 2014 and 2015, respectively	603,558	444,269
Current deferred tax asset	28,688	15,991
Prepaid income taxes	16,694	17,888
Other current assets	85,779	46,142
Total Current Assets	749,154	527,644
Property and equipment, net	864,124	542,310
Goodwill	2,314,624	1,642,083
Other identifiable intangibles, net	318,675	72,519
Other assets	180,089	140,253
Total Assets	4,426,666	2,924,809
Current Liabilities:
Bank overdrafts	28,615	21,746
Current portion of long-term debt and notes payable	233,570	10,874
Accounts payable	137,409	108,532
Accrued payroll	120,989	97,090
Accrued vacation	73,977	63,132
Accrued interest	9,401	10,674
Accrued other	133,728	82,376
Total Current Liabilities	737,689	394,424
Long-term debt, net of current portion	2,190,314	1,542,102
Non-current deferred tax liability	218,705	109,203
Other non-current liabilities	133,220	92,855
Total Liabilities	$ 3,279,928	$ 2,138,584
Commitments and contingencies (Note 15)
Redeemable non-controlling interests	$ 238,221	$ 10,985
Stockholders' Equity:
Common stock of Holdings, $0.001 par value, 700,000,000 shares authorized, 131,233,308 and 131,282,798 shares issued and outstanding at 2014 and 2015, respectively	0	0
Common stock of Select, $0.01 par value, 100 shares issued and outstanding	0	0
Capital in excess of par	904,375	885,407
Retained earnings (accumulated deficit)	(45,122)	(145,892)
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity	859,253	739,515
Non-controlling interests	49,264	35,725
Total Equity	908,517	775,240
Total Liabilities and Equity	$ 4,426,666	$ 2,924,809

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 61,133	$ 46,425
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	700,000,000	700,000,000
Common stock, shares issued	131,282,798	131,233,308
Common stock, shares outstanding	131,282,798	131,233,308
Select
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 61,133	$ 46,425
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares issued	100	100
Common stock, shares outstanding	100	100

XML

Consolidated Statements of Operations and Comprehensive Income - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Net operating revenues	$ 3,742,736	$ 3,065,017	$ 2,975,648
Costs and expenses:
Cost of services	3,211,541	2,582,340	2,495,476
General and administrative	92,052	85,247	76,921
Bad debt expense	59,372	44,600	37,423
Depreciation and amortization	104,981	68,354	64,392
Total costs and expenses	3,467,946	2,780,541	2,674,212
Income (loss) from operations	274,790	284,476	301,436
Other income and expense:
Loss on early retirement of debt		(2,277)	(18,747)
Equity in earnings of unconsolidated subsidiaries	16,811	7,044	2,476
Gain on sale of equity investment	29,647
Interest expense	(112,816)	(85,446)	(87,364)
Income before income taxes	208,432	203,797	197,801
Income tax expense	72,436	75,622	74,792
Net income	135,996	128,175	123,009
Less: Net income attributable to non-controlling interests	5,260	7,548	8,619
Net income attributable to Select Medical Holdings Corporation and Select Medical Corporation	$ 130,736	$ 120,627	$ 114,390
Income per common share:
Basic (in dollars per share)	$ 1.00	$ 0.91	$ 0.82
Diluted (in dollars per share)	0.99	0.91	0.82
Dividends paid per share	$ 0.10	$ 0.40	$ 0.30
Weighted average shares outstanding:
Basic	127,478	129,026	136,879
Diluted	127,752	129,465	137,047
Select
Net operating revenues	$ 3,742,736	$ 3,065,017	$ 2,975,648
Costs and expenses:
Cost of services	3,211,541	2,582,340	2,495,476
General and administrative	92,052	85,247	76,921
Bad debt expense	59,372	44,600	37,423
Depreciation and amortization	104,981	68,354	64,392
Total costs and expenses	3,467,946	2,780,541	2,674,212
Income (loss) from operations	274,790	284,476	301,436
Other income and expense:
Loss on early retirement of debt		(2,277)	(17,788)
Equity in earnings of unconsolidated subsidiaries	16,811	7,044	2,476
Gain on sale of equity investment	29,647
Interest expense	(112,816)	(85,446)	(84,954)
Income before income taxes	208,432	203,797	201,170
Income tax expense	72,436	75,622	75,971
Net income	135,996	128,175	125,199
Less: Net income attributable to non-controlling interests	5,260	7,548	8,619
Net income attributable to Select Medical Holdings Corporation and Select Medical Corporation	$ 130,736	$ 120,627	$ 116,580

XML

Consolidated Statement of Changes in Equity and Income - USD ($) $ in Thousands	Comprehensive Income Select	Comprehensive Income	Common Stock Select	Common Stock	Capital in Excess of Par Select	Capital in Excess of Par	Retained Earnings (Accumulated Deficit) Select	Retained Earnings (Accumulated Deficit)	Non-controlling Interests Select	Non-controlling Interests	Select	Total
Balance at Dec. 31, 2012			$ 0	$ 141	$ 859,839	$ 473,697	$ 21,478	$ 243,210	$ 28,430	$ 28,430	$ 909,747	$ 745,478
Balance (in shares) at Dec. 31, 2012			0	140,589,000
Increase (Decrease) in Stockholders' Equity
Net income	$ 122,136	$ 119,946					116,580	114,390	5,556	5,556	122,136	119,946
Net income (loss) attributable to redeemable non-controlling interests	3,063	3,063										(3,063)
Total comprehensive income	125,199	123,009
Federal tax benefit of losses contributed by Holdings					1,179						1,179
Net change in dividends payable to Holdings							5,239				5,239
Additional investment by Holdings					1,525						1,525
Dividends declared and paid to Holdings							(226,621)				(226,621)
Dividends paid to common stockholders								(41,961)				(41,961)
Contribution related to restricted stock awards and stock option issuances by Holdings					7,033						7,033
Issuance and vesting of restricted stock						6,220						6,220
Issuance and vesting of restricted stock (in shares)				953,000
Repurchase of common shares				$ (1)		(7,524)		(4,256)				(11,781)
Repurchase of common shares (in shares)				(1,447,000)
Stock option expense						811						811
Exercise of stock options						1,525						$ 1,525
Exercise of stock options (in shares)				166,000								166,600
Distributions to non-controlling interests									(1,839)	(1,839)	(1,839)	$ (1,839)
Purchase of non-controlling interests									261	261	261	261
Other							(18)	(18)			(18)	(18)
Balance at Dec. 31, 2013			$ 0	$ 140	869,576	474,729	(83,342)	311,365	32,408	32,408	818,642	818,642
Balance (in shares) at Dec. 31, 2013			0	140,261,000
Increase (Decrease) in Stockholders' Equity
Net income	126,765	126,765					120,627	120,627	6,138	6,138	126,765	126,765
Net income (loss) attributable to redeemable non-controlling interests	1,410	1,410										(1,410)
Total comprehensive income	128,175	128,175
Additional investment by Holdings					7,355						7,355
Dividends declared and paid to Holdings							(184,100)				(184,100)
Dividends paid to common stockholders								(53,366)				(53,366)
Contribution related to restricted stock awards and stock option issuances by Holdings					12,778						12,778
Issuance and vesting of restricted stock				$ 2		12,078						12,080
Issuance and vesting of restricted stock (in shares)				1,586,000
Tax benefit from stock based awards					3,119	3,119					3,119	3,119
Repurchase of common shares				$ (12)		(76,851)		(53,871)				(130,734)
Repurchase of common shares (in shares)				(11,589,000)
Stock option expense						698						698
Exercise of stock options				$ 1		7,354						$ 7,355
Exercise of stock options (in shares)				975,000								974,969
Distributions to non-controlling interests									(2,893)	(2,893)	(2,893)	$ (2,893)
Issuance of non-controlling interest									1,693	1,693	1,693	1,693
Purchase of non-controlling interests					(7,421)	(7,421)			(1,360)	(1,360)	(8,781)	(8,781)
Other							923	923	(261)	(261)	662	662
Balance at Dec. 31, 2014			$ 0	$ 131	885,407	413,706	(145,892)	325,678	35,725	35,725	775,240	775,240
Balance (in shares) at Dec. 31, 2014			0	131,233,000
Increase (Decrease) in Stockholders' Equity
Net income	138,186	138,186					130,736	130,736	7,450	7,450	138,186	138,186
Net income (loss) attributable to redeemable non-controlling interests	(2,190)	(2,190)										2,190
Total comprehensive income	$ 135,996	$ 135,996
Additional investment by Holdings					1,649						1,649
Dividends declared and paid to Holdings							(28,956)				(28,956)
Dividends paid to common stockholders								(13,129)				(13,129)
Contribution related to restricted stock awards and stock option issuances by Holdings					13,969						13,969
Issuance and vesting of restricted stock						13,916						13,916
Issuance and vesting of restricted stock (in shares)				1,385,000
Tax benefit from stock based awards					1,846	1,846					1,846	1,846
Repurchase of common shares				$ 0		(8,168)		(7,659)				(15,827)
Repurchase of common shares (in shares)				(1,441,000)
Stock option expense						53						53
Exercise of stock options				$ 0		1,649						$ 1,649
Exercise of stock options (in shares)				183,000								183,450
Distributions to non-controlling interests									(9,732)	(9,732)	(9,732)	$ (9,732)
Non-controlling interests acquired in business combination									2,888	2,888	2,888	2,888
Issuance of non-controlling interest					1,689	1,689			12,880	12,880	14,569	14,569
Purchase of non-controlling interests					(194)	(194)			(25)	(25)	(219)	(219)
Other				$ 0	9	9	(1,010)	(1,010)	78	78	(923)	(923)
Balance at Dec. 31, 2015			$ 0	$ 131	$ 904,375	$ 424,506	$ (45,122)	$ 434,616	$ 49,264	$ 49,264	$ 908,517	$ 908,517
Balance (in shares) at Dec. 31, 2015			0	131,360,000

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Operating activities
Net income	$ 135,996	$ 128,175	$ 123,009
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions from unconsolidated subsidiaries	13,969	11,954
Depreciation and amortization	104,981	68,354	64,392
Provision for bad debts	59,372	44,600	37,423
Equity in earnings of unconsolidated subsidiaries	(16,811)	(7,044)	(2,476)
Loss on early retirement of debt		2,277	18,747
Gain on sale of assets and businesses	(1,098)	(1,048)	(581)
Gain on sale of equity investment	(29,647)
Stock compensation expense	14,985	11,186	7,033
Amortization of debt discount, premium and issuance costs	9,543	7,553	8,433
Deferred income taxes	(2,058)	14,311	7,032
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Accounts receivable	(92,572)	(97,802)	(67,145)
Other current assets	(2,503)	(1,729)	(8,167)
Other assets	4,713	(103)	(3,484)
Accounts payable	2,345	5,997	(1,283)
Accrued expenses	7,200	(16,039)	9,590
Net cash provided by operating activities	208,415	170,642	192,523
Investing activities
Purchases of property and equipment	(182,642)	(95,246)	(73,660)
Proceeds from sale of assets	1,767		2,912
Investment in businesses	(2,347)	(4,634)	(34,893)
Proceeds from sale of equity investment	33,096
Acquisition of businesses, net of cash acquired	(1,061,628)	(1,211)	(1,665)
Net cash used in investing activities	(1,211,754)	(101,091)	(107,306)
Financing activities
Borrowings on revolving facilities	1,135,000	910,000	690,000
Payments on revolving facilities	(895,000)	(870,000)	(800,000)
Proceeds from term loans, net of discount	646,875		298,500
Payments on Select term loans	(29,134)	(33,994)	(596,720)
Issuance of 6.375% senior notes, includes premium		111,650	600,000
Repurchase of senior floating rate notes			(167,300)
Repurchase of 7 5/8% senior subordinated notes			(70,000)
Borrowings of other debt	13,374	9,076	15,310
Principle payments on other debt	(18,136)	(14,673)	(10,834)
Debt issuance costs	(23,300)	(4,434)	(18,914)
Proceeds from (repayment of) bank overdrafts	6,869	9,240	(5,330)
Purchase of non-controlling interests	(1,095)	(9,961)
Proceeds from issuance of non-controlling interests	217,065	185
Dividends paid to common stockholders	(13,129)	(53,366)	(41,961)
Tax benefit from stock based awards	1,846	3,119
Repurchase of common stock	(15,827)	(130,734)	(11,781)
Proceeds from issuance of common stock	1,649	7,355	1,525
Distributions to non-controlling interests	(12,637)	(3,979)	(3,537)
Net cash provided by (used in) financing activities	1,014,420	(70,516)	(121,042)
Net increase (decrease) in cash and cash equivalents	11,081	(965)	(35,825)
Cash and cash equivalents at beginning of period	3,354	4,319	40,144
Cash and cash equivalents at end of period	14,435	3,354	4,319
Supplemental Cash Flow Information
Cash paid for interest	103,166	78,812	89,061
Cash paid for taxes	79,420	77,771	64,963
Select
Operating activities
Net income	135,996	128,175	125,199
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions from unconsolidated subsidiaries	13,969	11,954
Depreciation and amortization	104,981	68,354	64,392
Provision for bad debts	59,372	44,600	37,423
Equity in earnings of unconsolidated subsidiaries	(16,811)	(7,044)	(2,476)
Loss on early retirement of debt		2,277	17,788
Gain on sale of assets and businesses	(1,098)	(1,048)	(581)
Gain on sale of equity investment	(29,647)
Stock compensation expense	14,985	11,186	7,033
Amortization of debt discount, premium and issuance costs	9,543	7,553	8,344
Deferred income taxes	(2,058)	14,311	7,032
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Accounts receivable	(92,572)	(97,802)	(67,145)
Other current assets	(2,503)	(1,729)	(8,167)
Other assets	4,713	(103)	(3,484)
Accounts payable	2,345	5,997	(1,283)
Accrued expenses	7,200	(16,039)	14,027
Net cash provided by operating activities	208,415	170,642	198,102
Investing activities
Purchases of property and equipment	(182,642)	(95,246)	(73,660)
Proceeds from sale of assets	1,767		2,912
Investment in businesses	(2,347)	(4,634)	(34,893)
Proceeds from sale of equity investment	33,096
Acquisition of businesses, net of cash acquired	(1,061,628)	(1,211)	(1,665)
Net cash used in investing activities	(1,211,754)	(101,091)	(107,306)
Financing activities
Borrowings on revolving facilities	1,135,000	910,000	690,000
Payments on revolving facilities	(895,000)	(870,000)	(800,000)
Proceeds from term loans, net of discount	646,875		298,500
Payments on Select term loans	(29,134)	(33,994)	(596,720)
Issuance of 6.375% senior notes, includes premium		111,650	600,000
Repurchase of 7 5/8% senior subordinated notes			(70,000)
Borrowings of other debt	13,374	9,076	15,310
Principle payments on other debt	(18,136)	(14,673)	(10,834)
Debt issuance costs	(23,300)	(4,434)	(18,914)
Proceeds from (repayment of) bank overdrafts	6,869	9,240	(5,330)
Purchase of non-controlling interests	(1,095)	(9,961)
Proceeds from issuance of non-controlling interests	217,065	185
Equity investment by Holdings	1,649	7,355	1,525
Dividends paid to Holdings	(28,956)	(184,100)	(226,621)
Tax benefit from stock based awards	1,846	3,119
Distributions to non-controlling interests	(12,637)	(3,979)	(3,537)
Net cash provided by (used in) financing activities	1,014,420	(70,516)	(126,621)
Net increase (decrease) in cash and cash equivalents	11,081	(965)	(35,825)
Cash and cash equivalents at beginning of period	3,354	4,319	40,144
Cash and cash equivalents at end of period	14,435	3,354	4,319
Supplemental Cash Flow Information
Cash paid for interest	103,166	78,812	83,482
Cash paid for taxes	$ 79,420	$ 77,771	$ 64,963

XML

Consolidated Statements of Cash Flows (Parenthetical)	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
7 5/8% senior subordinated notes
Long-term debt and notes payable
Interest rate of debt (as a percent)	7.625%	7.625%	7.625%
6.375% senior notes
Long-term debt and notes payable
Interest rate of debt (as a percent)	6.375%	6.375%	6.375%

XML

Organization and Significant Accounting Policies

12 Months Ended

Dec. 31, 2015

Organization and Significant Accounting Policies

Organization and Significant Accounting Policies

1. Organization and Significant Accounting Policies

Business Description

        Select Medical Corporation ("Select") was formed in December 1996 and commenced operations during February 1997 upon the completion of its first acquisition. Select Medical Holdings Corporation ("Holdings") was formed in October 2004 for the purpose of affecting a leveraged buyout of Select, which was a publicly traded entity. On February 24, 2005, Select merged with a subsidiary of Holdings, which resulted in Select becoming a wholly owned subsidiary of Holdings (the "Merger"). On September 30, 2009 Holdings completed its initial public offering of common stock. At the time of the transaction, generally accepted accounting principles ("GAAP") required that any amounts recorded or incurred (such as goodwill and compensation expense) by the parent as a result of the Merger or for the benefit of the subsidiary be "pushed down" and recorded in Select's consolidated financial statements. Holdings and Select and their subsidiaries are collectively referred to as the "Company." The consolidated financial statements of Holdings include the accounts of its wholly owned subsidiary Select. Holdings conducts substantially all of its business through Select and its subsidiaries.

        The Company is managed through three business segments; specialty hospitals, outpatient rehabilitation, and, as of June 1, 2015, the Concentra segment. Through the specialty hospitals segment, the Company provides long term acute care hospital services and inpatient acute rehabilitative hospital care. The specialty hospitals segment consists of hospitals designed to serve the needs of long term stay acute patients and hospitals designed to serve patients that require intensive medical rehabilitation care. Patients are typically admitted to the Company's specialty hospitals from general acute care hospitals. These patients have specialized needs, and serious and often complex medical conditions such as respiratory failure, neuromuscular disorders, traumatic brain and spinal cord injuries, strokes, non-healing wounds, cardiac disorders, renal disorders, and cancer. The Company operated 123, 129, and 127 specialty hospitals at December 31, 2013, 2014 and 2015, respectively. The Company's outpatient rehabilitation segment consists of clinics and contract services that provide physical, occupational, and speech rehabilitation services. The Company's outpatient rehabilitation patients are typically diagnosed with musculoskeletal impairments that restrict their ability to perform normal activities of daily living. At December 31, 2013, 2014 and 2015, the Company operated 1,006, 1,023, and 1,038 outpatient clinics, respectively. The Company's Concentra segment consists of medical centers and contract services provided at employer worksites and Department of Veterans Affairs community-based outpatient clinics, or "CBOCs", that deliver occupational medicine, consumer health, physical therapy, and veteran's healthcare services. At December 31, 2015, the Company operated 300 medical centers, 138 medical facilities located at the workplaces of Concentra's employer customers, and 33 Department of Veterans Affairs CBOCs. At December 31, 2015, the Company had operations in 46 states and the District of Columbia.

Principles of Consolidation

        The consolidated financial statements include the accounts of the Company, its majority owned subsidiaries, limited liability companies, and limited partnerships the Company and its subsidiaries control through ownership of general and limited partnership or membership interests. All intercompany balances and transactions are eliminated in consolidation.

Use of Estimates

        The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and amounts of revenue and expenses recognized during the period. Actual results could differ materially from those estimates.

Cash and Cash Equivalents

        The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are stated at cost which approximates market value.

Accounts Receivable and Allowance for Doubtful Accounts

        The Company reports accounts receivable at estimated net realizable values. Substantially all of the Company's accounts receivable are related to providing healthcare services to patients whose costs are primarily paid by federal and state governmental authorities, managed care health plans, commercial insurance companies, and workers' compensation programs. Collection of these accounts receivable is the Company's primary source of cash and is critical to its operating performance. The Company's primary collection risks relate to non-governmental payors who insure these patients and deductibles, co-payments, and amounts owed by the patient. Deductibles, co-payments, and amounts owed by the patient are an immaterial portion of the Company's net accounts receivable balance and accounted for approximately 0.2% and 1.2% of the net accounts receivable balance before doubtful accounts at December 31, 2014 and 2015, respectively. The Company's general policy is to verify insurance coverage prior to the date of admission for a patient admitted to the Company's hospitals, or in the case of the Company's outpatient rehabilitation clinics and Concentra medical centers, the Company verifies insurance coverage prior to their first visit. The Company's estimate for the allowance for doubtful accounts is calculated by providing a reserve allowance based upon the age of an account balance. Generally the Company has reserved as uncollectible all governmental accounts over 365 days and non-governmental accounts over 180 days from discharge. This method is monitored based on historical cash collections experience. Collections are impacted by the effectiveness of the Company's collection efforts with non-governmental payors and regulatory or administrative disruptions with the fiscal intermediaries that pay the Company's governmental receivables. Uncollected accounts are written off the balance sheet when they are turned over to an outside collection agency, or when management determines that the balance is uncollectible, whichever occurs first.

Property and Equipment

        Property and equipment are stated at cost, net of accumulated depreciation. Direct internal and external costs of developing software for internal use, including programming and enhancements, are capitalized and depreciated over the estimated useful lives once the software is placed in service. Capitalized software costs are included within furniture and equipment. Software training costs, maintenance, and repairs are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or the term of the lease, as appropriate. The general range of useful lives is as follows:

Leasehold improvements	5 - 15 years
Furniture and equipment	3 - 20 years
Buildings	40 years
Building improvements	5 - 25 years
Land improvements	2 - 25 years

        The Company reviews the realizability of long-lived assets whenever events or circumstances occur which indicate recorded costs may not be recoverable. Gains or losses related to the retirement or disposal of property and equipment are reported as a component of income from operations.

Concentration of Credit Risk

        Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash balances and trade receivables. The Company invests its excess cash with large financial institutions. The Company grants unsecured credit to its patients, most of who reside in the service area of the Company's facilities and are insured under third-party payor agreements. Because of the geographic diversity of the Company's facilities and non-governmental third-party payors, Medicare represents the Company's only significant concentration of credit risk.

Income Taxes

        Deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. As part of the process of preparing its consolidated financial statements, the Company estimates income taxes based on its actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for book and tax purposes. The Company also recognizes as deferred tax assets the future tax benefits from net operating loss carry forwards. The Company evaluates the realizability of these deferred tax assets by assessing their valuation allowances and by adjusting the amount of such allowances, if necessary. Among the factors used to assess the likelihood of realization are projections of future taxable income streams, the expected timing of the reversals of existing temporary differences, and the impact of tax planning strategies that could be implemented to avoid the potential loss of future tax benefits.

        Reserves for uncertain tax positions are established for exposure items related to various federal and state tax matters. Income tax reserves are recorded when an exposure is identified and when, in the opinion of management, it is more likely than not that a tax position will not be sustained and the amount of the liability can be estimated.

Intangible Assets and Liabilities

        Finite-lived intangible assets and liabilities are amortized based on the pattern in which the economic benefits are consumed or otherwise depleted. If such a pattern cannot be reliably determined, other intangible assets are amortized on a straight-line basis over their estimated lives. Goodwill and certain other indefinite-lived intangible assets are not amortized, but instead are subject to periodic impairment evaluations. In performing the quantitative periodic impairment tests, the fair value of the reporting unit is compared to its carrying value, including goodwill and other intangible assets. If the carrying value exceeds the fair value and an impairment condition exists, an impairment loss would be recognized.

        To determine the fair value of its reporting units, the Company uses a discounted cash flow approach. Included in this analysis are assumptions regarding revenue growth rate, future Adjusted EBITDA margin estimates, future general and administrative expense rates, and the industry's weighted average cost of capital and industry specific market comparable Adjusted EBITDA multiples. The Company also must estimate residual values at the end of the forecast period and future capital expenditure requirements. Each of these assumptions requires the Company to use its knowledge of (1) its industry, (2) its recent transactions, and (3) reasonable performance expectations for its operations. If any one of the above assumptions changes or fails to materialize, the resulting decline in the Company's estimated fair value could result in a material impairment charge to the goodwill associated with any one of the reporting units.

        Impairment tests are required to be conducted at least annually, or when events or conditions occur that might suggest a possible impairment. These events or conditions include, but are not limited to, a significant adverse change in the business environment, regulatory environment or legal factors; a current period operating or cash flow loss combined with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these events or conditions could significantly impact an impairment assessment, necessitating an impairment charge. For purposes of goodwill impairment assessment, the Company has defined its reporting units as specialty hospitals, Concentra, outpatient rehabilitation clinics, and contract therapy. Goodwill has been allocated among reporting units based on the relative fair value of those divisions when the Merger occurred in 2005 and based on subsequent acquisitions and dispositions. The Company's most recent impairment assessment was completed during the fourth quarter of 2015 utilizing financial information as of October 1, 2015 and indicated that there was no impairment with respect to goodwill or other recorded intangible assets.

        Identifiable assets and liabilities acquired in connection with business combinations accounted for under the purchase method are recorded at their respective fair values. Deferred income taxes have been recorded to the extent of differences between the fair value and the tax basis of the assets acquired and liabilities assumed. Company management has allocated the intangible assets between identifiable intangibles and goodwill. At December 31, 2015, intangible assets other than goodwill consist of the values assigned to trademarks, certificates of need, accreditations, customer relationships, and leasehold interests. Management believes that the estimated useful lives established are reasonable based on the economic factors applicable to each of the intangible assets.

        The approximate useful life of each class of intangible assets and liabilities is as follows:

Trademarks	Indefinite
Certificates of need	Indefinite
Accreditations	Indefinite
Customer relationships	9 - 17 years
Leasehold interests	2 - 10 years

        The Company reviews the realizability of intangible assets whenever events or circumstances occur which indicate recorded amounts may not be recoverable.

        If the expected future cash flows (undiscounted) are less than the carrying amount of such assets, the Company recognizes an impairment loss for the difference between the carrying amount of the assets and their estimated fair value.

Deferred Financing Costs

        The Company has incurred debt issuance costs related to indebtedness which are recognized as other assets in the consolidated balance sheet. Debt issuance costs are subsequently amortized and recognized as interest expense using the effective interest method over the term of the related indebtedness. Whenever indebtedness is modified from its original terms an evaluation is made whether an accounting modification or accounting extinguishment has occurred in order to determine the accounting treatment.

Due to Third-Party Payors

        Due to third-party payors represents the difference between amounts received under interim payment plans from Medicare and Medicaid for services rendered and amounts estimated to be reimbursed by those third-party payors upon settlement of cost reports.

Insurance Risk Programs

        Under a number of the Company's insurance programs, which include the Company's employee health insurance program, its workers' compensation and professional malpractice liability insurance programs, the Company is liable for a portion of its losses. In these situations the Company accrues for its losses under an occurrence-based approach whereby the Company estimates the losses that will be incurred in a respective accounting period and accrues that estimated liability using actuarial methods. These programs are monitored quarterly and estimates are revised as necessary to take into account additional information. Provisions for losses for professional liability risks retained by the Company at December 31, 2014 and 2015 have been discounted at 3%. At December 31, 2014 and 2015, respectively, the Company had recorded a liability of $101.9 million and $157.4 million related to these programs. If the Company did not discount the provisions for losses for professional liability risks, the aggregate liability for all of the insurance risk programs would be approximately $105.5 million and $165.8 million at December 31, 2014 and 2015, respectively.

Equity Method Investments

        Investments in equity method investees are accounted for using the equity method based upon the level of ownership and/or the Company's ability to exercise significant influence over the operating and financial policies of the investee. Investments of this nature are recorded at original cost and adjusted periodically to recognize the Company's proportionate share of the investees' net income or losses after the date of investment. When net losses from an investment accounted for under the equity method exceeds its carrying amount, the investment balance is reduced to zero. The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company's share of that net income exceeds the share of the net losses not recognized during the period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred. The Company evaluates its investments in companies accounted for using the equity method for impairment when there is evidence or indicators that a decrease in value may be other than temporary. The Company's Other Assets are primarily composed of equity method investments of $99.6 million and $101.4 million as of December 31, 2014 and 2015, respectively. The Company's equity method investments consist principally of non-consolidating interests in inpatient and outpatient rehabilitation businesses. These rehabilitation businesses include a 49.0% interest in BIR, JV, LLP; a 49.0% interest in OHRH, LLC, a 49.0% interest in GlobalRehab—Scottsdale, LLC, a 50.0% interest in Rehabilitation Institute of Denton, LLC, and a 49.0% interest in ES Rehabilitation, LLC as of December 31, 2014 and 2015. The Company's equity method investments had equity in earnings of unconsolidated subsidiaries of $2.5 million, $7.0 million and $16.8 million for the years ended December 31, 2013, 2014 and 2015, respectively.

Non-Controlling Interests

        The ownership interests held by other parties in subsidiaries, limited liability companies and limited partnerships controlled by the Company are classified as non-controlling interests. Non-controlling interests' which are reported in the stockholders' equity section of the Company's consolidated balance sheets, were $35.7 million and $49.3 million as of December 31, 2014 and 2015, respectively.

        Some of our non-controlling ownership interests consist of outside parties that have certain redemption rights that, if exercised, require the Company to purchase the parties ownership interest. These interests are classified and reported as redeemable non-controlling interests and they have been adjusted to their approximate redemption values. The redeemable non-controlling interests' balances reported on the Company's consolidated balance sheets were $11.0 million and $238.2 million as of December 31, 2014 and 2015, respectively. As of December 31, 2014 and 2015, the Company believes the redemption amounts of these ownership interests approximates the fair value of those interests. The changes in the redeemable non-controlling interests amounts for the years ended December 31, 2014 and 2015 are as follows:

Balance at January 1, 2014	$	11,584
Changes in the redemption amounts		(923	)
Net income		1,410
Distributions		(1,086	)
Balance at December 31, 2014	$	10,985
Issuance of ownership interests in Concentra		218,005
Ownership interests acquired in business combination		14,196
Repurchase of ownership interests		(876	)
Changes in the redemption amounts		1,010
Net loss		(2,190	)
Distributions		(2,909	)
Balance at December 31, 2015	$	238,221

        Net income (loss) of entities controlled by the Company that are less than wholly owned require attribution of net income (loss) amounts to each non-controlling ownership interest and to the Company in the consolidated statement of operations and comprehensive income. The net income (loss) attributable to non controlling interests for the years ended December 31, 2013, 2014, and 2015 are as follows:

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
Net income (loss) attributable to non-controlling interests classified as redeemable non-controlling interests	$	3,063	$	1,410	$	(2,190	)
Net income attributable to non-controlling interests classified as equity		5,556		6,138		7,450
Net income attributable to non-controlling interests	$	8,619	$	7,548	$	5,260

Revenue Recognition

        Net operating revenues consists primarily of patient service revenues and revenues generated from therapy services provided to healthcare institutions under contractual arrangements and are recognized as services are rendered.

        Patient service revenue is reported net of provisions for contractual allowances from third-party payors and patients. The Company has agreements with third-party payors that provide for payments to the Company at amounts different from its established billing rates. The differences between the estimated program reimbursement rates and the standard billing rates are accounted for as contractual adjustments, which are deducted from gross revenues to arrive at net operating revenues. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges, per diem, and per visit payments. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined. Accounts receivable resulting from such payment arrangements are recorded net of contractual allowances.

        A significant portion of the Company's net operating revenues are generated directly from the Medicare program. Net operating revenues generated directly from the Medicare program represented approximately 46%, 45% and 36% of the Company's net operating revenues for the years ended December 31, 2013, 2014 and 2015, respectively. Approximately 32% and 24% of the Company's accounts receivable (after allowances for contractual adjustments but before doubtful accounts) are from Medicare at December 31, 2014 and 2015. As a provider of services to the Medicare program, the Company is subject to extensive regulations. The inability of any of the Company's specialty hospitals or outpatient clinics to comply with regulations can result in significant changes in that specialty hospital's or outpatient clinic's net operating revenues generated from the Medicare program.

        Revenues generated under contractual arrangements are comprised primarily of billings for services rendered to nursing homes, hospitals, schools and other third parties.

Stock Based Compensation

        The Company measures the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognizes the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements comprise both stock options and restricted share plans. Employee stock options are valued using the Black-Scholes option valuation method which uses assumptions that relate to the expected volatility of the Company's common stock, the expected dividend yield of the Company's stock, the expected life of the options and the risk free interest rate. Such compensation amounts are amortized over the respective vesting periods or periods of service of the option grant. The Company values restricted stock grants by using the closing market price of its stock on the date of grant.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, which supersedes most of the current revenue recognition requirements. The core principle of the new guidance 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. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. The original standard was effective for fiscal years beginning after December 15, 2016; however, in July 2015, the FASB approved a one-year deferral of this standard, with a new effective date for fiscal years beginning after December 15, 2017. The Company is currently evaluating the standard to determine the impact it will have on its consolidated financial statements.

In April and August 2015, the FASB issued ASU No. 2015-03 and ASU No. 2015-15, Interest—Imputation of Interest, respectively, to simplify the presentation of debt issuance costs. The standard requires debt issuance costs be presented in the balance sheet as a direct deduction from the carrying value of the debt liability. The FASB clarified that debt issuance costs related to line-of-credit arrangements can be presented as an asset and amortized over the term of the arrangement. The guidance is effective for annual fiscal periods beginning after December 15, 2015. The Company will adopt the standard in 2016. As of December 31, 2015, we had approximately $38.0 million in debt issuance costs included in other assets that would be a direct deduction of the debt liability under the new standard.

In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement—Period Adjustments, which changes the reporting requirement for retrospective adjustments to provisional amounts in the measurement period. The amendments in this update require an entity to present separately on the face of the income statement or disclose in the notes, the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The revised guidance is effective for annual fiscal periods beginning after December 15, 2015. Early adoption is permitted and the Company intends to prospectively adopt ASU No. 2015-16.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which changes the presentation of deferred income taxes. The intent is to simplify the presentation of deferred income taxes through the requirement that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The revised guidance is effective for annual fiscal periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the standard to determine the impact it will have on its consolidated financial statements.

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Acquisitions

12 Months Ended

Dec. 31, 2015

Acquisitions

Acquisitions

2. Acquisitions

Concentra Acquistion

        On June 1, 2015, MJ Acquisition Corporation, a joint venture that Select created with Welsh, Carson, Anderson & Stowe XII, L.P. ("WCAS"), consummated the acquisition of Concentra, the indirect operating subsidiary of Concentra Group Holdings, LLC ("Group Holdings"), and its subsidiaries. Pursuant to the terms of the stock purchase agreement, dated as of March 22, 2015, by and among MJ Acquisition Corporation, Concentra and Humana Inc. ("Humana"), MJ Acquisition Corporation acquired 100% of the issued and outstanding equity securities of Concentra from Humana for $1,047.2 million, net of $3.8 million of cash acquired.

        MJ Acquisition Corporation entered into the Concentra credit facilities, see Note 6, to fund a portion of the purchase price for all of the issued and outstanding stock of Concentra. Concentra, as the surviving entity of the merger between MJ Acquisition Corporation and Concentra, became the borrower under the Concentra credit facilities.

        Select entered into a Subscription Agreement (the "Subscription Agreement"), by and among Select, WCAS, Group Holdings and the other members of Group Holdings. Pursuant to the Subscription Agreement, Select purchased Class A equity interests of Group Holdings for an aggregate purchase price of $217.9 million, representing a majority (50.1%) of the voting equity interests in Group Holdings. WCAS and the other members purchased redeemable non-controlling Class A interests of Group Holdings for an aggregate purchase price of $217.1 million, representing a 49.9% share of the voting equity interests of Group Holdings.

        Group Holdings contributed cash of $435.0 million, to MJ Acquisition Corporation. MJ Acquisition Corporation used the cash, together with $650.0 million in borrowings under the Concentra credit facilities, to pay the purchase price, and fees and expenses.

        Concentra, formed in 1979, is one of the largest providers of occupational medicine, consumer health, physical therapy and veteran's healthcare services in the United States based on the number of facilities. As of December 31, 2015, Concentra operated 300 medical centers in 38 states, 138 medical facilities located at the workplaces of Concentra's employer customers and 33 Department of Veterans Affairs CBOCs. Concentra's financial results are consolidated with Select's as of June 1, 2015.

        The Concentra acquisition was accounted for under the provisions of Accounting Standards Codification ("ASC") 805, Business Combinations. The Company allocated the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values.

        During the fourth quarter of the year ended December 31, 2015, the Company finalized the purchase price allocation to identifiable intangible assets, fixed assets, non-controlling interests, and certain pre-acquisition contingencies. The Company is in the process of completing the accounting for certain deferred tax matters. The Company expects to complete the purchase price allocation during the second quarter of 2016.

        The following table summarizes the allocation of the purchase price to the fair value of identifiable assets acquired and liabilities assumed, in accordance with the acquisition method of accounting (in thousands):

Cash and cash equivalents	$	3,772
Identifiable tangible assets, excluding cash and cash equivalents		405,428
Identifiable intangible assets		254,990
Goodwill		646,466
Total assets		1,310,656
Total current liabilities		90,188
Total non-current liabilities		152,425
Total liabilities		242,613
Acquired non-controlling interests		17,084
Net assets acquired		1,050,959
Less: Cash and cash equivalents acquired		3,772
Net cash paid	$	1,047,187

        The fair value assigned to intangible assets were determined through the use of the income approach, specifically the relief from royalty and the multi-period excess earnings methods. Both valuation methods rely on management judgment, including expected future cash flows resulting from existing customer relationships, customer attrition rates, contributory effects of other assets utilized in the business, peer group cost of capital and royalty rates, and other factors. Useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows. The valuation of tangible assets was derived using a combination of the income, market, and cost approaches. Significant judgments used in valuing tangible assets include estimated reproduction or replacement cost, useful lives of assets, estimated selling prices, costs to complete, and reasonable profit. The fair value assigned to non-controlling interests were determined through the use of a market multiple approach.

        Intangible assets acquired consisted of the following:

	Amount		Weighted Average Amortization Period
	(in thousands)		(in years)
Trademarks	$	104,900	Indefinite
Customer relationships		141,265	10.2
Leasehold interests		8,825	6.3
Total	$	254,990

        Intangible liabilities acquired included unfavorable leasehold interests of $3.3 million with a weighted average amortization period of 4.4 years. The customer relationships are being amortized on a straight-line basis over their expected useful lives. Leasehold interests are being amortized over their remaining lease terms at time of acquisition.

        Goodwill of $646.5 million was recognized in the transaction, representing the excess of the purchase price over the value of the tangible and intangible assets acquired and liabilities assumed. The factors considered in determining the goodwill that resulted from the Concentra purchase price included Concentra's future earnings potential and the value of Concentra's assembled workforce. The goodwill is allocated to the Concentra segment and is not deductible for tax purposes. However, prior to its acquisition by MJ Acquisition Corporation, Concentra completed certain acquisitions that resulted in goodwill with an estimated value of $23.9 million that is deductible for tax purposes, which the Company will deduct through 2025.

        For the period of June 1, 2015 through December 31, 2015, Concentra contributed net revenue of $585.2 million and a net loss of approximately $12.2 million which is reflected in the Company's consolidated statement of operations. The Company incurred $4.7 million of acquisition costs in the year ended December 31, 2015. Acquisition costs consisted of legal, advisory, and due diligence fees and expenses.

        The following pro forma unaudited results of operations have been prepared assuming the acquisition of Concentra occurred January 1, 2014. These results are not necessarily indicative of results of future operations nor of the results that would have actually occurred had the acquisition been consummated January 1, 2014.

	December 31,
	2014		2015
	(in thousands, except per share amounts)
Net revenue	$	4,063,218	$	4,154,941
Net income		106,945		129,737
Income per common share:
Basic	$	0.81	$	1.00
Diluted	$	0.80	$	0.99

        The pro forma financial information is based on the allocation of the purchase price and therefore subject to adjustment upon finalizing the purchase price allocation, as described above, during the measurement period. The net income tax impact was calculated at a statutory rate, as if Concentra had been a subsidiary of the Company as of January 1, 2014.

        Pro forma results for the year ended December 31, 2015 were adjusted to include approximately $19.8 million of interest expense, an income tax benefit of approximately $11.4 million, approximately $4.8 million in net income attributable to non-controlling interests, approximately $1.8 million of rent expense, and approximately $1.2 million of depreciation expense. Results for the same period were also adjusted to exclude seller costs of $6.0 million, Concentra acquisition costs of $4.7 million, and amortization expense of approximately $0.8 million.

        Pro forma results for the year ended December 31, 2014 were adjusted to include approximately $48.1 million of interest expense, an income tax benefit of approximately $15.5 million, approximately $8.3 million of net loss attributable to non-controlling interests, $4.7 million of Concentra acquisition costs, approximately $4.0 million of rent expense, and approximately $3.0 million of depreciation expense. Results for the same period were also adjusted to exclude amortization expense of approximately $2.3 million.

Other Acquistions

        For the year ended December 31, 2013, the Company provided total consideration of $5.6 million to acquire businesses, consisting of cash amounting to $1.7 million (net of cash acquired) and the issuance of non controlling interests, for identifiable tangible net assets consisting principally of accounts receivable, and property and equipment with an aggregate fair value of $3.5 million and goodwill of $2.1 million.

        For the year ended December 31, 2014, the Company provided total consideration of $3.2 million to acquire businesses, consisting of cash amounting to $1.1 million (net of cash acquired) and non controlling interests, for identifiable tangible net assets consisting principally of accounts receivable, and property and equipment with an aggregate fair value of $1.3 million and goodwill of $1.9 million.

        In addition to the acquisition of Concentra, during the year ended December 31, 2015, the Company acquired interests in several businesses, consisting principally of inpatient and outpatient rehabilitation businesses. The Company provided total consideration of $30.2 million, consisting of cash amounting to $14.4 million (net of cash acquired) and the issuance of non controlling interests in the amount of $14.7 million, for identifiable tangible net assets consisting principally of accounts receivable, and property and equipment with an aggregate fair value of $4.1 million. These acquisitions resulted in recognition of goodwill of $21.9 million and $4.2 million in the specialty hospitals segment and Concentra segment, respectively.

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Property and Equipment

12 Months Ended

Dec. 31, 2015

Property and Equipment

Property and Equipment

3. Property and Equipment

        Property and equipment consists of the following:

	December 31,
	2014			2015
	(in thousands)
Land	$	71,635		$	76,118
Leasehold improvements		155,648			295,647
Buildings		396,228			411,376
Furniture and equipment		272,919			382,838
Construction-in-progress		41,230			146,868
Total property and equipment		937,660			1,312,847
Accumulated depreciation		(395,350	)		(448,723	)
Property and equipment, net	$	542,310		$	864,124

        Depreciation expense was $63.9 million, $67.9 million, and $96.1 million for the years ended December 31, 2013, 2014 and 2015, respectively.

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Intangible Assets and Liabilities

12 Months Ended

Dec. 31, 2015

Intangible Assets and Liabilities

Intangible Assets and Liabilities

4. Intangible Assets and Liabilities

        The net carrying value of the Company's goodwill and identifiable intangible assets consist of the following:

	December 31,
	2014		2015
	(in thousands)
Goodwill	$	1,642,083	$	2,314,624
Identifiable intangibles—Indefinite lived assets:
Trademarks		57,709		162,609
Certificates of need		12,727		13,022
Accreditations		2,083		2,045
Identifiable intangibles—Finite lived assets:
Customer relationships		—		132,751
Favorable leasehold interests		—		8,248
Total identifiable intangibles	$	1,714,602	$	2,633,299

        The Company's customer relationship assets amortize over their estimated useful lives. Amortization expense for the Company's customer relationships was $8.5 million for the year ended December 31, 2015. Estimated amortization expense of the Company's customer relationships for each of the five succeeding years is $14.6 million.

        In addition, the Company has recognized unfavorable leasehold interests which are recorded as liabilities. The net carrying value of unfavorable leasehold interests was $3.0 million as of December 31, 2015.

        The Company's favorable leasehold assets and unfavorable leasehold liabilities are amortized to rent expense over the remaining term of their respective leases to reflect a market rent per period based upon the market conditions present at the acquisition date. The effect of this amortization increased rent expense by $0.3 million for the year ended December 31, 2015.

        The Company's accreditations and trademarks have renewal terms. The costs to renew these intangibles are expensed as incurred. At December 31, 2015, the accreditations and trademarks have a weighted average time until next renewal of 1.5 years and 3.8 years, respectively.

        The changes in the carrying amount of goodwill for the Company's reportable segments for the years ended December 31, 2014 and 2015 are as follows:

	Specialty Hospitals			Outpatient Rehabilitation			Concentra			Total
	(in thousands)
Balance as of January 1, 2014	$	1,334,615		$	308,018					$	1,642,633
Goodwill acquired during year		855			1,011						1,866
Goodwill allocated to contributed business		—			(2,406	)					(2,406	)
Purchase accounting adjustment		(10	)		—						(10	)
Balance as of December 31, 2014	$	1,335,460		$	306,623		$	—		$	1,642,083
Goodwill acquired during year		21,972			—			702,023			723,995
Measurement period adjustment		(53	)		—			(51,373	)		(51,426	)
Disposal of business		—			(28	)		—			(28	)
Balance as of December 31, 2015	$	1,357,379		$	306,595		$	650,650		$	2,314,624

        See Note 2 for details of the goodwill acquired during the period.

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Investments in Unconsolidated Subsidiaries

12 Months Ended

Dec. 31, 2015

Investments in Unconsolidated Subsidiaries

Investments in Unconsolidated Subsidiaries

5. Investments in Unconsolidated Subsidiaries

        During the year ended December 31, 2015, the Company sold an equity investment in an unconsolidated subsidiary of a start-up healthcare company for $33.1 million, which resulted in a gain on the sale of an equity investment of $29.6 million. The gain on sale of the equity investment was classified as non-operating income in the condensed consolidated statements of operations for the year ended December 31, 2015. The proceeds of $33.1 million were classified as cash provided from an investing activity in the condensed consolidated statements of cash flows for the year ended December 31, 2015.

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Long-Term Debt and Notes Payable

12 Months Ended

Dec. 31, 2015

Long-Term Debt and Notes Payable

Long-Term Debt and Notes Payable

6. Long-Term Debt and Notes Payable

        For purposes of this indebtedness footnote, references to Select exclude Concentra, because the Concentra credit facilities are non-recourse to Holdings and Select.

        The components of long-term debt and notes payable are shown in the following tables:

	December 31,
	2014		2015
	(in thousands)
Select 6.375% senior notes(1)	$	711,465	$	711,235
Select credit facilities:
Select revolving facility		60,000		295,000
Select term loans(2)		775,996		750,485
Other—Select		5,515		11,987
Total Select debt		1,552,976		1,768,707
Less: Select current maturities		10,874		228,316
Select long-term debt maturities	$	1,542,102	$	1,540,391
Concentra credit facilities:
Concentra revolving facility			$	5,000
Concentra term loans(3)				644,865
Other—Concentra				5,312
Total Concentra debt				655,177
Less: Concentra current maturities				5,254
Concentra long-term debt maturities			$	649,923
Total current maturities	$	10,874	$	233,570
Total long-term debt maturities		1,542,102		2,190,314
Total debt	$	1,552,976	$	2,423,884

(1)	Includes unamortized premium of $1.5 million and $1.2 million at December 31, 2014 and 2015, respectively.
(2)	Includes unamortized discounts of $4.2 million and $2.8 million at December 31, 2014 and 2015, respectively.
(3)	Includes unamortized discounts of $2.9 million at December 31, 2015.

Select Credit Facilities

        On June 1, 2011, Select entered into its existing senior secured credit agreement that originally provided for $1.15 billion in senior secured credit facilities. The following discussion summarizes amendments and significant transactions affecting the term loan facilities (collectively, the "Select term loans") and the revolving credit facility (the "Select revolving facility" and together with the Select term loans, the "Select credit facilities").

        On August 13, 2012, Select entered into an additional credit extension amendment to the Select credit facilities providing for a $275.0 million series A term loan at the same interest rate and with the same term as the original term loan.

        On February 20, 2013, Select entered into a credit extension amendment to the Select credit facilities providing for a $300.0 million series B term loan. Select used the borrowings under the series B term loan to redeem all of its outstanding 75/8% senior subordinated notes due 2015 on March 22, 2013, to finance Holdings' redemption of all of its senior floating rate notes due 2015 on March 22, 2013 and to repay a portion of the balance outstanding under the Select revolving facility.

        On May 28, 2013, Select issued and sold $600.0 million aggregate principal amount of 6.375% senior notes due June 1, 2021. Select used the proceeds of the 6.375% senior notes to pay a portion of the amounts then outstanding on the original term loan and the series A term loan and to pay related fees and expenses.

        On June 3, 2013, Select amended the Select credit facilities in order to, among other things: (i) extend the maturity date on $293.3 million of its $300.0 million revolving facility from June 1, 2016 to March 1, 2018; (ii) convert the remaining original term loan and series A term loan to a new series C term loan, and lower the interest rate payable on the series C term loan from Adjusted LIBO plus 3.75%, or Alternate Base Rate plus 2.75%, to Adjusted LIBO plus 3.00%, or Alternate Base Rate plus 2.00%, and amend the provision of the series C term loan from providing that Adjusted LIBO will at no time be less than 1.75% to providing that Adjusted LIBO will at no time be less than 1.00%; (iii) lower the interest rate payable on the series B term loan from Adjusted LIBO plus 3.75%, or Alternate Base Rate plus 2.75%, to Adjusted LIBO plus 3.25%, or Alternate Base Rate plus 2.25%; (iv) amend the restrictive covenants governing the Select credit facilities in order to allow for unlimited restricted payments so long as there is no event of default under the credit facilities and the total pro forma ratio of total indebtedness to Consolidated EBITDA (as defined in the credit facilities) is less than or equal to 2.75 to 1.00; and (v) amend the definition of "Available Amount" in a manner the effect of which was to increase the amount available for investments, restricted payments and payment of specified indebtedness.

        On March 4, 2014, Select made a principal prepayment of $34.0 million associated with the Select term loans in accordance with the provision in the Select credit facilities that requires mandatory prepayments of term loans resulting from excess cash flow as defined in the Select credit facilities.

        On March 4, 2014, Select amended the Select credit facilities in order to, among other things: (i) convert the remaining series B term loan to a new series D term loan, and lower the interest rate payable on the series D term loan from Adjusted LIBO plus 3.25%, or Alternate Base Rate plus 2.25%, to Adjusted LIBO plus 2.75%, or Alternate Base Rate plus 1.75%; (ii) set the maturity date of the series D term loan at December 20, 2016; (iii) convert the remaining series C term loan to a new series E term loan, and lower the interest rate payable on the series E term loan from Adjusted LIBO plus 3.00% (subject to an Adjusted LIBO rate floor of 1.00%), or Alternate Base Rate plus 2.00%, to Adjusted LIBO plus 2.75% (subject to an Adjusted LIBO rate floor of 1.00%), or Alternate Base Rate plus 1.75%; (iv) set the maturity date of the series E term loan at June 1, 2018; (v) beginning with the quarter ending March 31, 2014, increase the quarterly compliance threshold set forth in the leverage ratio financial maintenance covenant to a level of 5.00 to 1.00 from 4.50 to 1.00; (vi) provide for a prepayment premium of 1.00% if the Select credit facilities are amended at any time prior to March 4, 2015 in the case of the series E term loans and such amendment reduces the yield applicable to such loans; and (vii) amend the definition of "Available Amount" in a manner the effect of which was to increase the amount available for investments, restricted payments and the payment of specified indebtedness.

        On October 23, 2014, Select entered into two additional credit extension amendments, one of which extended the maturity date on $6.75 million in aggregate principal of revolving commitments from June 1, 2016 to March 1, 2018, the second of which added $50.0 million in incremental revolving commitments that mature on March 1, 2018.

        On March 4, 2015, Select made a principal prepayment of $26.9 million associated with the series D term loan and series E term loan in accordance with the provision in the Select credit facilities that requires mandatory prepayments of term loans as a result of annual excess cash flow as defined in the Select credit facilities.

        On May 20, 2015 Select entered into an additional credit extension amendment of the Select revolving facility to obtain $100.0 million of incremental revolving commitments. The revolving commitments mature on March 1, 2018.

        On December 11, 2015, Select amended the Select credit facilities in order to, among other things: (i) convert $56.2 million of its series D term loan into series E term loan, which have a maturity date of June 1, 2018; (ii) increase the interest rate payable on the series E term loan from Adjusted LIBO plus 2.75% (subject to an Adjusted LIBO rate floor of 1.00%), or Alternative Base Rate plus 1.75%, to Adjusted LIBO plus 4.00% (subject to an Adjusted LIBO rate floor of 1.00%), or Alternative Base Rate plus 3.00%; (iii) beginning with the quarter ending December 31, 2015, increase the quarterly compliance threshold set forth in the leverage ratio financial maintenance covenant to a level of 5.75 to 1.00 from 5.00 to 1.00; (iv) increase the capacity for incremental extensions of credit to $450.0 million; and (v) amend the definition of "Consolidated EBITDA" to add back certain specialty hospital start-up losses.

        At December 31, 2015, Select's credit facilities provided for senior secured financing consisting of a $450.0 million revolving facility which matures on March 1, 2018, including a $75.0 million sublimit for the issuance of standby letters of credit and a $25.0 million sublimit for swingline loans; a $218.6 million series D term loan, maturing on December 20, 2016; and $534.7 million series E term loan, maturing on June 1, 2018.

        The Select term loans amortize quarterly in the amount of 0.25% of the aggregate principal amount, subject to mandatory prepayment provisions.

        All borrowings under Select's credit facilities are subject to the satisfaction of required conditions, including the absence of a default at the time of and after giving effect to such borrowing and the accuracy of the representations and warranties of the borrowers.

        The interest rates per annum applicable to borrowings under Select's credit facilities are, at its option, equal to either an Alternate Base Rate or an Adjusted LIBO rate for a one, two, three or six month interest period, or a nine or twelve month period if available, in each case, plus an applicable margin percentage. The Alternate Base Rate is the greatest of (i) JPMorgan Chase Bank, N.A.'s prime rate, (ii) one-half of 1% over the weighted average of rates on overnight Federal funds as published by the Federal Reserve Bank of New York and (iii) the Adjusted LIBO rate from time to time for an interest period of one month, plus 1.00%. The Adjusted LIBO rate is, with respect to any interest period, the London interbank offered rate for such interest period, adjusted for any applicable statutory reserve requirements.

        Borrowings under the series D term loan bear interest at a rate equal to Adjusted LIBO plus 2.75%, or Alternate Base Rate plus 1.75%. Borrowings under the series E term loan bear interest at a rate equal to Adjusted LIBO plus 4.00%, or Alternate Base Rate plus 3.00%. The Adjusted LIBO for the series E term loan will at no time be less than 1.00%.

        Borrowings under the revolving facility bear interest at a rate equal to Adjusted LIBO plus a percentage ranging from 2.75% to 3.75%, or Alternate Base Rate plus a percentage ranging from 1.75% to 2.75%, in each case based on Select's ratio of total indebtedness to Consolidated EBITDA (as defined in the Select credit facilities).

        On the last day of each calendar quarter Select is required to pay each lender a commitment fee in respect of any unused commitments under the revolving facility, which is currently 0.50% per annum subject to adjustment based upon the ratio of Select's total indebtedness to Consolidated EBITDA (as defined in the Select credit facilities).

        Subject to exceptions, the Select credit facilities require mandatory prepayments of Select term loans in amounts equal to:

•           50% (as may be reduced based on Select's ratio of total indebtedness to Consolidated EBITDA (as defined in the Select credit facilities)) of Select's annual excess cash flow;

•           100% of the net cash proceeds from non-ordinary course asset sales or other dispositions, or as a result of a casualty or condemnation event, subject to reinvestment rights and certain other exceptions; and

•           100% of the net cash proceeds from certain incurrences of debt.

        Select's credit facilities are guaranteed by Holdings, Select and substantially all of its current wholly owned subsidiaries, and will be guaranteed by substantially all of Select's future subsidiaries and secured by substantially all of Select's existing and future property and assets and by a pledge of its capital stock and the capital stock of its subsidiaries.

        Select's credit facilities require that it comply on a quarterly basis with certain financial covenants, including a maximum leverage ratio test.

        In addition, Select's credit facilities include negative covenants, subject to significant exceptions, restricting or limiting its ability and the ability of Holdings and Select's restricted subsidiaries, to, among other things:

•           incur, assume, permit to exist or guarantee additional debt and issue or sell or permit any subsidiary to issue or sell preferred stock;

•           amend, modify or waiver any rights under the certificate of indebtedness, credit agreements, certificate of incorporation, bylaws or other organizational documents which would be materially adverse to the creditors;

•           pay dividends or other distributions on, redeem, repurchase, retire or cancel capital stock;

•           purchase or acquire any debt or equity securities of, make any loans or advances to, guarantee any obligation of, or make any other investment in, any other company;

•           incur or permit to exist certain liens on property or assets owned or accrued or assign or sell any income or revenues with respect to such property or assets;

•           sell or otherwise transfer property or assets to, purchase or otherwise receive property or assets from, or otherwise enter into transactions with affiliates;

•           merge, consolidate or amalgamate with another company or permit any subsidiary to merge, consolidate or amalgamate with another company;

•           sell, transfer, lease or otherwise dispose of assets, including any equity interests;

•           repay, redeem, repurchase, retire or cancel any subordinated debt;

•           incur capital expenditures;

•           engage to any material extent in any business other than business of the type currently conducted by Select or reasonably related businesses; and

•           incur obligations that restrict the ability of its subsidiaries to incur or permit to exist any liens on Select's property or assets or to make dividends or other payments to Select.

        The Select credit facilities also contain certain representations and warranties, affirmative covenants and events of default. The events of default include payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain indebtedness, certain events of bankruptcy, certain events under ERISA, material judgments, actual or asserted failure of any guaranty or security document supporting Select's credit facilities to be in full force and effect and any change of control. If such an event of default occurs, the lenders under the Select credit facilities will be entitled to take various actions, including the acceleration of amounts due under the Select credit facilities and all actions permitted to be taken by a secured creditor.

        At December 31, 2015, Select had outstanding borrowings under the Select credit facilities of $753.3 million of the Select term loans (excluding unamortized original issue discounts of $2.8 million) and borrowings of $295.0 million (excluding letters of credit) under the Select revolving facility. Select had $116.1 million of availability under the Select revolving facility (after giving effect to $38.9 million of outstanding letters of credit) at December 31, 2015.

        The applicable margin percentage for borrowings under the Select revolving facility is subject to change based upon the ratio of Select's leverage ratio (as defined in the Select credit facilities). The applicable interest rate for revolving loans as of December 31, 2015 was (1) Alternate Base plus 2.75% for alternate base rate loans and (2) LIBO plus 3.75% for adjusted LIBO rate loans.

        The Select credit facilities require it to maintain certain leverage ratios (as defined in the Select credit facilities). For the three fiscal quarters ended March 31, 2015, June 30, 2015, and September 30, 2015, Select was required to maintain its leverage ratio (its ratio of total indebtedness to consolidated EBITDA) at less than 5.00 to 1.00. For the quarter ended December 31, 2015, Select was required to maintain its leverage ratio at less than 5.75 to 1.00. Select's leverage ratio was 4.78 to 1.00 as of December 31, 2015. Additionally, the Select credit facilities will require a prepayment of borrowings of 50% of excess cash flow, which will result in a prepayment of approximately $10.2 million. Select expects to have the borrowing capacity and intends to use borrowings under its revolving facility to make the required prepayment during the first quarter ended March 31, 2016.

Senior Notes

        On March 11, 2014, Select issued and sold $110.0 million aggregate principal amount of additional 6.375% senior notes due June 1, 2021 (the "Additional Notes"), at 101.50% of the aggregate principal amount resulting in gross proceeds of $111.7 million. The notes were issued as additional notes under the indenture pursuant to which it previously issued $600.0 million of 6.375% senior notes due June 1, 2021 (the "Existing Notes" and, together with the Additional Notes, the "Notes"). The Additional Notes are treated as a single series with the Existing Notes and have the same terms as those of the Existing Notes.

        Interest on the Notes accrues at the rate of 6.375% per annum and is payable semi-annually in cash in arrears on June 1 and December 1 of each year. The Notes are Select's senior unsecured obligations and rank equally in right of payment with all of its other existing and future senior unsecured indebtedness and senior in right of payment to all of its existing and future subordinated indebtedness. The Notes are fully and unconditionally guaranteed by all of Select's wholly owned subsidiaries. The Notes are guaranteed, jointly and severally, by Select's direct or indirect existing and future domestic restricted subsidiaries other than certain non-guarantor subsidiaries.

        Select may redeem some or all of the Notes prior to June 1, 2016 by paying a "make-whole" premium. Select may redeem some or all of the Notes on or after June 1, 2016 at specified redemption prices. In addition, prior to June 1, 2016, Select may redeem up to 35% of the Notes with the net proceeds of certain equity offerings at a price of 106.375% plus accrued and unpaid interest, if any. Select is obligated to offer to repurchase the Notes at a price of 101% of their principal amount plus accrued and unpaid interest, if any, as a result of certain change of control events. These restrictions and prohibitions are subject to certain qualifications and exceptions.

        The indenture relating to the Notes contains covenants that, among other things, limit Select's ability and the ability of certain of its subsidiaries to (i) grant liens on its assets, (ii) make dividend payments, other distributions or other restricted payments, (iii) incur restrictions on the ability of Select's restricted subsidiaries to pay dividends or make other payments, (iv) enter into sale and leaseback transactions, (v) merge, consolidate, transfer or dispose of substantially all of their assets, (vi) incur additional indebtedness, (vii) make investments, (viii) sell assets, including capital stock of subsidiaries, (ix) use the proceeds from sales of assets, including capital stock of restricted subsidiaries, and (x) enter into transactions with affiliates. In addition, the Indenture requires, among other things, Select to provide financial and current reports to holders of the Notes or file such reports electronically with the SEC. These covenants are subject to a number of exceptions, limitations and qualifications set forth in the Indenture.

Concentra credit facilities

Concentra first lien credit agreement

        On June 1, 2015, MJ Acquisition Corporation, as the initial borrower, entered into a first lien credit agreement (the "Concentra first lien credit agreement"). Concentra, as the surviving entity of the merger between MJ Acquisition Corporation and Concentra, became the borrower. The Concentra first lien credit agreement provides for $500.0 million in first lien loans comprised of a $450.0 million, seven-year term loan ("Concentra first lien term loan") and a $50.0 million, five-year revolving credit facility ("Concentra revolving facility"). The borrowings under the Concentra first lien credit agreement are guaranteed, on a first lien basis, by Concentra Holdings, Inc., the direct parent of Concentra. Select and Holdings are not parties to the Concentra first lien credit agreement and are not obligors with respect to Concentra's debt under such agreement.

        Borrowings under the Concentra first lien credit agreement bear interest at a rate equal to: (i) in the case of the Concentra first lien term loan, Adjusted LIBO (as defined in the Concentra first lien credit agreement) plus 3.00% (subject to an Adjusted LIBO floor of 1.00%), or Alternate Base Rate (as defined in the Concentra first lien credit agreement) plus 2.00% (subject to an Alternate Base Rate floor of 2.00%); and (ii) in the case of the Concentra revolving facility, Adjusted LIBO plus a percentage ranging from 2.75% to 3.00%, or Alternate Base Rate plus a percentage ranging from 1.75% to 2.00%, in each case based on Concentra's leverage ratio.

        The Concentra first lien term loan amortizes in equal quarterly installments, in aggregate annual amounts equal to 0.25% of the original principal amount of the first lien term loan commencing on September 30, 2015. The balance of the Concentra first lien term loan will be payable on June 1, 2022. The Concentra revolving facility matures on June 1, 2020.

Concentra second lien credit agreement

        On June 1, 2015, MJ Acquisition Corporation, as the initial borrower, entered into a second lien credit agreement (the "Concentra second lien credit agreement" and, together with the Concentra first lien credit agreement, the "Concentra credit facilities"). Concentra, as the surviving entity of the merger between MJ Acquisition Corporation and Concentra, became the borrower. The Concentra second lien credit agreement provides for a $200.0 million eight-year second lien term loan ("Concentra second lien term loan" and, together with the Concentra first lien term loans, the "Concentra term loans"). The borrowings under the Concentra second lien credit agreement are guaranteed, on a second lien basis, by Concentra Holdings, Inc., the direct parent of Concentra. Select and Holdings are not parties to the Concentra second lien credit agreement and are not obligors with respect to Concentra's debt under such agreement.

        Borrowings under the Concentra second lien term loan bear interest at a rate equal to Adjusted LIBO Rate (as defined in the Concentra second lien credit agreement) plus 8.00% (subject to an Adjusted LIBO floor of 1.00%), or Alternate Base Rate (as defined in the Concentra second lien credit agreement) plus 7.00% (subject to an Alternate Base Rate floor of 2.00%).

        In the event that, on or prior to June 1, 2016, Concentra prepays any of the Concentra second lien term loan, Concentra shall pay a premium of 2.00% of the aggregate principal amount of the Concentra second lien term loan prepaid and if Concentra prepays any of the Concentra second lien term loan on or prior to June 1, 2017, Concentra shall pay a premium of 1.00% of the aggregate principal amount of the Concentra second lien term loan prepaid. The Concentra second lien term loan will be payable on June 1, 2023.

Maturities of Long-Term Debt and Notes Payable

        Maturities of the Company's long-term debt for the years after 2015 are approximately as follows and are presented including the discounts on Select term loans and premium on Select's senior notes, and including the discounts on Concentra credit facilities:

	Select		Concentra		Total
	(in thousands)
2016	$	228,316	$	5,254	$	233,570
2017		6,952		4,168		11,120
2018		820,651		4,186		824,837
2019		2,465		4,206		6,671
2020		228		9,227		9,455
2021 and beyond		710,095		628,136		1,338,231
Total	$	1,768,707	$	655,177	$	2,423,884

Loss on Early Retirement of Debt

        On February 20, 2013, Select entered into a credit extension amendment, the proceeds of which were used to redeem all of its outstanding 75/8% senior subordinated notes, to finance Holdings' redemption of all of its 10% senior floating rate, and to repay a portion of the balance outstanding under Select's revolving facility. Additionally, on May 28, 2013, Select issued and sold $600.0 million aggregate principal amount of its 6.375% senior notes due 2021, the proceeds of which were used to pay a portion of Select term loans then outstanding and to pay related fees and expenses. A loss on early retirement of debt of $18.7 million and $17.8 million for Holdings and Select, respectively, was recognized for the year ended December 31, 2013, which included the write off of unamortized debt issuance costs.

        During the year ended December 31, 2014, Select amended the Select term loans under the Select credit facilities and recognized a loss $2.3 million for unamortized debt issuance costs, unamortized original issue discount, and certain fees incurred related to term loan modifications.

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Stockholders' Equity

12 Months Ended

Dec. 31, 2015

Stockholders' Equity

Stockholders' Equity

7. Stockholders' Equity

Common Stock

        Holdings' board of directors has authorized a common stock repurchase program to repurchase up to $500.0 million worth of shares of its common stock. The program will remain in effect until December 31, 2016, unless extended or earlier terminated by the board of directors. Stock repurchases under this program may be made in the open market or through privately negotiated transactions, and at times and in such amounts as Holdings deems appropriate. Holdings is funding this program with cash on hand and borrowings under the Select revolving facility. For the years ended December 31, 2013, 2014 and 2015, respectively, Holdings repurchased 1,115,691 shares at a cost of $10.0 million, 11,285,714 shares at a cost of $127.5 million, and 1,032,334 shares at a cost of $13.6 million, which includes transaction costs. During the year ended December 31, 2014, the shares were repurchased from Welsh, Carson, Anderson & Stowe IX, L.P. and WCAS Capital Partners IV, L.P. pursuant to stock purchase agreements dated February 26, 2014 and May 5, 2014. Two of the Company's directors are affiliated with these entities. The common stock repurchase program has available capacity of $185.2 million as of December 31, 2015.

        Holdings granted 952,500 shares, 1,585,775 shares, and 1,384,954 shares of restricted stock for the years ended December 31, 2013, 2014 and 2015, respectively and issued 166,600 shares, 974,969 shares, and 183,450 shares of common stock related to the exercise of stock options and for the years ended December 31, 2013, 2014 and 2015, respectively. Also, 331,697 shares, 302,690 shares, and 486,580 shares of stock were forfeited for the years ended December 31, 2013, 2014 and 2015, respectively.

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Stock-based Compensation

12 Months Ended

Dec. 31, 2015

Stock-based Compensation

Stock-based Compensation

8. Stock-based Compensation

        On February 25, 2005, Holdings adopted the Select Medical Holdings Corporation 2005 Equity Incentive Plan. On May 13, 2011, the Select Medical Holdings Corporation 2005 Equity Incentive Plan was frozen and Holdings adopted the 2011 Select Medical Holdings Corporation 2011 Equity Incentive Plan. The Select Medical Holdings Corporation 2005 Equity Incentive Plan and the Select Medical Holdings Corporation 2011 Equity Incentive Plan are referred to as the "Plans." The Plans provide for grants of restricted stock and stock options of Holdings. On November 8, 2005 the board of directors of Holdings adopted a director equity incentive plan ("Director Plan") and on August 12, 2009, the board of directors and stockholders of Holdings approved an amendment and restatement of the Director Plan. This amendment authorized Holdings to issue under the Director Plan options to purchase up to 75,000 shares of its common stock and restricted stock awards covering up to 150,000 shares of its common stock. All of the aforementioned equity plans allow for the use of unissued shares or treasury shares to be used to satisfy share-based awards.

        The options under the Plans and Director Plan generally vest over five years and have an option term not to exceed ten years. The fair value of the options granted was estimated using the Black-Scholes option pricing model. There were no options granted under the Plans or Director Plan during the year ended December 31, 2015.

        Transactions and other information related to restricted stock awards are as follows:

	Shares			Weighted Average Grant Date Fair Value
	(share amounts in thousands)
Unvested Balance, January 1, 2015		3,728		$	10.82
Granted		1,385			13.94
Vested		(992	)		9.07
Forfeited		(304	)		12.28
Unvested Balance, December 31, 2015		3,817		$	12.29

        The weighted average grant date fair value of restricted stock awards granted for the years ended December 31, 2013, 2014, and 2015 was $8.48, $13.61, and $13.94, respectively. The total weighted average grant date fair value of restricted stock awards vested for the years ended December 31, 2013, 2014, and 2015 was $4.6 million, $7.4 million, and $9.0 million, respectively.

        As of December 31, 2015 there were 743,000 stock options outstanding and 728,000 stock options exercisable under the Plans and Director Plans. The outstanding and exercisable shares have a weighted average exercise price of $8.85 and a weighted average remaining contractual life of 2.87 years.

        The total intrinsic value of options exercised under the Plans and Director Plans for the years ended December 31, 2013, 2014, and 2015 was $0.2 million, $6.0 million, and $1.0 million, respectively. The aggregate intrinsic value of options outstanding and options exercisable under the Plans and Director Plans at December 31, 2015 was $2.3 million.

        Stock compensation expense recognized by the Company was as follows:

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
Stock compensation expense:
Included in general and administrative	$	5,276	$	9,027	$	11,633
Included in cost of services		1,757		2,015		3,046
Total	$	7,033	$	11,042	$	14,679

        Stock compensation expense based on current share-based awards for each of the next five years is estimated to be as follows:

	2016		2017		2018		2019		2020
	(in thousands)
Stock compensation expense	$	15,532	$	10,610	$	5,204	$	1,406	$	324

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Income Taxes

12 Months Ended

Dec. 31, 2015

Income Taxes

Income Taxes

9. Income Taxes

        Significant components of the Company's tax provision for the years ended December 31, 2013, 2014, and 2015 are as follows:

	Holdings							Select
	For the Year Ended December 31,							For the Year Ended December 31,
	2013		2014		2015			2013		2014		2015
	(in thousands)							(in thousands)
Current:
Federal	$	55,847	$	52,063	$	63,626		$	57,026	$	52,063	$	63,626
State and local		11,913		9,248		10,868			11,913		9,248		10,868
Total current		67,760		61,311		74,494			68,939		61,311		74,494
Deferred		7,032		14,311		(2,058	)		7,032		14,311		(2,058	)
Total income tax provision	$	74,792	$	75,622	$	72,436		$	75,971	$	75,622	$	72,436

        The differences between the expected income tax provision and income taxes computed at the federal statutory rate of 35% were as follows:

	Holdings									Select
	For the Year Ended December 31,									For the Year Ended December 31,
	2013			2014			2015			2013			2014			2015
Expected federal tax rate		35.0	%		35.0	%		35.0	%		35.0	%		35.0	%		35.0	%
State and local taxes, net of federal benefit		4.6			4.2			4.0			4.5			4.2			4.0
Other permanent differences		1.1			0.8			1.4			1.1			0.8			1.4
Valuation allowance		(0.7	)		(0.4	)		(0.9	)		(0.6	)		(0.4	)		(0.9	)
Uncertain tax positions		(0.6	)		(0.3	)		(2.3	)		(0.6	)		(0.3	)		(2.3	)
IRS audit settlements		—			(0.4	)		(0.1	)		—			(0.4	)		(0.1	)
Non-controlling interest		(1.7	)		(1.5	)		(2.0	)		(1.7	)		(1.5	)		(2.0	)
Other		0.1			(0.3	)		(0.3	)		0.1			(0.3	)		(0.3	)
Total		37.8	%		37.1	%		34.8	%		37.8	%		37.1	%		34.8	%

        During 2015, the Company settled with the Internal Revenue Service a tax liability relating to the 2011 settlement of a lawsuit under the qui tam provisions of the federal False Claims Act and reversed through the income tax provision the remaining excess tax reserves.

        During 2009, the Company settled with the Internal Revenue Service a refund of previously paid federal income taxes that resulted from the acceleration of tax amortization in years prior to the Merger. Tax reserves related to this dispute were released in 2014 resulting in the abatement of penalties and interest.

        A summary of the components of deferred tax assets and liabilities is as follows:

	December 31, 2014									December 31, 2015
	Total			Current			Non-Current			Total			Current			Non-Current
	(in thousands)
Deferred tax assets
Allowance for doubtful accounts	$	701		$	701		$	—		$	9,153		$	9,153		$	—
Compensation and benefit related accruals		49,373			38,722			10,651			61,111			50,303			10,808
Professional malpractice liability insurance		17,934			4,732			13,202			19,654			4,642			15,012
Restructuring reserve		333			333			—			—			—			—
Deferred revenue		(829	)		(829	)		—			(1,009	)		(1,009	)		—
State net operating loss carryforwards		21,555			436			21,119			21,591			445			21,146
Other		552			552			—			1,273			357			916
Stock options		5,336			—			5,336			6,061			—			6,061
Equity investments		3,475			—			3,475			3,939			—			3,939
Uncertain tax positions		1,632			—			1,632			641			—			641
Total deferred tax assets		100,062			44,647			55,415			122,414			63,891			58,523
Deferred tax liabilities
Deferred income		(31,190	)		(25,651	)		(5,539	)		(31,375	)		(27,221	)		(4,154	)
Investment in unconsolidated affiliates		(3,659	)		—			(3,659	)		(4,302	)		—			(4,302	)
Other		(1,587	)		(1,093	)		(494	)		(8,444	)		(6,072	)		(2,372	)
Depreciation and amortization		(147,197	)		—			(147,197	)		(260,724	)		—			(260,724	)
Total deferred tax liabilities		(183,633	)		(26,744	)		(156,889	)		(304,845	)		(33,293	)		(271,552	)
Net deferred taxes before valuation allowance		(83,571	)		17,903			(101,474	)		(182,431	)		30,598			(213,029	)
Valuation allowance		(9,641	)		(1,912	)		(7,729	)		(7,586	)		(1,910	)		(5,676	)
Net deferred taxes	$	(93,212	)	$	15,991		$	(109,203	)	$	(190,017	)	$	28,688		$	(218,705	)

        The valuation allowance as of December 31, 2015 is primarily attributable to the uncertainty regarding the realization of state net operating losses and other net deferred tax assets of loss entities. The state net deferred tax assets have a full valuation allowance recorded for entities that have a cumulative history of pre-tax losses (current year in addition to the two prior years). The net deferred tax liabilities at December 31, 2014 and 2015 of approximately $93.2 million and $190.0 million, respectively, consist of items which have been recognized for tax reporting purposes, but which will increase tax on returns to be filed in the future, and include the use of net operating loss carryforwards. The Company has performed the required assessment of positive and negative evidence regarding the realization of the net deferred tax assets. This assessment included a review of legal entities with three years of cumulative losses, estimates of projected future taxable income, generation of income from the turning of existing deferred tax liabilities and the impact of tax planning strategies that management would and could implement in order to keep deferred tax assets from expiring unused. Although realization is not assured, based on the Company's assessment, it has concluded that it is more likely than not that such assets, net of the determined valuation allowance, will be realized.

        The total state net operating losses are approximately $465.6 million. State net operating loss carry forwards expire and are subject to valuation allowances as follows:

	State Net Operating Losses		Gross Valuation Allowance
	(in thousands)
2016	$	6,479	$	5,891
2017		10,818		9,828
2018		7,319		4,574
2019		7,948		7,927
Thereafter through 2035		433,068		333,817

Reserves for Uncertain Tax Positions:

        The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. Significant judgment is required in evaluating the Company's tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. The Company establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when it is believed that certain positions might be challenged despite the Company's belief that its tax return positions are fully supportable. The Company adjusts these reserves in light of changing facts and circumstances, such as the outcome of a tax audit. The provision for income taxes includes the impact of reserve provisions and changes to reserves that have resulted from resolution of the tax position or expirations of statutes of limitations.

        The reconciliation of the Company's unrecognized tax benefits is as follows (in thousands):

Gross tax contingencies—January 1, 2013	$	13,890
Reductions for tax positions taken in prior periods due primarily to statute expiration		(2,299	)
Additions for existing tax positions taken		435
Gross tax contingencies—December 31, 2013		12,026
Reductions for tax positions taken in prior periods due primarily to statute expiration		(1,632	)
Additions for existing tax positions taken		273
Gross tax contingencies—December 31, 2014		10,667
Reductions for tax positions taken in prior periods due primarily to statute expiration		(3,309	)
Reductions for settlements with taxing authorities		(770	)
Additions for existing tax positions taken		373
Reductions for existing tax positions taken		(1,395	)
Gross tax contingencies—December 31, 2015	$	5,566

        As of December 31, 2014 and 2015, the Company had $10.7 million and $5.6 million of unrecognized tax benefits, respectively, all of which, if fully recognized, would affect the Company's effective income tax rate.

        As of December 31, 2015, approximately $2.6 million of gross unrecognized tax benefits, including interest, will be eligible for release in the next 12 months due to the expiration of statutes of limitations. The Company's policy is to include interest related to income taxes in income tax expense. As of December 31, 2014 and December 31, 2015, the Company has accrued interest related to income taxes of $1.9 million and $0.6 million, net of federal income taxes, respectively. Interest recognized for each of the years ended December 31, 2013, 2014 and 2015 was $0.5 million, $0.5 million, and $0.3 million, net of federal income tax benefits, respectively.

        The federal statute of limitations remains open for tax years 2013 through 2015.

        State jurisdictions generally have statutes of limitations for tax returns ranging from three to five years. The state impact of any federal income tax changes remains subject to examination for a period of up to one year after formal notification to the states. Currently, the Company has one state income tax return under examination.

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Retirement Savings Plan

12 Months Ended

Dec. 31, 2015

Retirement Savings Plan

Retirement Savings Plan

10. Retirement Savings Plan

        Select sponsors a defined contribution retirement savings plan for substantially all of its employees. Employees who are not classified as HCE's (highly compensated employees) may contribute up to 30% of their salary; HCE's may contribute up to 7% of their salary. The plan provides a discretionary company match which is determined annually. Currently, Select matches 25% of the first 6% of compensation employees contribute to the plan. The employees vest in the employer contributions over a three-year period beginning on the employee's hire date. The expense incurred by Select related to this plan was $8.7 million, $9.3 million and $10.0 million during the years ended December 31, 2013, 2014 and 2015, respectively.

        Concentra sponsored a separate defined contribution retirement savings plan and incurred expenses related to this plan of $8.8 million for the period June 1, 2015 through December 31, 2015. Beginning in January 2016, Concentra's employees will participate in the defined contribution retirement savings plan sponsored by Select.

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Segment Information

12 Months Ended

Dec. 31, 2015

Segment Information

Segment Information

11. Segment Information

        The Company's reportable segments consist of: (i) specialty hospitals, (ii) outpatient rehabilitation, and (iii) Concentra. Other activities include the Company's corporate services and certain other non-consolidating joint ventures and minority investments in other healthcare related businesses. The outpatient rehabilitation reportable segment has two operating segments: outpatient rehabilitation clinics and contract therapy. These operating segments are aggregated for reporting purposes as they have common economic characteristics and provide a similar service to a similar patient base. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance of the segments based on Adjusted EBITDA. Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, Concentra acquisition costs, equity in earnings (losses) of unconsolidated subsidiaries, and gain on sale of equity investment.

        The following tables summarize selected financial data for the Company's reportable segments. The segment results of Holdings are identical to those of Select.

	Year Ended December 31, 2013
	Specialty Hospitals		Outpatient Rehabilitation		Concentra(2)	Other			Total
	(in thousands)
Net revenue	$	2,198,121	$	777,177		$	350		$	2,975,648
Adjusted EBITDA		353,843		90,313			(71,295	)		372,861
Total assets(1):		2,205,921		512,539			99,162			2,817,622
Capital expenditures		56,523		14,113			3,024			73,660

	Year Ended December 31, 2014
	Specialty Hospitals		Outpatient Rehabilitation		Concentra(2)	Other			Total
	(in thousands)
Net revenue	$	2,244,899	$	819,397		$	721		$	3,065,017
Adjusted EBITDA		341,787		97,584			(75,499	)		363,872
Total assets(1):		2,279,665		532,685			112,459			2,924,809
Capital expenditures		77,742		12,506			4,998			95,246

	Year Ended December 31, 2015
	Specialty Hospitals		Outpatient Rehabilitation		Concentra(2)		Other			Total
	(in thousands)
Net revenue	$	2,346,781	$	810,009	$	585,222	$	724		$	3,742,736
Adjusted EBITDA		327,623		98,220		48,301		(74,979	)		399,165
Total assets(1):		2,425,113		548,242		1,331,837		121,474			4,426,666
Capital expenditures		126,014		17,768		26,771		12,089			182,642

        A reconciliation of Adjusted EBITDA to income before income taxes is as follows:

	Year Ended December 31, 2013
	Specialty Hospitals			Outpatient Rehabilitation			Concentra	Other
	(in thousands)
Adjusted EBITDA	$	353,843		$	90,313			$	(71,295	)
Depreciation and amortization		(48,621	)		(12,024	)			(3,747	)
Stock compensation expense		—			—				(7,033	)

								Holdings			Select
Income (loss) from operations	$	305,222	$	78,289	$	(82,075	)	$	301,436		$	301,436
Loss on early retirement of debt									(18,747	)		(17,788	)
Equity in earnings of unconsolidated subsidiaries									2,476			2,476
Interest expense									(87,364	)		(84,954	)
Income before income taxes								$	197,801		$	201,170

	Year Ended December 31, 2014
	Specialty Hospitals			Outpatient Rehabilitation			Concentra	Other
	(in thousands)
Adjusted EBITDA	$	341,787		$	97,584			$	(75,499	)
Depreciation and amortization		(51,786	)		(12,845	)			(3,723	)
Stock compensation expense		—			—				(11,042	)

								Holdings			Select
Income (loss) from operations	$	290,001	$	84,739	$	(90,264	)	$	284,476		$	284,476
Loss on early retirement of debt									(2,277	)		(2,277	)
Equity in earnings of unconsolidated subsidiaries									7,044			7,044
Interest expense									(85,446	)		(85,446	)
Income before income taxes								$	203,797		$	203,797

	Year Ended December 31, 2015
	Specialty Hospitals			Outpatient Rehabilitation			Concentra(2)			Other
	(in thousands)
Adjusted EBITDA	$	327,623		$	98,220		$	48,301		$	(74,979	)
Depreciation and amortization		(53,992	)		(13,053	)		(33,644	)		(4,292	)
Stock compensation expense		—			—			(1,016	)		(13,663	)
Concentra acquisition costs		—			—			(4,715	)		—

										Holdings			Select
Income (loss) from operations	$	273,631	$	85,167	$	8,926	$	(92,934	)	$	274,790		$	274,790
Gain on sale of equity investment											29,647			29,647
Equity in earnings of unconsolidated subsidiaries											16,811			16,811
Interest expense											(112,816	)		(112,816	)
Income before income taxes										$	208,432		$	208,432

(1)	The specialty hospitals segment includes $2.7 million in real estate assets held for sale on December 31, 2013, 2014 and 2015.
(2)	The selected financial data for the Company's Concentra segment for the periods presented begins as of June 1, 2015, which is the date the Concentra acquisition was consummated.

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Income per Share

12 Months Ended

Dec. 31, 2015

Income per Share

Income per Share

12. Income per Share

        The Company applies the two-class method for calculating and presenting income per common share. The two-class method is an earnings allocation formula that determines earnings per share for each class of stock participation rights in undistributed earnings. Under the two class method:

(a)	Net income attributable to Select Medical Holdings Corporation is reduced by any contractual amount of dividends in the current period for each class of stock. There were no contractual dividends for the years ended December 31, 2013, 2014 and 2015.
(b)	The remaining income is allocated to common stock and unvested restricted stock to the extent that each security may share in income, as if all of the earnings for the period had been distributed. The total income allocated to each security is determined by adding together the amount allocated for dividends in (a) above and the amount allocated for participation features.
(c)	The income allocated to common stock is then divided by the weighted average number of outstanding shares to which the earnings are allocated to determine the income per share for common stock.

        In applying the two-class method, the Company determined that undistributed earnings should be allocated equally on a per share basis between the common stock and unvested restricted stock due to the equal participation rights of the common stock and unvested restricted stock (i.e., the voting conversion rights).

        The following table sets forth for the periods indicated the calculation of income per share in the Company's consolidated statement of operations and the differences between basic weighted average shares outstanding and diluted weighted average shares outstanding used to compute basic and diluted earnings per share, respectively:

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands, except per share amounts)
Numerator:
Net income attributable to Select Medical Holdings Corporation	$	114,390	$	120,627	$	130,736
Less: Earnings allocated to unvested restricted stockholders		2,450		3,337		3,830
Net income available to common stockholders	$	111,940	$	117,290	$	126,906
Denominator:
Weighted average shares—basic		136,879		129,026		127,478
Effect of dilutive securities:
Stock options		168		439		274
Weighted average shares—diluted		137,047		129,465		127,752
Basic income per common share:	$	0.82	$	0.91	$	1.00
Diluted income per common share:	$	0.82	$	0.91	$	0.99

        The following amounts are shown here for informational and comparative purposes only since their inclusion would be anti-dilutive:

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
Stock options		1,474		6		—

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Fair Value

12 Months Ended

Dec. 31, 2015

Fair Value

Fair Value

13. Fair Value

        Financial instruments include cash and cash equivalents, notes payable and long-term debt. The carrying amount of cash and cash equivalents approximates fair value because of the short-term maturity of these instruments.

        The carrying value of the Select credit facilities was $836.0 million and $1,045.5 million at December 31, 2014 and 2015, respectively. The fair value of the Select credit facilities was $816.6 million and $1,023.6 million at December 31, 2014 and 2015, respectively. The fair value of the Select credit facilities was based on quoted market prices for this debt in the syndicated loan market.

        The carrying value of Select's 6.375% senior notes was $711.5 million and $711.2 million at December 31, 2014 and 2015, respectively. The fair value of Select's 6.375% senior notes was $722.4 million and $623.9 million at December 31, 2014 and 2015, respectively. The fair value of this debt was based on quoted market prices.

        The carrying value of the Concentra credit facilities was $649.9 million at December 31, 2015. The fair value of the Concentra credit facilities was $645.4 million at December 31, 2015. The fair value of the Concentra credit facilities was based on quoted market prices for this debt in the syndicated loan market.

        The Company considers the inputs in the valuation process to be Level 2 in the fair value hierarchy. Level 2 in the fair value hierarchy is defined as inputs that are observable for the asset or liability, either directly or indirectly, which includes quoted prices for identical assets or liabilities in markets that are not active.

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Related Party Transactions

12 Months Ended

Dec. 31, 2015

Related Party Transactions

Related Party Transactions

14. Related Party Transactions

        The Company rents its corporate office space from related parties affiliated through common ownership or management. The Company made payments for office rent, leasehold improvements and miscellaneous expenses aggregating $4.2 million, $4.4 million and $4.7 million for the years ended December 31, 2013, 2014 and 2015, respectively, to the affiliated companies.

        As of December 31, 2015, future rental commitments under outstanding agreements with the affiliated companies are approximately as follows (in thousands):

2016	$	4,174
2017		4,221
2018		4,318
2019		4,421
2020		4,526
Thereafter		9,385
	$	31,045

        During the year ended December 31, 2014, common shares were repurchased from Welsh, Carson, Anderson & Stowe IX, L.P. and WCAS Capital Partners IV, L.P. pursuant to stock purchase agreements dated February 26, 2014 and May 5, 2014. Two of the Company's directors are affiliated with these entities (Note 7).

        The Company provides contracted services, principally employee leasing services and charges management fees to related parties affiliated through its equity investments. Net operating revenues generated from the provision of contracted services and management fees to related parties through equity investments are as follows:

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
BIR JV, LLP	$	96,465	$	101,385	$	112,273
Rehabilitation Institute of Denton, LLC		7,163		8,337		9,560
OHRH, LLC		2,069		8,280		10,010
Global Rehab—Scottsdale, LLC		4,129		10,747		12,155
Other		310		518		2,035
Total	$	110,136	$	129,267	$	146,033

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2015

Commitment and Contingencies.

Commitment and Contingencies

15. Commitments and Contingencies

Leases

        The Company leases facilities and equipment from unrelated parties under operating leases. Minimum future lease obligations on long-term non-cancelable operating leases in effect at December 31, 2015 are approximately as follows (in thousands):

	Select		Concentra		Total
	(in thousands)
2016	$	145,185	$	59,845	$	205,030
2017		122,606		53,518		176,124
2018		99,873		44,688		144,561
2019		79,002		36,485		115,487
2020		61,462		30,098		91,560
Thereafter		348,222		61,501		409,723
	$	856,350	$	286,135	$	1,142,485

        Total rent expense for operating leases, including cancelable leases, for the years ended December 31, 2013, 2014 and 2015 was $164.6 million, $169.1 million, and $212.9 million (including $34. 9 million for Concentra), respectively.

        Property rent expense to unrelated parties for the years ended December 31, 2013, 2014 and 2015 was $119.5 million, $124.4 million, and $163.4 million (including $32.9 million for Concentra), respectively.

Construction Commitments

        At December 31, 2015, the Company had outstanding commitments under construction contracts related to new construction, improvements and renovations at the Company's long term acute care properties and inpatient rehabilitation facilities, and Concentra facilities totaling approximately $15.7 million.

Other

        A subsidiary of the Company has entered into a naming, promotional and sponsorship agreement with an NFL team for the team's headquarters complex that requires a payment of $3.1 million in 2016. Each successive annual payment increases by 2.3% through 2025. The naming, promotional and sponsorship agreement is in effect until 2025.

Litigation

        The Company is a party to various legal actions, proceedings and claims (some of which are not insured), and regulatory and other governmental audits and investigations in the ordinary course of its business. The Company cannot predict the ultimate outcome of pending litigation, proceedings and regulatory and other governmental audits and investigations. These matters could potentially subject the Company to sanctions, damages, recoupments, fines and other penalties. CMS or other federal and state enforcement and regulatory agencies may conduct additional investigations related to the Company's businesses in the future that may, either individually or in the aggregate, have a material adverse effect on the Company's business, financial position, results of operations and liquidity.

        To address claims arising out of the Company's operations, the Company maintains professional malpractice liability insurance and general liability insurance, subject to self-insured retention of $2.0 million per medical incident for professional liability claims and $2.0 million per occurrence for general liability claims. The Company also maintains umbrella liability insurance covering claims which, due to their nature or amount, are not covered by or not fully covered by the Company's other insurance policies. These insurance policies also do not generally cover punitive damages and are subject to various deductibles and policy limits. Significant legal actions, as well as the cost and possible lack of available insurance, could subject the Company to substantial uninsured liabilities. In the Company's opinion, the outcome of these actions, individually or in the aggregate, will not have a material adverse effect on its financial position, results of operations, or cash flows.

        Healthcare providers are subject to lawsuits under the qui tam provisions of the federal False Claims Act. Qui tam lawsuits typically remain under seal (hence, usually unknown to the defendant) for some time while the government decides whether or not to intervene on behalf of a private qui tam plaintiff (known as a relator) and take the lead in the litigation. These lawsuits can involve significant monetary damages and penalties and award bounties to private plaintiffs who successfully bring the suits. The Company is and has been a defendant in these cases in the past, and may be named as a defendant in similar cases from time to time in the future.

        On October 19, 2015, the plaintiff-relators filed a Second Amended Complaint in United States of America, ex rel. Tracy Conroy, Pamela Schenk and Lisa Wilson v. Select Medical Corporation, Select Specialty Hospital—Evansville, LLC ("SSH-Evansville"), Select Employment Services, Inc., and Dr. Richard Sloan. The case is a civil action filed in the United States District Court for the Southern District of Indiana by private plaintiff-relators on behalf of the United States under the federal False Claims Act. The plaintiff-relators are the former CEO and two former case managers at SSH-Evansville, and the defendants currently include the Company, SSH-Evansville, a subsidiary of the Company serving as common paymaster for its employees, and a physician who practices at SSH-Evansville. The plaintiff-relators allege that that SSH-Evansville discharged patients too early or held patients too long, improperly discharged patients to and readmitted them from short stay hospitals, up-coded diagnoses at admission, and admitted patients for whom long-term acute care was not medically necessary. They also allege that the defendants engaged in retaliation in violation of federal and state law. The Second Amended Complaint replaces a prior complaint that was filed under seal on September 28, 2012 and served on the Company on February 15, 2013, after a federal magistrate judge unsealed it on January 8, 2013. All deadlines in the case had been stayed after the seal was lifted in order to allow the government time to complete its investigation and to decide whether or not to intervene. On June 19, 2015, the U.S. Department of Justice notified the court of its decision not to intervene in the case, and the court thereafter approved a case management plan imposing certain deadlines. The plaintiff-relators filed a Second Amended Complaint in October 2015, and defendants filed a Motion to Dismiss such Complaint in December 2015. The Company intends to vigorously defend this action, but at this time the Company is unable to predict the timing and outcome of this matter.

        On July 13, 2015, the federal District Court for the Eastern District of Tennessee unsealed a qui tam Complaint in Armes v. Garman, et al, No. 3:14-cv-00172-TAV-CCS, which named as defendants Select, Select Specialty Hospital—Knoxville, Inc. ("SSH-Knoxville"), Select Specialty Hospital—North Knoxville, Inc. and ten current or former employees of these facilities. The Complaint was unsealed after the United States and the State of Tennessee notified the Court on July 13, 2015 that each had decided not to intervene in the case. The Complaint is a civil action that was filed under seal on April 29, 2014 by a respiratory therapist formerly employed at SSH-Knoxville. The Complaint alleges violations of the federal False Claims Act and the Tennessee Medicaid False Claims Act based on extending patient stays to increase reimbursement and to increase average length of stay; artificially prolonging the lives of patients to increase Medicare reimbursements and decrease inspections; admitting patients who do not require medically necessary care; performing unnecessary procedures and services; and delaying performance of procedures to increase billing. The Complaint was served on some of the defendants during October 2015. The defendants filed a Motion to Dismiss such Complaint in November 2015. The Company intends to vigorously defend this action if the relators pursue it, but at this time the Company is unable to predict the timing and outcome of this matter.

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Supplemental Disclosures of Cash Flow Information

12 Months Ended

Dec. 31, 2015

Supplemental Disclosures of Cash Flow Information

Supplemental Disclosures of Cash Flow Information

16. Supplemental Disclosures of Cash Flow Information

        The following table summarizes non cash investing and financing activities for both Holdings and Select at December 31, 2013, 2014, and 2015:

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
Notes issued with acquisitions	$	3,283	$	327	$	12
Liabilities assumed with acquisitions		885		122		298
Contingent consideration related to acquisitions		100		—		—
Liability for property and equipment		—		14,230		36,744
Notes issued to acquire non-consolidating interest		3,399		—		—

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Subsequent Events

12 Months Ended

Dec. 31, 2015

Subsequent Events

Subsequent Events

17. Subsequent Events

        On January 25, 2016, Select announced that it has entered into an Agreement and Plan of Merger, dated as of January 22, 2016 with Grip Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Select, Physiotherapy Associates Holdings, Inc., a Delaware corporation ("Physiotherapy"), and KHR Physio, LLC, a Delaware limited liability company, solely in its capacity as the Holder Representative (as defined in the merger agreement). Pursuant to the terms of the merger agreement, Select will acquire Physiotherapy for $400.0 million in cash, subject to certain adjustments in accordance with the terms set forth in the merger agreement, through the merger of Grip Merger Sub, Inc. with and into Physiotherapy, with Physiotherapy continuing as the surviving corporation under its present name as a wholly owned subsidiary of Select.

        Select expects to finance the transaction and related expenses using a combination of cash on hand and the proceeds from a proposed $400.0 million senior secured incremental term facility under its existing credit facility, for which JP Morgan Chase, N.A. has provided Select with a debt commitment letter. Should the merger agreement be terminated by Physiotherapy under specified conditions, including circumstances where Select is required to close the transaction under the merger agreement and there is a failure of the debt financing to be funded in accordance with its terms, a reverse termination fee of $24.0 million would be payable by Select to Physiotherapy. The transaction, which is expected to close in the first half of 2016, is subject to a number of closing conditions.

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Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes

12 Months Ended

Dec. 31, 2015

Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes

Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes

18. Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes

        Select's 6.375% senior notes are fully and unconditionally guaranteed, except for customary limitations, on a senior basis by all of Select's wholly owned subsidiaries (the "Subsidiary Guarantors") which is defined as a subsidiary where Select or a subsidiary of Select holds all of the outstanding ownership interests. Certain of Select's subsidiaries did not guarantee the 6.375% senior notes (the "Non-Guarantor Subsidiaries," including Group Holdings and its subsidiaries, which were designated as Non-Guarantor subsidiaries by Select's board of directors at the closing of the Concentra acquisition, the "Non-Guarantor Concentra").

        Select conducts a significant portion of its business through its subsidiaries. Presented below is condensed consolidating financial information for Select, the Subsidiary Guarantors, the Non-Guarantor Subsidiaries, and Non-Guarantor Concentra at December 31, 2014 and 2015 and for the years ended December 31, 2013, 2014 and 2015.

        Select conducts a significant portion of its business through its subsidiaries. Presented below is condensed consolidating financial information for Select, the Subsidiary Guarantors, the Non-Guarantor Subsidiaries, and Non-Guarantor Concentra

        During the year ended December 31, 2014, the Company purchased the remaining outstanding non-controlling interest in a specialty hospital business changing the entity from a non-guarantor subsidiary to a guarantor subsidiary. The year ended and as of December 31, 2013 has been retrospectively revised based on the guarantor structure that existed at December 31, 2014.

Select Medical Corporation
Condensed Consolidating Balance Sheet
December 31, 2015

	Select (Parent Company Only)			Subsidiary Guarantors		Non-Guarantor Subsidiaries			Non-Guarantor Concentra			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Assets
Current Assets:
Cash and cash equivalents	$	4,070		$	3,706	$	625		$	6,034		$	—		$	14,435
Accounts receivable, net		—			419,382		68,504			115,672			—			603,558
Current deferred tax asset		11,556			6,708		4,786			5,638			—			28,688
Intercompany receivables		—			1,970,477		137,512			—			(2,107,989)	(a)		—
Prepaid income taxes		7,979			—		—			8,715			—			16,694
Other current assets		10,521			34,859		5,759			34,640			—			85,779
Total Current Assets		34,126			2,435,132		217,186			170,699			(2,107,989	)		749,154
Property and equipment, net		38,872			548,809		61,137			215,306			—			864,124
Investment in affiliates		4,107,930			75,027		—			—			(4,182,957)	(b)(c)		—
Goodwill		—			1,663,974		—			650,650			—			2,314,624
Non-current deferred tax asset		12,297			—		—			—			(12,297)	(d)		—
Other identifiable intangibles		—			72,776		—			245,899			—			318,675
Other assets		21,623			108,524		659			49,283			—			180,089
Total Assets	$	4,214,848		$	4,904,242	$	278,982		$	1,331,837		$	(6,303,243	)	$	4,426,666
Liabilities and Equity
Current Liabilities:
Bank overdrafts	$	28,615		$	—	$	—		$	—		$	—		$	28,615
Current portion of long-term debt and notes payable		227,180			197		939			5,254			—			233,570
Accounts payable		10,445			101,156		16,997			8,811			—			137,409
Intercompany payables		1,970,477			137,512		—			—			(2,107,989)	(a)		—
Accrued payroll		22,970			66,892		3,932			27,195			—			120,989
Accrued vacation		6,406			50,194		9,423			7,954			—			73,977
Accrued interest		6,315			3		—			3,083			—			9,401
Accrued other		38,883			42,939		9,866			42,040			—			133,728
Total Current Liabilities		2,311,291			398,893		41,157			94,337			(2,107,989	)		737,689
Long-term debt, net of current portion		997,114			452,417		90,860			649,923			—			2,190,314
Non-current deferred tax liability		—			113,977		9,656			107,369			(12,297)	(d)		218,705
Other non-current liabilities		47,190			41,904		4,798			39,328			—			133,220
Total Liabilities		3,355,595			1,007,191		146,471			890,957			(2,120,286	)		3,279,928
Redeemable non-controlling interests		—			—		12,094			226,127			—			238,221
Stockholder's Equity:
Common stock		0			—		—			—			—			0
Capital in excess of par		904,375			—		—			—			—			904,375
Retained earnings (accumulated deficit)		(45,122	)		1,187,022		(1,006	)		(6,120	)		(1,179,896)	(c)		(45,122	)
Subsidiary investment		—			2,710,029		75,097			217,935			(3,003,061)	(b)		—
Total Select Medical Corporation Stockholder's Equity		859,253			3,897,051		74,091			211,815			(4,182,957	)		859,253
Non-controlling interests		—			—		46,326			2,938			—			49,264
Total Equity		859,253			3,897,051		120,417			214,753			(4,182,957	)		908,517
Total Liabilities and Equity	$	4,214,848		$	4,904,242	$	278,982		$	1,331,837		$	(6,303,243	)	$	4,426,666

(a)	Elimination of intercompany.
(b)	Elimination of investments in consolidated subsidiaries.
(c)	Elimination of investments in consolidated subsidiaries' earnings.
(d)	Reclass of non-current deferred tax asset to report net non-current deferred tax liability in consolidation.

Select Medical Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2015

	Select (Parent Company Only)			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Non-Guarantor Concentra			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Net operating revenues	$	724		$	2,673,987		$	482,803		$	585,222		$	—		$	3,742,736
Costs and expenses:
Cost of services		2,029			2,266,647			414,518			528,347			—			3,211,541
General and administrative		88,227			(890	)		—			4,715			—			92,052
Bad debt expense		—			40,541			9,240			9,591			—			59,372
Depreciation and amortization		4,292			56,447			10,598			33,644			—			104,981
Total costs and expenses		94,548			2,362,745			434,356			576,297			—			3,467,946
Income (loss) from operations		(93,824	)		311,242			48,447			8,925			—			274,790
Other income and expense:
Intercompany interest and royalty fees		(1,417	)		1,387			30			—			—			—
Intercompany management fees		143,939			(119,388	)		(24,551	)		—			—			—
Gain on sale of equity investment		—			29,647			—			—			—			29,647
Equity in earnings of unconsolidated subsidiaries		—			16,719			92			—			—			16,811
Interest expense		(58,350	)		(24,250	)		(6,154	)		(24,062	)		—			(112,816	)
Income (loss) from operations before income taxes		(9,652	)		215,357			17,864			(15,137	)		—			208,432
Income tax expense (benefit)		(7,869	)		85,907			(470	)		(5,132	)		—			72,436
Equity in earnings of subsidiaries		132,520			9,117			—			—			(141,637)	(a)		—
Net income		130,737			138,567			18,334			(10,005	)		(141,637	)		135,996
Less: Net income attributable to non-controlling interests		—			—			9,144			(3,884	)		—			5,260
Net income (loss) attributable to Select Medical Corporation	$	130,737		$	138,567		$	9,190		$	(6,121	)	$	(141,637	)	$	130,736

(a) Elimination of equity in earnings of subsidiaries.

Select Medical Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2015

	Select (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Non- Guarantor Concentra			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Operating activities
Net income	$	130,737		$	138,567		$	18,334		$	(10,005	)	$	(141,637)	(a)	$	135,996
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions from unconsolidated subsidiaries		—			13,870			99			—			—			13,969
Depreciation and amortization		4,292			56,447			10,598			33,644			—			104,981
Provision for bad debts		—			40,541			9,240			9,591			—			59,372
Equity in earnings of unconsolidated subsidiaries		—			(16,719	)		(92	)		—			—			(16,811	)
Loss (gain) on sale of assets and businesses		—			(1,128	)		16			14			—			(1,098	)
Gain on sale of equity investment		—			(29,647	)		—			—			—			(29,647	)
Stock compensation expense		13,969			—			—			1,016			—			14,985
Amortization of debt discount and issuance costs		7,404			—			—			2,139			—			9,543
Deferred income taxes		(3,484	)		—			—			1,426			—			(2,058	)
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries		(132,520	)		(9,117	)		—			—			141,637	(a)		—
Accounts receivable		—			(83,142	)		(10,255	)		825			—			(92,572	)
Other current assets		(2,661	)		(2,236	)		(396	)		2,790			—			(2,503	)
Other assets		10,840			(6,415	)		288			—			—			4,713
Accounts payable		560			8,569			2,654			(9,438	)		—			2,345
Accrued expenses		(1,508	)		9,569			5,696			(6,557	)		—			7,200
Net cash provided by operating activities		27,629			119,159			36,182			25,445			—			208,415
Investing activities
Purchases of property and equipment		(10,890	)		(134,002	)		(10,979	)		(26,771	)		—			(182,642	)
Proceeds from sale of assets		—			1,742			24			1			—			1,767
Investment in businesses		—			(2,347	)		—			—			—			(2,347	)
Proceeds from sale of equity method investment		—			33,096			—			—			—			33,096
Acquisition of businesses, net of cash acquired		—			—			(8,832	)		(1,052,796	)		—			(1,061,628	)
Net cash used in investing activities		(10,890	)		(101,511	)		(19,787	)		(1,079,566	)		—			(1,211,754	)
Financing activities
Borrowings on revolving facilities		1,115,000			—			—			20,000			—			1,135,000
Payments on revolving facilities		(880,000	)		—			—			(15,000	)		—			(895,000	)
Proceeds from term loans, net of discounts		—			—			—			646,875			—			646,875
Payments on term loans		(26,884	)		—			—			(2,250	)		—			(29,134	)
Borrowings of other debt		8,684			—			1,681			3,009			—			13,374
Principal payments on other debt		(11,923	)		(2,736	)		(1,513	)		(1,964	)		—			(18,136	)
Debt issuance costs		—			—			—			(23,300	)		—			(23,300	)
Proceeds from bank overdrafts		6,869			—			—			—			—			6,869
Equity investment by Holdings		1,649			—			—			—			—			1,649
Dividends paid to Holdings		(28,956	)		—			—			—			—			(28,956	)
Intercompany		(199,024	)		(13,660	)		(5,251	)		217,935			—			—
Purchase of non-controlling interests		—			—			(1,095	)		—			—			(1,095	)
Proceeds from issuance of non-controlling interests		—			—			—			217,065			—			217,065
Tax benefit from stock based awards		1,846			—			—			—			—			1,846
Distributions to non-controlling interests		—			—			(10,422	)		(2,215	)		—			(12,637	)
Net cash provided by (used in) financing activities		(12,739	)		(16,396	)		(16,600	)		1,060,155			—			1,014,420
Net increase (decrease) in cash and cash equivalents		4,000			1,252			(205	)		6,034			—			11,081
Cash and cash equivalents at beginning of period		70			2,454			830			—			—			3,354
Cash and cash equivalents at end of period	$	4,070		$	3,706		$	625		$	6,034		$	—		$	14,435

(a) Elimination of equity in earnings of consolidated subsidiaries.

Select Medical Corporation
Condensed Consolidating Balance Sheet
December 31, 2014

	Select (Parent Company Only)			Subsidiary Guarantors		Non- Guarantor Subsidiaries		Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Assets
Current Assets:
Cash and cash equivalents	$	70		$	2,454	$	830	$	—		$	3,354
Accounts receivable, net		—			376,780		67,489		—			444,269
Current deferred tax asset		10,186			2,458		3,347		—			15,991
Prepaid income taxes		17,888			—		—		—			17,888
Intercompany receivables		—			1,728,708		106,509		(1,835,217	)(a)		—
Other current assets		7,860			32,919		5,363		—			46,142
Total Current Assets		36,004			2,143,319		183,538		(1,835,217	)		527,644
Property and equipment, net		17,521			468,138		56,651		—			542,310
Investment in affiliates		3,741,085			67,575		—		(3,808,660)	(b)(c)		—
Goodwill		—			1,642,083		—		—			1,642,083
Non-current deferred tax asset		11,230			—		—		(11,230)	(d)		—
Other identifiable intangibles		—			72,519		—		—			72,519
Other assets		32,463			106,843		947		—			140,253
Total Assets	$	3,838,303		$	4,500,477	$	241,136	$	(5,655,107	)	$	2,924,809
Liabilities and Equity
Current Liabilities:
Bank overdrafts	$	21,746		$	—	$	—	$	—		$	21,746
Current portion of long-term debt and notes payable		8,496			1,844		534		—			10,874
Accounts payable		9,885			84,304		14,343		—			108,532
Intercompany payables		1,835,217			—		—		(1,835,217	)(a)		—
Accrued payroll		17,410			76,670		3,010		—			97,090
Accrued vacation		5,070			49,315		8,747		—			63,132
Accrued interest		10,596			76		2		—			10,674
Accrued other		39,801			36,874		5,701		—			82,376
Total Current Liabilities		1,948,221			249,083		32,337		(1,835,217	)		394,424
Long-term debt, net of current portion		1,098,151			364,794		79,157		—			1,542,102
Non-current deferred tax liability		—			112,013		8,420		(11,230)	(d)		109,203
Other non-current liabilities		52,416			35,576		4,863		—			92,855
Total Liabilities		3,098,788			761,466		124,777		(1,846,447	)		2,138,584
Redeemable non-controlling interests		—			—		10,985		—			10,985
Stockholder's Equity:
Common stock		0			—		—		—			0
Capital in excess of par		885,407			—		—		—			885,407
Retained earnings (accumulated deficit)		(145,892	)		1,048,455		8,366		(1,056,821)	(c)		(145,892	)
Subsidiary investment		—			2,690,556		61,283		(2,751,839)	(b)		—
Total Select Medical Corporation Stockholder's Equity		739,515			3,739,011		69,649		(3,808,660	)		739,515
Non-controlling interests		—			—		35,725		—			35,725
Total Equity		739,515			3,739,011		105,374		(3,808,660	)		775,240
Total Liabilities and Equity	$	3,838,303		$	4,500,477	$	241,136	$	(5,655,107	)	$	2,924,809

(a)	Elimination of intercompany.
(b)	Elimination of investments in consolidated subsidiaries.
(c)	Elimination of investments in consolidated subsidiaries' earnings.
(d)	Reclass of non-current deferred tax asset to report net non-current deferred tax liability in consolidation.

Select Medical Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2014

	Select (Parent Company Only)			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Net operating revenues	$	721		$	2,634,480		$	429,816		$	—		$	3,065,017
Costs and expenses:
Cost of services		2,015			2,209,724			370,601			—			2,582,340
General and administrative		86,311			(1,064	)		—			—			85,247
Bad debt expense		—			38,052			6,548			—			44,600
Depreciation and amortization		3,723			54,876			9,755			—			68,354
Total costs and expenses		92,049			2,301,588			386,904			—			2,780,541
Income (loss) from operations		(91,328	)		332,892			42,912			—			284,476
Other income and expense:
Intercompany interest and royalty fees		(1,142	)		1,131			11			—			—
Intercompany management fees		142,273			(120,528	)		(21,745	)		—			—
Equity in earnings of unconsolidated subsidiaries		—			6,958			86			—			7,044
Loss on early retirement of debt		(2,277	)		—			—			—			(2,277	)
Interest expense		(57,651	)		(23,367	)		(4,428	)		—			(85,446	)
Income (loss) from operations before income taxes		(10,125	)		197,086			16,836			—			203,797
Income tax expense (benefit)		(4,333	)		78,748			1,207			—			75,622
Equity in earnings of subsidiaries		126,419			8,995			—			(135,414	)(a)		—
Net income		120,627			127,333			15,629			(135,414	)		128,175
Less: Net income attributable to non-controlling interests		—			623			6,925			—			7,548
Net income attributable to Select Medical Corporation	$	120,627		$	126,710		$	8,704		$	(135,414	)	$	120,627

(a) Elimination of equity in earnings of subsidiaries.

Select Medical Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2014

	Select (Parent Company Only)			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Operating activities
Net income	$	120,627		$	127,333		$	15,629		$	(135,414	)(a)	$	128,175
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions from unconsolidated subsidiaries		—			11,889			65						11,954
Depreciation and amortization		3,723			54,876			9,755			—			68,354
Provision for bad debts		—			38,052			6,548			—			44,600
Equity in earnings of unconsolidated subsidiaries		—			(6,958	)		(86	)		—			(7,044	)
Loss on early retirement of debt		2,277			—			—			—			2,277
Gain on disposal or sale of assets		—			(1,168	)		120			—			(1,048	)
Stock compensation expense		11,186			—			—			—			11,186
Amortization of debt discount and issuance costs		7,553			—			—			—			7,553
Deferred income taxes		14,311			—			—			—			14,311
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries		(126,419	)		(8,995	)		—			135,414	(a)		—
Accounts receivable		—			(80,394	)		(17,408	)		—			(97,802	)
Other current assets		1,885			(4,004	)		390			—			(1,729	)
Other assets		2,811			(2,566	)		(348	)		—			(103	)
Accounts payable		3,136			2,440			421			—			5,997
Accrued expenses		(6,353	)		(9,407	)		(279	)		—			(16,039	)
Net cash provided by operating activities		34,737			121,098			14,807			—			170,642
Investing activities
Purchases of property and equipment		(4,674	)		(79,600	)		(10,972	)		—			(95,246	)
Investment in businesses		—			(4,634	)		—			—			(4,634	)
Acquisition of businesses, net of cash acquired		—			(397	)		(814	)		—			(1,211	)
Net cash used in investing activities		(4,674	)		(84,631	)		(11,786	)		—			(101,091	)
Financing activities
Borrowings on revolving facilities		910,000			—			—			—			910,000
Payments on revolving facilities		(870,000	)		—			—			—			(870,000	)
Payments on term loans		(33,994	)		—			—			—			(33,994	)
Issuance of 6.375% senior notes		111,650			—			—			—			111,650
Borrowings of other debt		8,151			—			925			—			9,076
Principal payments on other debt		(9,213	)		(2,058	)		(3,402	)		—			(14,673	)
Debt issuance costs		(4,434	)		—			—			—			(4,434	)
Proceeds from bank overdrafts		9,240			—			—			—			9,240
Purchase of non-controlling interests		—			(9,961	)		—			—			(9,961	)
Equity investment by Holdings		7,355			—			—			—			7,355
Dividends paid to Holdings		(184,100	)		—			—			—			(184,100	)
Intercompany		22,162			(25,092	)		2,930			—			—
Proceeds from issuance of non-controlling interests		—			—			185			—			185
Tax benefit from stock based awards		3,119			—			—			—			3,119
Distributions to non-controlling interests		—			—			(3,979	)		—			(3,979	)
Net cash used in financing activities		(30,064	)		(37,111	)		(3,341	)		—			(70,516	)
Net decrease in cash and cash equivalents		(1	)		(644	)		(320	)		—			(965	)
Cash and cash equivalents at beginning of period		71			3,098			1,150			—			4,319
Cash and cash equivalents at end of period	$	70		$	2,454		$	830		$	—		$	3,354

(a) Elimination of equity in earnings of consolidated subsidiaries.

Select Medical Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2013

	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net operating revenues	$	350		$	2,576,906		$	398,392		$	—		$	2,975,648
Costs and expenses:
Cost of services		1,757			2,155,370			338,349			—			2,495,476
General and administrative		76,709			212			—			—			76,921
Bad debt expense		—			31,173			6,250			—			37,423
Depreciation and amortization		3,746			51,825			8,821			—			64,392
Total costs and expenses		82,212			2,238,580			353,420			—			2,674,212
Income (loss) from operations		(81,862	)		338,326			44,972			—			301,436
Other income and expense:
Intercompany interest and royalty fees		(1,326	)		836			490			—			—
Intercompany management fees		144,447			(125,357	)		(19,090	)		—			—
Equity in earnings of unconsolidated subsidiaries		—			2,384			92			—			2,476
Loss on early retirement of debt		(17,788	)		—			—			—			(17,788	)
Interest expense		(58,100	)		(22,916	)		(3,938	)		—			(84,954	)
Income (loss) from operations before income taxes		(14,629	)		193,273			22,526			—			201,170
Income tax expense (benefit)		(1,238	)		76,837			372			—			75,971
Equity in earnings of subsidiaries		129,971			14,561			—			(144,532)	(a)		—
Net income		116,580			130,997			22,154			(144,532	)		125,199
Less: Net income attributable to non-controlling interests		—			995			7,624			—			8,619
Net income attributable to Select Medical Corporation	$	116,580		$	130,002		$	14,530		$	(144,532	)	$	116,580

(a)           Elimination of equity in earnings of subsidiaries.

Select Medical Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2013

	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Operating activities
Net income	$	116,580		$	130,997		$	22,154		$	(144,532)	(a)	$	125,199
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,746			51,825			8,821			—			64,392
Provision for bad debts		—			31,173			6,250			—			37,423
Equity in earnings of unconsolidated subsidiaires		—			(2,384	)		(92	)		—			(2,476	)
Loss on early retirement of debt		17,788			—			—			—			17,788
Gain on disposal or sale of assets		—			(463	)		(118	)		—			(581	)
Stock compensation expense		7,033			—			—			—			7,033
Amortization of debt discount and issuance costs		8,344			—			—			—			8,344
Deferred income taxes		7,032			—			—			—			7,032
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries		(129,971	)		(14,561	)		—			144,532	(a)		—
Accounts receivable		—			(60,460	)		(6,685	)		—			(67,145	)
Other current assets		(4,145	)		(5,849	)		1,827			—			(8,167	)
Other assets		(6,594	)		3,026			84			—			(3,484	)
Accounts payable		2,075			(3,746	)		388			—			(1,283	)
Due to third-party payors		—			3,067			(4,108	)		—			(1,041	)
Accrued expenses		(4,929	)		20,843			(846	)		—			15,068
Net cash provided by operating activities		16,959			153,468			27,675			—			198,102
Investing activities
Purchases of property and equipment		(3,024	)		(60,532	)		(10,104	)		—			(73,660	)
Investment in businesses, net of distributions		—			(34,893	)		—			—			(34,893	)
Acquisition of businesses, net of cash acquired		—			(1,665	)		—			—			(1,665	)
Proceeds from sale of assets		—			2,456			456			—			2,912
Net cash used in investing activities		(3,024	)		(94,634	)		(9,648	)		—			(107,306	)

Select Medical Corporation
Condensed Consolidating Statement of Cash Flows (Continued)
For the Year Ended December 31, 2013

	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations		Consolidated
	(in thousands)
Financing activities
Borrowings on revolving facilities		690,000			—			—			—		690,000
Payments on revolving facilities		(800,000	)		—			—			—		(800,000	)
Borrowings on term loans, net of discount		298,500			—			—			—		298,500
Payments on term loans		(596,720	)		—			—			—		(596,720	)
Issuance of 6.375% senior notes		600,000			—			—			—		600,000
Repurchase of 75/8% senior subordinated notes, net of premiums		(70,000	)		—			—			—		(70,000	)
Borrowings of other debt		8,923			5,303			1,084			—		15,310
Principal payments on other debt		(7,752	)		(873	)		(2,209	)		—		(10,834	)
Debt issuance costs		(18,914	)		—			—			—		(18,914	)
Repayments of bank overdrafts		(5,330	)		—			—			—		(5,330	)
Equity investment by Holdings		1,525			—			—			—		1,525
Dividends paid to Holdings		(226,621	)		—			—			—		(226,621	)
Intercompany		77,455			(63,900	)		(13,555	)		—		—
Distributions to non-controlling interests		—			—			(3,537	)		—		(3,537	)
Net cash used in financing activities		(48,934	)		(59,470	)		(18,217	)		—		(126,621	)
Net decrease in cash and cash equivalents		(34,999	)		(636	)		(190	)		—		(35,825	)
Cash and cash equivalents at beginning of period		35,070			3,734			1,340			—		40,144
Cash and cash equivalents at end of period	$	71		$	3,098		$	1,150		$	—	$	4,319

(a)           Elimination of equity in earnings of consolidated subsidiaries.

XML

Selected Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2015

Selected Quarterly Financial Data (Unaudited)

Selected Quarterly Financial Data (Unaudited)

19. Selected Quarterly Financial Data (Unaudited)

        The table below sets forth selected unaudited financial data for each quarter of the last two years.

	Holdings
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands, except per share amounts)
Year ended December 31, 2014
Net operating revenues	$	762,578	$	772,762	$	758,069	$	771,608
Income from operations		78,444		82,193		66,017		57,822
Net income attributable to Select Medical Holdings Corporation	$	33,044	$	35,341	$	26,530	$	25,712
Income per common share(1):
Basic	$	0.24	$	0.27	$	0.20	$	0.20
Diluted	$	0.24	$	0.27	$	0.20	$	0.20

	Select
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands)
Year ended December 31, 2014
Net operating revenues	$	762,578	$	772,762	$	758,069	$	771,608
Income from operations		78,444		82,193		66,017		57,822
Net income attributable to Select Medical Corporation	$	33,044	$	35,341	$	26,530	$	25,712

	Holdings
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands, except per share amounts)
Year ended December 31, 2015
Net operating revenues	$	795,343	$	887,065	$	1,021,123	$	1,039,205
Income from operations		79,265		85,011		48,214		62,300
Net income attributable to Select Medical Holdings Corporation	$	35,063	$	36,940	$	29,406	$	29,327
Income per common share(1):
Basic	$	0.27	$	0.28	$	0.22	$	0.22
Diluted	$	0.27	$	0.28	$	0.22	$	0.22

	Select
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands)
Year ended December 31, 2015
Net operating revenues	$	795,343	$	887,065	$	1,021,123	$	1,039,205
Income from operations		79,265		85,011		48,214		62,300
Net income attributable to Select Medical Corporation	$	35,063	$	36,940	$	29,406	$	29,327

(1)           Due to rounding, the summation of quarterly Income per share balances may not equal year to date equivalents.

XML

Schedule II - Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2015

Schedule II - Valuation and Qualifying Accounts

Schedule II - Valuation and Qualifying Accounts

Schedule II—Valuation and Qualifying Accounts

Description	Balance at Beginning of Year		Charged to Cost and Expenses			Deductions(1)			Balance at End of Year
Allowance for Doubtful Accounts
Year ended December 31, 2015	$	46,425	$	59,372		$	(44,664	)	$	61,133
Year ended December 31, 2014	$	40,815	$	44,600		$	(38,990	)	$	46,425
Year ended December 31, 2013	$	41,854	$	37,423		$	(38,462	)	$	40,815
Income Tax Valuation Allowance
Year ended December 31, 2015	$	9,641	$	(2,055	)	$	—		$	7,586
Year ended December 31, 2014	$	10,547	$	(906	)	$	—		$	9,641
Year ended December 31, 2013	$	13,341	$	(2,794	)	$	—		$	10,547

(1)           Allowance for doubtful accounts deductions represent write-offs against the reserve for 2013, 2014 and 2015.

XML

Organization and Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2015

Organization and Significant Accounting Policies

Principles of Consolidation

Principles of Consolidation

        The consolidated financial statements include the accounts of the Company, its majority owned subsidiaries, limited liability companies, and limited partnerships the Company and its subsidiaries control through ownership of general and limited partnership or membership interests. All intercompany balances and transactions are eliminated in consolidation.

Use of Estimates

Use of Estimates

        The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and amounts of revenue and expenses recognized during the period. Actual results could differ materially from those estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents

        The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are stated at cost which approximates market value.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts

        The Company reports accounts receivable at estimated net realizable values. Substantially all of the Company's accounts receivable are related to providing healthcare services to patients whose costs are primarily paid by federal and state governmental authorities, managed care health plans, commercial insurance companies, and workers' compensation programs. Collection of these accounts receivable is the Company's primary source of cash and is critical to its operating performance. The Company's primary collection risks relate to non-governmental payors who insure these patients and deductibles, co-payments, and amounts owed by the patient. Deductibles, co-payments, and amounts owed by the patient are an immaterial portion of the Company's net accounts receivable balance and accounted for approximately 0.2% and 1.2% of the net accounts receivable balance before doubtful accounts at December 31, 2014 and 2015, respectively. The Company's general policy is to verify insurance coverage prior to the date of admission for a patient admitted to the Company's hospitals, or in the case of the Company's outpatient rehabilitation clinics and Concentra medical centers, the Company verifies insurance coverage prior to their first visit. The Company's estimate for the allowance for doubtful accounts is calculated by providing a reserve allowance based upon the age of an account balance. Generally the Company has reserved as uncollectible all governmental accounts over 365 days and non-governmental accounts over 180 days from discharge. This method is monitored based on historical cash collections experience. Collections are impacted by the effectiveness of the Company's collection efforts with non-governmental payors and regulatory or administrative disruptions with the fiscal intermediaries that pay the Company's governmental receivables. Uncollected accounts are written off the balance sheet when they are turned over to an outside collection agency, or when management determines that the balance is uncollectible, whichever occurs first.

Property and Equipment

Property and Equipment

        Property and equipment are stated at cost, net of accumulated depreciation. Direct internal and external costs of developing software for internal use, including programming and enhancements, are capitalized and depreciated over the estimated useful lives once the software is placed in service. Capitalized software costs are included within furniture and equipment. Software training costs, maintenance, and repairs are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or the term of the lease, as appropriate. The general range of useful lives is as follows:

Leasehold improvements	5 - 15 years
Furniture and equipment	3 - 20 years
Buildings	40 years
Building improvements	5 - 25 years
Land improvements	2 - 25 years

        The Company reviews the realizability of long-lived assets whenever events or circumstances occur which indicate recorded costs may not be recoverable. Gains or losses related to the retirement or disposal of property and equipment are reported as a component of income from operations.

Concentration of Credit Risk

Concentration of Credit Risk

        Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash balances and trade receivables. The Company invests its excess cash with large financial institutions. The Company grants unsecured credit to its patients, most of who reside in the service area of the Company's facilities and are insured under third-party payor agreements. Because of the geographic diversity of the Company's facilities and non-governmental third-party payors, Medicare represents the Company's only significant concentration of credit risk.

Income Taxes

Income Taxes

        Deferred tax assets and liabilities are recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. As part of the process of preparing its consolidated financial statements, the Company estimates income taxes based on its actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for book and tax purposes. The Company also recognizes as deferred tax assets the future tax benefits from net operating loss carry forwards. The Company evaluates the realizability of these deferred tax assets by assessing their valuation allowances and by adjusting the amount of such allowances, if necessary. Among the factors used to assess the likelihood of realization are projections of future taxable income streams, the expected timing of the reversals of existing temporary differences, and the impact of tax planning strategies that could be implemented to avoid the potential loss of future tax benefits.

        Reserves for uncertain tax positions are established for exposure items related to various federal and state tax matters. Income tax reserves are recorded when an exposure is identified and when, in the opinion of management, it is more likely than not that a tax position will not be sustained and the amount of the liability can be estimated.

Intangible Assets and Liabilities

Intangible Assets and Liabilities

        Finite-lived intangible assets and liabilities are amortized based on the pattern in which the economic benefits are consumed or otherwise depleted. If such a pattern cannot be reliably determined, other intangible assets are amortized on a straight-line basis over their estimated lives. Goodwill and certain other indefinite-lived intangible assets are not amortized, but instead are subject to periodic impairment evaluations. In performing the quantitative periodic impairment tests, the fair value of the reporting unit is compared to its carrying value, including goodwill and other intangible assets. If the carrying value exceeds the fair value and an impairment condition exists, an impairment loss would be recognized.

        To determine the fair value of its reporting units, the Company uses a discounted cash flow approach. Included in this analysis are assumptions regarding revenue growth rate, future Adjusted EBITDA margin estimates, future general and administrative expense rates, and the industry's weighted average cost of capital and industry specific market comparable Adjusted EBITDA multiples. The Company also must estimate residual values at the end of the forecast period and future capital expenditure requirements. Each of these assumptions requires the Company to use its knowledge of (1) its industry, (2) its recent transactions, and (3) reasonable performance expectations for its operations. If any one of the above assumptions changes or fails to materialize, the resulting decline in the Company's estimated fair value could result in a material impairment charge to the goodwill associated with any one of the reporting units.

        Impairment tests are required to be conducted at least annually, or when events or conditions occur that might suggest a possible impairment. These events or conditions include, but are not limited to, a significant adverse change in the business environment, regulatory environment or legal factors; a current period operating or cash flow loss combined with a history of such losses or a projection of continuing losses; or a sale or disposition of a significant portion of a reporting unit. The occurrence of one of these events or conditions could significantly impact an impairment assessment, necessitating an impairment charge. For purposes of goodwill impairment assessment, the Company has defined its reporting units as specialty hospitals, Concentra, outpatient rehabilitation clinics, and contract therapy. Goodwill has been allocated among reporting units based on the relative fair value of those divisions when the Merger occurred in 2005 and based on subsequent acquisitions and dispositions. The Company's most recent impairment assessment was completed during the fourth quarter of 2015 utilizing financial information as of October 1, 2015 and indicated that there was no impairment with respect to goodwill or other recorded intangible assets.

        Identifiable assets and liabilities acquired in connection with business combinations accounted for under the purchase method are recorded at their respective fair values. Deferred income taxes have been recorded to the extent of differences between the fair value and the tax basis of the assets acquired and liabilities assumed. Company management has allocated the intangible assets between identifiable intangibles and goodwill. At December 31, 2015, intangible assets other than goodwill consist of the values assigned to trademarks, certificates of need, accreditations, customer relationships, and leasehold interests. Management believes that the estimated useful lives established are reasonable based on the economic factors applicable to each of the intangible assets.

        The approximate useful life of each class of intangible assets and liabilities is as follows:

Trademarks	Indefinite
Certificates of need	Indefinite
Accreditations	Indefinite
Customer relationships	9 - 17 years
Leasehold interests	2 - 10 years

        The Company reviews the realizability of intangible assets whenever events or circumstances occur which indicate recorded amounts may not be recoverable.

        If the expected future cash flows (undiscounted) are less than the carrying amount of such assets, the Company recognizes an impairment loss for the difference between the carrying amount of the assets and their estimated fair value.

Deferred Financing Costs

Deferred Financing Costs

        The Company has incurred debt issuance costs related to indebtedness which are recognized as other assets in the consolidated balance sheet. Debt issuance costs are subsequently amortized and recognized as interest expense using the effective interest method over the term of the related indebtedness. Whenever indebtedness is modified from its original terms an evaluation is made whether an accounting modification or accounting extinguishment has occurred in order to determine the accounting treatment.

Due to Third-Party Payors

Due to Third-Party Payors

        Due to third-party payors represents the difference between amounts received under interim payment plans from Medicare and Medicaid for services rendered and amounts estimated to be reimbursed by those third-party payors upon settlement of cost reports.

Insurance Risk Programs

Insurance Risk Programs

        Under a number of the Company's insurance programs, which include the Company's employee health insurance program, its workers' compensation and professional malpractice liability insurance programs, the Company is liable for a portion of its losses. In these situations the Company accrues for its losses under an occurrence-based approach whereby the Company estimates the losses that will be incurred in a respective accounting period and accrues that estimated liability using actuarial methods. These programs are monitored quarterly and estimates are revised as necessary to take into account additional information. Provisions for losses for professional liability risks retained by the Company at December 31, 2014 and 2015 have been discounted at 3%. At December 31, 2014 and 2015, respectively, the Company had recorded a liability of $101.9 million and $157.4 million related to these programs. If the Company did not discount the provisions for losses for professional liability risks, the aggregate liability for all of the insurance risk programs would be approximately $105.5 million and $165.8 million at December 31, 2014 and 2015, respectively.

Equity Method Investments

Equity Method Investments

        Investments in equity method investees are accounted for using the equity method based upon the level of ownership and/or the Company's ability to exercise significant influence over the operating and financial policies of the investee. Investments of this nature are recorded at original cost and adjusted periodically to recognize the Company's proportionate share of the investees' net income or losses after the date of investment. When net losses from an investment accounted for under the equity method exceeds its carrying amount, the investment balance is reduced to zero. The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company's share of that net income exceeds the share of the net losses not recognized during the period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred. The Company evaluates its investments in companies accounted for using the equity method for impairment when there is evidence or indicators that a decrease in value may be other than temporary. The Company's Other Assets are primarily composed of equity method investments of $99.6 million and $101.4 million as of December 31, 2014 and 2015, respectively. The Company's equity method investments consist principally of non-consolidating interests in inpatient and outpatient rehabilitation businesses. These rehabilitation businesses include a 49.0% interest in BIR, JV, LLP; a 49.0% interest in OHRH, LLC, a 49.0% interest in GlobalRehab—Scottsdale, LLC, a 50.0% interest in Rehabilitation Institute of Denton, LLC, and a 49.0% interest in ES Rehabilitation, LLC as of December 31, 2014 and 2015. The Company's equity method investments had equity in earnings of unconsolidated subsidiaries of $2.5 million, $7.0 million and $16.8 million for the years ended December 31, 2013, 2014 and 2015, respectively.

Non-Controlling Interests

Non-Controlling Interests

        The ownership interests held by other parties in subsidiaries, limited liability companies and limited partnerships controlled by the Company are classified as non-controlling interests. Non-controlling interests' which are reported in the stockholders' equity section of the Company's consolidated balance sheets, were $35.7 million and $49.3 million as of December 31, 2014 and 2015, respectively.

        Some of our non-controlling ownership interests consist of outside parties that have certain redemption rights that, if exercised, require the Company to purchase the parties ownership interest. These interests are classified and reported as redeemable non-controlling interests and they have been adjusted to their approximate redemption values. The redeemable non-controlling interests' balances reported on the Company's consolidated balance sheets were $11.0 million and $238.2 million as of December 31, 2014 and 2015, respectively. As of December 31, 2014 and 2015, the Company believes the redemption amounts of these ownership interests approximates the fair value of those interests. The changes in the redeemable non-controlling interests amounts for the years ended December 31, 2014 and 2015 are as follows:

Balance at January 1, 2014	$	11,584
Changes in the redemption amounts		(923	)
Net income		1,410
Distributions		(1,086	)
Balance at December 31, 2014	$	10,985
Issuance of ownership interests in Concentra		218,005
Ownership interests acquired in business combination		14,196
Repurchase of ownership interests		(876	)
Changes in the redemption amounts		1,010
Net loss		(2,190	)
Distributions		(2,909	)
Balance at December 31, 2015	$	238,221

        Net income (loss) of entities controlled by the Company that are less than wholly owned require attribution of net income (loss) amounts to each non-controlling ownership interest and to the Company in the consolidated statement of operations and comprehensive income. The net income (loss) attributable to non controlling interests for the years ended December 31, 2013, 2014, and 2015 are as follows:

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
Net income (loss) attributable to non-controlling interests classified as redeemable non-controlling interests	$	3,063	$	1,410	$	(2,190	)
Net income attributable to non-controlling interests classified as equity		5,556		6,138		7,450
Net income attributable to non-controlling interests	$	8,619	$	7,548	$	5,260

Revenue Recognition

Revenue Recognition

        Net operating revenues consists primarily of patient service revenues and revenues generated from therapy services provided to healthcare institutions under contractual arrangements and are recognized as services are rendered.

        Patient service revenue is reported net of provisions for contractual allowances from third-party payors and patients. The Company has agreements with third-party payors that provide for payments to the Company at amounts different from its established billing rates. The differences between the estimated program reimbursement rates and the standard billing rates are accounted for as contractual adjustments, which are deducted from gross revenues to arrive at net operating revenues. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges, per diem, and per visit payments. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined. Accounts receivable resulting from such payment arrangements are recorded net of contractual allowances.

        A significant portion of the Company's net operating revenues are generated directly from the Medicare program. Net operating revenues generated directly from the Medicare program represented approximately 46%, 45% and 36% of the Company's net operating revenues for the years ended December 31, 2013, 2014 and 2015, respectively. Approximately 32% and 24% of the Company's accounts receivable (after allowances for contractual adjustments but before doubtful accounts) are from Medicare at December 31, 2014 and 2015. As a provider of services to the Medicare program, the Company is subject to extensive regulations. The inability of any of the Company's specialty hospitals or outpatient clinics to comply with regulations can result in significant changes in that specialty hospital's or outpatient clinic's net operating revenues generated from the Medicare program.

        Revenues generated under contractual arrangements are comprised primarily of billings for services rendered to nursing homes, hospitals, schools and other third parties.

Stock Based Compensation

Stock Based Compensation

        The Company measures the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognizes the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements comprise both stock options and restricted share plans. Employee stock options are valued using the Black-Scholes option valuation method which uses assumptions that relate to the expected volatility of the Company's common stock, the expected dividend yield of the Company's stock, the expected life of the options and the risk free interest rate. Such compensation amounts are amortized over the respective vesting periods or periods of service of the option grant. The Company values restricted stock grants by using the closing market price of its stock on the date of grant.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, which supersedes most of the current revenue recognition requirements. The core principle of the new guidance 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. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. The original standard was effective for fiscal years beginning after December 15, 2016; however, in July 2015, the FASB approved a one-year deferral of this standard, with a new effective date for fiscal years beginning after December 15, 2017. The Company is currently evaluating the standard to determine the impact it will have on its consolidated financial statements.

In April and August 2015, the FASB issued ASU No. 2015-03 and ASU No. 2015-15, Interest—Imputation of Interest, respectively, to simplify the presentation of debt issuance costs. The standard requires debt issuance costs be presented in the balance sheet as a direct deduction from the carrying value of the debt liability. The FASB clarified that debt issuance costs related to line-of-credit arrangements can be presented as an asset and amortized over the term of the arrangement. The guidance is effective for annual fiscal periods beginning after December 15, 2015. The Company will adopt the standard in 2016. As of December 31, 2015, we had approximately $38.0 million in debt issuance costs included in other assets that would be a direct deduction of the debt liability under the new standard.

In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement—Period Adjustments, which changes the reporting requirement for retrospective adjustments to provisional amounts in the measurement period. The amendments in this update require an entity to present separately on the face of the income statement or disclose in the notes, the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The revised guidance is effective for annual fiscal periods beginning after December 15, 2015. Early adoption is permitted and the Company intends to prospectively adopt ASU No. 2015-16.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which changes the presentation of deferred income taxes. The intent is to simplify the presentation of deferred income taxes through the requirement that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The revised guidance is effective for annual fiscal periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the standard to determine the impact it will have on its consolidated financial statements.

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Organization and Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2015

Organization and Significant Accounting Policies

Schedule of range of useful lives

Leasehold improvements	5 - 15 years
Furniture and equipment	3 - 20 years
Buildings	40 years
Building improvements	5 - 25 years
Land improvements	2 - 25 years

Schedule of approximate useful life of intangible assets and liabilities

Trademarks	Indefinite
Certificates of need	Indefinite
Accreditations	Indefinite
Customer relationships	9 - 17 years
Leasehold interests	2 - 10 years

Schedule of redeemable non-controlling interests

Balance at January 1, 2014	$	11,584
Changes in the redemption amounts		(923	)
Net income		1,410
Distributions		(1,086	)
Balance at December 31, 2014	$	10,985
Issuance of ownership interests in Concentra		218,005
Ownership interests acquired in business combination		14,196
Repurchase of ownership interests		(876	)
Changes in the redemption amounts		1,010
Net loss		(2,190	)
Distributions		(2,909	)
Balance at December 31, 2015	$	238,221

Schedule of net income (loss) attributable to non-controlling interests

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
Net income (loss) attributable to non-controlling interests classified as redeemable non-controlling interests	$	3,063	$	1,410	$	(2,190	)
Net income attributable to non-controlling interests classified as equity		5,556		6,138		7,450
Net income attributable to non-controlling interests	$	8,619	$	7,548	$	5,260

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Acquisitions (Tables)

12 Months Ended

Dec. 31, 2015

Acquisitions

Schedule of allocation of the purchase price to the fair value of identifiable assets acquired and liabilities assumed

        The following table summarizes the allocation of the purchase price to the fair value of identifiable assets acquired and liabilities assumed, in accordance with the acquisition method of accounting (in thousands):

Cash and cash equivalents	$	3,772
Identifiable tangible assets, excluding cash and cash equivalents		405,428
Identifiable intangible assets		254,990
Goodwill		646,466
Total assets		1,310,656
Total current liabilities		90,188
Total non-current liabilities		152,425
Total liabilities		242,613
Acquired non-controlling interests		17,084
Net assets acquired		1,050,959
Less: Cash and cash equivalents acquired		3,772
Net cash paid	$	1,047,187

Schedule of intangible assets acquired

	Amount		Weighted Average Amortization Period
	(in thousands)		(in years)
Trademarks	$	104,900	Indefinite
Customer relationships		141,265	10.2
Leasehold interests		8,825	6.3
Total	$	254,990

Schedule of pro forma unaudited results of operations

	December 31,
	2014		2015
	(in thousands, except per share amounts)
Net revenue	$	4,063,218	$	4,154,941
Net income		106,945		129,737
Income per common share:
Basic	$	0.81	$	1.00
Diluted	$	0.80	$	0.99

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Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2015

Property and Equipment

Schedule of components of property and equipment

	December 31,
	2014			2015
	(in thousands)
Land	$	71,635		$	76,118
Leasehold improvements		155,648			295,647
Buildings		396,228			411,376
Furniture and equipment		272,919			382,838
Construction-in-progress		41,230			146,868
Total property and equipment		937,660			1,312,847
Accumulated depreciation		(395,350	)		(448,723	)
Property and equipment, net	$	542,310		$	864,124

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Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2015

Intangible Assets

Schedule of net carrying value of the Company's goodwill and identifiable intangible assets

	December 31,
	2014		2015
	(in thousands)
Goodwill	$	1,642,083	$	2,314,624
Identifiable intangibles—Indefinite lived assets:
Trademarks		57,709		162,609
Certificates of need		12,727		13,022
Accreditations		2,083		2,045
Identifiable intangibles—Finite lived assets:
Customer relationships		—		132,751
Favorable leasehold interests		—		8,248
Total identifiable intangibles	$	1,714,602	$	2,633,299

Schedule of changes in the carrying amount of goodwill for the Company's reportable segments

	Specialty Hospitals			Outpatient Rehabilitation			Concentra			Total
	(in thousands)
Balance as of January 1, 2014	$	1,334,615		$	308,018					$	1,642,633
Goodwill acquired during year		855			1,011						1,866
Goodwill allocated to contributed business		—			(2,406	)					(2,406	)
Purchase accounting adjustment		(10	)		—						(10	)
Balance as of December 31, 2014	$	1,335,460		$	306,623		$	—		$	1,642,083
Goodwill acquired during year		21,972			—			702,023			723,995
Measurement period adjustment		(53	)		—			(51,373	)		(51,426	)
Disposal of business		—			(28	)		—			(28	)
Balance as of December 31, 2015	$	1,357,379		$	306,595		$	650,650		$	2,314,624

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Long-Term Debt and Notes Payable (Tables)

12 Months Ended

Dec. 31, 2015

Long-Term Debt and Notes Payable

Schedule of components of long-term debt and notes payable

	December 31,
	2014		2015
	(in thousands)
Select 6.375% senior notes(1)	$	711,465	$	711,235
Select credit facilities:
Select revolving facility		60,000		295,000
Select term loans(2)		775,996		750,485
Other—Select		5,515		11,987
Total Select debt		1,552,976		1,768,707
Less: Select current maturities		10,874		228,316
Select long-term debt maturities	$	1,542,102	$	1,540,391
Concentra credit facilities:
Concentra revolving facility			$	5,000
Concentra term loans(3)				644,865
Other—Concentra				5,312
Total Concentra debt				655,177
Less: Concentra current maturities				5,254
Concentra long-term debt maturities			$	649,923
Total current maturities	$	10,874	$	233,570
Total long-term debt maturities		1,542,102		2,190,314
Total debt	$	1,552,976	$	2,423,884

(1)	Includes unamortized premium of $1.5 million and $1.2 million at December 31, 2014 and 2015, respectively.
(2)	Includes unamortized discounts of $4.2 million and $2.8 million at December 31, 2014 and 2015, respectively.
(3)	Includes unamortized discounts of $2.9 million at December 31, 2015.

Schedule of maturities of the Company's long-term debt

	Select		Concentra		Total
	(in thousands)
2016	$	228,316	$	5,254	$	233,570
2017		6,952		4,168		11,120
2018		820,651		4,186		824,837
2019		2,465		4,206		6,671
2020		228		9,227		9,455
2021 and beyond		710,095		628,136		1,338,231
Total	$	1,768,707	$	655,177	$	2,423,884

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Stock-based Compensation (Tables)

12 Months Ended

Dec. 31, 2015

Stock-based Compensation

Schedule of restricted stock award transactions and other information

	Shares			Weighted Average Grant Date Fair Value
	(share amounts in thousands)
Unvested Balance, January 1, 2015		3,728		$	10.82
Granted		1,385			13.94
Vested		(992	)		9.07
Forfeited		(304	)		12.28
Unvested Balance, December 31, 2015		3,817		$	12.29

Schedule of stock compensation expense recognized

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
Stock compensation expense:
Included in general and administrative	$	5,276	$	9,027	$	11,633
Included in cost of services		1,757		2,015		3,046
Total	$	7,033	$	11,042	$	14,679

Schedule of stock compensation expense based on current share-based awards for each of the next five years

	2016		2017		2018		2019		2020
	(in thousands)
Stock compensation expense	$	15,532	$	10,610	$	5,204	$	1,406	$	324

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Income Taxes

Schedule of significant components of the Company's tax provision

	Holdings							Select
	For the Year Ended December 31,							For the Year Ended December 31,
	2013		2014		2015			2013		2014		2015
	(in thousands)							(in thousands)
Current:
Federal	$	55,847	$	52,063	$	63,626		$	57,026	$	52,063	$	63,626
State and local		11,913		9,248		10,868			11,913		9,248		10,868
Total current		67,760		61,311		74,494			68,939		61,311		74,494
Deferred		7,032		14,311		(2,058	)		7,032		14,311		(2,058	)
Total income tax provision	$	74,792	$	75,622	$	72,436		$	75,971	$	75,622	$	72,436

Schedule of differences between the expected income tax provision and income taxes computed at the federal statutory rate

	Holdings									Select
	For the Year Ended December 31,									For the Year Ended December 31,
	2013			2014			2015			2013			2014			2015
Expected federal tax rate		35.0	%		35.0	%		35.0	%		35.0	%		35.0	%		35.0	%
State and local taxes, net of federal benefit		4.6			4.2			4.0			4.5			4.2			4.0
Other permanent differences		1.1			0.8			1.4			1.1			0.8			1.4
Valuation allowance		(0.7	)		(0.4	)		(0.9	)		(0.6	)		(0.4	)		(0.9	)
Uncertain tax positions		(0.6	)		(0.3	)		(2.3	)		(0.6	)		(0.3	)		(2.3	)
IRS audit settlements		—			(0.4	)		(0.1	)		—			(0.4	)		(0.1	)
Non-controlling interest		(1.7	)		(1.5	)		(2.0	)		(1.7	)		(1.5	)		(2.0	)
Other		0.1			(0.3	)		(0.3	)		0.1			(0.3	)		(0.3	)
Total		37.8	%		37.1	%		34.8	%		37.8	%		37.1	%		34.8	%

Summary of the components of deferred tax assets and liabilities for Holdings and Select

	December 31, 2014									December 31, 2015
	Total			Current			Non-Current			Total			Current			Non-Current
	(in thousands)
Deferred tax assets
Allowance for doubtful accounts	$	701		$	701		$	—		$	9,153		$	9,153		$	—
Compensation and benefit related accruals		49,373			38,722			10,651			61,111			50,303			10,808
Professional malpractice liability insurance		17,934			4,732			13,202			19,654			4,642			15,012
Restructuring reserve		333			333			—			—			—			—
Deferred revenue		(829	)		(829	)		—			(1,009	)		(1,009	)		—
State net operating loss carryforwards		21,555			436			21,119			21,591			445			21,146
Other		552			552			—			1,273			357			916
Stock options		5,336			—			5,336			6,061			—			6,061
Equity investments		3,475			—			3,475			3,939			—			3,939
Uncertain tax positions		1,632			—			1,632			641			—			641
Total deferred tax assets		100,062			44,647			55,415			122,414			63,891			58,523
Deferred tax liabilities
Deferred income		(31,190	)		(25,651	)		(5,539	)		(31,375	)		(27,221	)		(4,154	)
Investment in unconsolidated affiliates		(3,659	)		—			(3,659	)		(4,302	)		—			(4,302	)
Other		(1,587	)		(1,093	)		(494	)		(8,444	)		(6,072	)		(2,372	)
Depreciation and amortization		(147,197	)		—			(147,197	)		(260,724	)		—			(260,724	)
Total deferred tax liabilities		(183,633	)		(26,744	)		(156,889	)		(304,845	)		(33,293	)		(271,552	)
Net deferred taxes before valuation allowance		(83,571	)		17,903			(101,474	)		(182,431	)		30,598			(213,029	)
Valuation allowance		(9,641	)		(1,912	)		(7,729	)		(7,586	)		(1,910	)		(5,676	)
Net deferred taxes	$	(93,212	)	$	15,991		$	(109,203	)	$	(190,017	)	$	28,688		$	(218,705	)

Schedule of state net operating loss carry forwards

	State Net Operating Losses		Gross Valuation Allowance
	(in thousands)
2016	$	6,479	$	5,891
2017		10,818		9,828
2018		7,319		4,574
2019		7,948		7,927
Thereafter through 2035		433,068		333,817

Schedule of reconciliation of the Company's unrecognized tax benefits

        The reconciliation of the Company's unrecognized tax benefits is as follows (in thousands):

Gross tax contingencies—January 1, 2013	$	13,890
Reductions for tax positions taken in prior periods due primarily to statute expiration		(2,299	)
Additions for existing tax positions taken		435
Gross tax contingencies—December 31, 2013		12,026
Reductions for tax positions taken in prior periods due primarily to statute expiration		(1,632	)
Additions for existing tax positions taken		273
Gross tax contingencies—December 31, 2014		10,667
Reductions for tax positions taken in prior periods due primarily to statute expiration		(3,309	)
Reductions for settlements with taxing authorities		(770	)
Additions for existing tax positions taken		373
Reductions for existing tax positions taken		(1,395	)
Gross tax contingencies—December 31, 2015	$	5,566

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2015

Segment Information

Schedule of selected financial data for the Company's reportable segments

	Year Ended December 31, 2013
	Specialty Hospitals		Outpatient Rehabilitation		Concentra(2)	Other			Total
	(in thousands)
Net revenue	$	2,198,121	$	777,177		$	350		$	2,975,648
Adjusted EBITDA		353,843		90,313			(71,295	)		372,861
Total assets(1):		2,205,921		512,539			99,162			2,817,622
Capital expenditures		56,523		14,113			3,024			73,660

	Year Ended December 31, 2014
	Specialty Hospitals		Outpatient Rehabilitation		Concentra(2)	Other			Total
	(in thousands)
Net revenue	$	2,244,899	$	819,397		$	721		$	3,065,017
Adjusted EBITDA		341,787		97,584			(75,499	)		363,872
Total assets(1):		2,279,665		532,685			112,459			2,924,809
Capital expenditures		77,742		12,506			4,998			95,246

	Year Ended December 31, 2015
	Specialty Hospitals		Outpatient Rehabilitation		Concentra(2)		Other			Total
	(in thousands)
Net revenue	$	2,346,781	$	810,009	$	585,222	$	724		$	3,742,736
Adjusted EBITDA		327,623		98,220		48,301		(74,979	)		399,165
Total assets(1):		2,425,113		548,242		1,331,837		121,474			4,426,666
Capital expenditures		126,014		17,768		26,771		12,089			182,642

Schedule of reconciliation of Adjusted EBITDA to income before income taxes

	Year Ended December 31, 2013
	Specialty Hospitals			Outpatient Rehabilitation			Concentra	Other
	(in thousands)
Adjusted EBITDA	$	353,843		$	90,313			$	(71,295	)
Depreciation and amortization		(48,621	)		(12,024	)			(3,747	)
Stock compensation expense		—			—				(7,033	)

								Holdings			Select
Income (loss) from operations	$	305,222	$	78,289	$	(82,075	)	$	301,436		$	301,436
Loss on early retirement of debt									(18,747	)		(17,788	)
Equity in earnings of unconsolidated subsidiaries									2,476			2,476
Interest expense									(87,364	)		(84,954	)
Income before income taxes								$	197,801		$	201,170

	Year Ended December 31, 2014
	Specialty Hospitals			Outpatient Rehabilitation			Concentra	Other
	(in thousands)
Adjusted EBITDA	$	341,787		$	97,584			$	(75,499	)
Depreciation and amortization		(51,786	)		(12,845	)			(3,723	)
Stock compensation expense		—			—				(11,042	)

								Holdings			Select
Income (loss) from operations	$	290,001	$	84,739	$	(90,264	)	$	284,476		$	284,476
Loss on early retirement of debt									(2,277	)		(2,277	)
Equity in earnings of unconsolidated subsidiaries									7,044			7,044
Interest expense									(85,446	)		(85,446	)
Income before income taxes								$	203,797		$	203,797

	Year Ended December 31, 2015
	Specialty Hospitals			Outpatient Rehabilitation			Concentra(2)			Other
	(in thousands)
Adjusted EBITDA	$	327,623		$	98,220		$	48,301		$	(74,979	)
Depreciation and amortization		(53,992	)		(13,053	)		(33,644	)		(4,292	)
Stock compensation expense		—			—			(1,016	)		(13,663	)
Concentra acquisition costs		—			—			(4,715	)		—

										Holdings			Select
Income (loss) from operations	$	273,631	$	85,167	$	8,926	$	(92,934	)	$	274,790		$	274,790
Gain on sale of equity investment											29,647			29,647
Equity in earnings of unconsolidated subsidiaries											16,811			16,811
Interest expense											(112,816	)		(112,816	)
Income before income taxes										$	208,432		$	208,432

(1)	The specialty hospitals segment includes $2.7 million in real estate assets held for sale on December 31, 2013, 2014 and 2015.
(2)	The selected financial data for the Company's Concentra segment for the periods presented begins as of June 1, 2015, which is the date the Concentra acquisition was consummated.

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Income per Common Share (Tables)

12 Months Ended

Dec. 31, 2015

Income per Share

Schedule of computation of basic and diluted income per common share

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands, except per share amounts)
Numerator:
Net income attributable to Select Medical Holdings Corporation	$	114,390	$	120,627	$	130,736
Less: Earnings allocated to unvested restricted stockholders		2,450		3,337		3,830
Net income available to common stockholders	$	111,940	$	117,290	$	126,906
Denominator:
Weighted average shares—basic		136,879		129,026		127,478
Effect of dilutive securities:
Stock options		168		439		274
Weighted average shares—diluted		137,047		129,465		127,752
Basic income per common share:	$	0.82	$	0.91	$	1.00
Diluted income per common share:	$	0.82	$	0.91	$	0.99

Schedule of anti-dilutive shares excluded from computation

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
Stock options		1,474		6		—

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Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2015

Related Party Transactions

Schedule of future rental commitments under outstanding agreements with the affiliated companies

        As of December 31, 2015, future rental commitments under outstanding agreements with the affiliated companies are approximately as follows (in thousands):

2016	$	4,174
2017		4,221
2018		4,318
2019		4,421
2020		4,526
Thereafter		9,385
	$	31,045

Schedule of net operating revenues generated from the provision of contracted services and management fees to related parties

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
BIR JV, LLP	$	96,465	$	101,385	$	112,273
Rehabilitation Institute of Denton, LLC		7,163		8,337		9,560
OHRH, LLC		2,069		8,280		10,010
Global Rehab—Scottsdale, LLC		4,129		10,747		12,155
Other		310		518		2,035
Total	$	110,136	$	129,267	$	146,033

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Commitment and Contingencies (Tables)

12 Months Ended

Dec. 31, 2015

Commitment and Contingencies.

Schedule of minimum future lease obligations on long-term non-cancelable operating leases

Minimum future lease obligations on long-term non-cancelable operating leases in effect at December 31, 2015 are approximately as follows (in thousands):

	Select		Concentra		Total
	(in thousands)
2016	$	145,185	$	59,845	$	205,030
2017		122,606		53,518		176,124
2018		99,873		44,688		144,561
2019		79,002		36,485		115,487
2020		61,462		30,098		91,560
Thereafter		348,222		61,501		409,723
	$	856,350	$	286,135	$	1,142,485

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Supplemental Disclosures of Cash Flow Information (Tables)

12 Months Ended

Dec. 31, 2015

Schedule of non-cash investing and financing activities

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
Notes issued with acquisitions	$	3,283	$	327	$	12
Liabilities assumed with acquisitions		885		122		298
Contingent consideration related to acquisitions		100		—		—
Liability for property and equipment		—		14,230		36,744
Notes issued to acquire non-consolidating interest		3,399		—		—

Select

Schedule of non-cash investing and financing activities

	For the Year Ended December 31,
	2013		2014		2015
	(in thousands)
Notes issued with acquisitions	$	3,283	$	327	$	12
Liabilities assumed with acquisitions		885		122		298
Contingent consideration related to acquisitions		100		—		—
Liability for property and equipment		—		14,230		36,744
Notes issued to acquire non-consolidating interest		3,399		—		—

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Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes (Tables)

12 Months Ended

Dec. 31, 2015

Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes

Schedule of Consolidating Balance Sheet

Select Medical Corporation
Condensed Consolidating Balance Sheet
December 31, 2015

	Select (Parent Company Only)			Subsidiary Guarantors		Non-Guarantor Subsidiaries			Non-Guarantor Concentra			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Assets
Current Assets:
Cash and cash equivalents	$	4,070		$	3,706	$	625		$	6,034		$	—		$	14,435
Accounts receivable, net		—			419,382		68,504			115,672			—			603,558
Current deferred tax asset		11,556			6,708		4,786			5,638			—			28,688
Intercompany receivables		—			1,970,477		137,512			—			(2,107,989)	(a)		—
Prepaid income taxes		7,979			—		—			8,715			—			16,694
Other current assets		10,521			34,859		5,759			34,640			—			85,779
Total Current Assets		34,126			2,435,132		217,186			170,699			(2,107,989	)		749,154
Property and equipment, net		38,872			548,809		61,137			215,306			—			864,124
Investment in affiliates		4,107,930			75,027		—			—			(4,182,957)	(b)(c)		—
Goodwill		—			1,663,974		—			650,650			—			2,314,624
Non-current deferred tax asset		12,297			—		—			—			(12,297)	(d)		—
Other identifiable intangibles		—			72,776		—			245,899			—			318,675
Other assets		21,623			108,524		659			49,283			—			180,089
Total Assets	$	4,214,848		$	4,904,242	$	278,982		$	1,331,837		$	(6,303,243	)	$	4,426,666
Liabilities and Equity
Current Liabilities:
Bank overdrafts	$	28,615		$	—	$	—		$	—		$	—		$	28,615
Current portion of long-term debt and notes payable		227,180			197		939			5,254			—			233,570
Accounts payable		10,445			101,156		16,997			8,811			—			137,409
Intercompany payables		1,970,477			137,512		—			—			(2,107,989)	(a)		—
Accrued payroll		22,970			66,892		3,932			27,195			—			120,989
Accrued vacation		6,406			50,194		9,423			7,954			—			73,977
Accrued interest		6,315			3		—			3,083			—			9,401
Accrued other		38,883			42,939		9,866			42,040			—			133,728
Total Current Liabilities		2,311,291			398,893		41,157			94,337			(2,107,989	)		737,689
Long-term debt, net of current portion		997,114			452,417		90,860			649,923			—			2,190,314
Non-current deferred tax liability		—			113,977		9,656			107,369			(12,297)	(d)		218,705
Other non-current liabilities		47,190			41,904		4,798			39,328			—			133,220
Total Liabilities		3,355,595			1,007,191		146,471			890,957			(2,120,286	)		3,279,928
Redeemable non-controlling interests		—			—		12,094			226,127			—			238,221
Stockholder's Equity:
Common stock		0			—		—			—			—			0
Capital in excess of par		904,375			—		—			—			—			904,375
Retained earnings (accumulated deficit)		(45,122	)		1,187,022		(1,006	)		(6,120	)		(1,179,896)	(c)		(45,122	)
Subsidiary investment		—			2,710,029		75,097			217,935			(3,003,061)	(b)		—
Total Select Medical Corporation Stockholder's Equity		859,253			3,897,051		74,091			211,815			(4,182,957	)		859,253
Non-controlling interests		—			—		46,326			2,938			—			49,264
Total Equity		859,253			3,897,051		120,417			214,753			(4,182,957	)		908,517
Total Liabilities and Equity	$	4,214,848		$	4,904,242	$	278,982		$	1,331,837		$	(6,303,243	)	$	4,426,666

(a)	Elimination of intercompany.
(b)	Elimination of investments in consolidated subsidiaries.
(c)	Elimination of investments in consolidated subsidiaries' earnings.
(d)	Reclass of non-current deferred tax asset to report net non-current deferred tax liability in consolidation.

Select Medical Corporation
Condensed Consolidating Balance Sheet
December 31, 2014

	Select (Parent Company Only)			Subsidiary Guarantors		Non- Guarantor Subsidiaries		Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Assets
Current Assets:
Cash and cash equivalents	$	70		$	2,454	$	830	$	—		$	3,354
Accounts receivable, net		—			376,780		67,489		—			444,269
Current deferred tax asset		10,186			2,458		3,347		—			15,991
Prepaid income taxes		17,888			—		—		—			17,888
Intercompany receivables		—			1,728,708		106,509		(1,835,217	)(a)		—
Other current assets		7,860			32,919		5,363		—			46,142
Total Current Assets		36,004			2,143,319		183,538		(1,835,217	)		527,644
Property and equipment, net		17,521			468,138		56,651		—			542,310
Investment in affiliates		3,741,085			67,575		—		(3,808,660)	(b)(c)		—
Goodwill		—			1,642,083		—		—			1,642,083
Non-current deferred tax asset		11,230			—		—		(11,230)	(d)		—
Other identifiable intangibles		—			72,519		—		—			72,519
Other assets		32,463			106,843		947		—			140,253
Total Assets	$	3,838,303		$	4,500,477	$	241,136	$	(5,655,107	)	$	2,924,809
Liabilities and Equity
Current Liabilities:
Bank overdrafts	$	21,746		$	—	$	—	$	—		$	21,746
Current portion of long-term debt and notes payable		8,496			1,844		534		—			10,874
Accounts payable		9,885			84,304		14,343		—			108,532
Intercompany payables		1,835,217			—		—		(1,835,217	)(a)		—
Accrued payroll		17,410			76,670		3,010		—			97,090
Accrued vacation		5,070			49,315		8,747		—			63,132
Accrued interest		10,596			76		2		—			10,674
Accrued other		39,801			36,874		5,701		—			82,376
Total Current Liabilities		1,948,221			249,083		32,337		(1,835,217	)		394,424
Long-term debt, net of current portion		1,098,151			364,794		79,157		—			1,542,102
Non-current deferred tax liability		—			112,013		8,420		(11,230)	(d)		109,203
Other non-current liabilities		52,416			35,576		4,863		—			92,855
Total Liabilities		3,098,788			761,466		124,777		(1,846,447	)		2,138,584
Redeemable non-controlling interests		—			—		10,985		—			10,985
Stockholder's Equity:
Common stock		0			—		—		—			0
Capital in excess of par		885,407			—		—		—			885,407
Retained earnings (accumulated deficit)		(145,892	)		1,048,455		8,366		(1,056,821)	(c)		(145,892	)
Subsidiary investment		—			2,690,556		61,283		(2,751,839)	(b)		—
Total Select Medical Corporation Stockholder's Equity		739,515			3,739,011		69,649		(3,808,660	)		739,515
Non-controlling interests		—			—		35,725		—			35,725
Total Equity		739,515			3,739,011		105,374		(3,808,660	)		775,240
Total Liabilities and Equity	$	3,838,303		$	4,500,477	$	241,136	$	(5,655,107	)	$	2,924,809

(a)	Elimination of intercompany.
(b)	Elimination of investments in consolidated subsidiaries.
(c)	Elimination of investments in consolidated subsidiaries' earnings.
(d)	Reclass of non-current deferred tax asset to report net non-current deferred tax liability in consolidation.

Schedule of Consolidating Statement of Operations

Select Medical Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2015

	Select (Parent Company Only)			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Non-Guarantor Concentra			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Net operating revenues	$	724		$	2,673,987		$	482,803		$	585,222		$	—		$	3,742,736
Costs and expenses:
Cost of services		2,029			2,266,647			414,518			528,347			—			3,211,541
General and administrative		88,227			(890	)		—			4,715			—			92,052
Bad debt expense		—			40,541			9,240			9,591			—			59,372
Depreciation and amortization		4,292			56,447			10,598			33,644			—			104,981
Total costs and expenses		94,548			2,362,745			434,356			576,297			—			3,467,946
Income (loss) from operations		(93,824	)		311,242			48,447			8,925			—			274,790
Other income and expense:
Intercompany interest and royalty fees		(1,417	)		1,387			30			—			—			—
Intercompany management fees		143,939			(119,388	)		(24,551	)		—			—			—
Gain on sale of equity investment		—			29,647			—			—			—			29,647
Equity in earnings of unconsolidated subsidiaries		—			16,719			92			—			—			16,811
Interest expense		(58,350	)		(24,250	)		(6,154	)		(24,062	)		—			(112,816	)
Income (loss) from operations before income taxes		(9,652	)		215,357			17,864			(15,137	)		—			208,432
Income tax expense (benefit)		(7,869	)		85,907			(470	)		(5,132	)		—			72,436
Equity in earnings of subsidiaries		132,520			9,117			—			—			(141,637)	(a)		—
Net income		130,737			138,567			18,334			(10,005	)		(141,637	)		135,996
Less: Net income attributable to non-controlling interests		—			—			9,144			(3,884	)		—			5,260
Net income (loss) attributable to Select Medical Corporation	$	130,737		$	138,567		$	9,190		$	(6,121	)	$	(141,637	)	$	130,736

(a) Elimination of equity in earnings of subsidiaries.

Select Medical Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2014

	Select (Parent Company Only)			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Net operating revenues	$	721		$	2,634,480		$	429,816		$	—		$	3,065,017
Costs and expenses:
Cost of services		2,015			2,209,724			370,601			—			2,582,340
General and administrative		86,311			(1,064	)		—			—			85,247
Bad debt expense		—			38,052			6,548			—			44,600
Depreciation and amortization		3,723			54,876			9,755			—			68,354
Total costs and expenses		92,049			2,301,588			386,904			—			2,780,541
Income (loss) from operations		(91,328	)		332,892			42,912			—			284,476
Other income and expense:
Intercompany interest and royalty fees		(1,142	)		1,131			11			—			—
Intercompany management fees		142,273			(120,528	)		(21,745	)		—			—
Equity in earnings of unconsolidated subsidiaries		—			6,958			86			—			7,044
Loss on early retirement of debt		(2,277	)		—			—			—			(2,277	)
Interest expense		(57,651	)		(23,367	)		(4,428	)		—			(85,446	)
Income (loss) from operations before income taxes		(10,125	)		197,086			16,836			—			203,797
Income tax expense (benefit)		(4,333	)		78,748			1,207			—			75,622
Equity in earnings of subsidiaries		126,419			8,995			—			(135,414	)(a)		—
Net income		120,627			127,333			15,629			(135,414	)		128,175
Less: Net income attributable to non-controlling interests		—			623			6,925			—			7,548
Net income attributable to Select Medical Corporation	$	120,627		$	126,710		$	8,704		$	(135,414	)	$	120,627

(a) Elimination of equity in earnings of subsidiaries.

Select Medical Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2013

	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Eliminations			Consolidated
	(in thousands)
Net operating revenues	$	350		$	2,576,906		$	398,392		$	—		$	2,975,648
Costs and expenses:
Cost of services		1,757			2,155,370			338,349			—			2,495,476
General and administrative		76,709			212			—			—			76,921
Bad debt expense		—			31,173			6,250			—			37,423
Depreciation and amortization		3,746			51,825			8,821			—			64,392
Total costs and expenses		82,212			2,238,580			353,420			—			2,674,212
Income (loss) from operations		(81,862	)		338,326			44,972			—			301,436
Other income and expense:
Intercompany interest and royalty fees		(1,326	)		836			490			—			—
Intercompany management fees		144,447			(125,357	)		(19,090	)		—			—
Equity in earnings of unconsolidated subsidiaries		—			2,384			92			—			2,476
Loss on early retirement of debt		(17,788	)		—			—			—			(17,788	)
Interest expense		(58,100	)		(22,916	)		(3,938	)		—			(84,954	)
Income (loss) from operations before income taxes		(14,629	)		193,273			22,526			—			201,170
Income tax expense (benefit)		(1,238	)		76,837			372			—			75,971
Equity in earnings of subsidiaries		129,971			14,561			—			(144,532)	(a)		—
Net income		116,580			130,997			22,154			(144,532	)		125,199
Less: Net income attributable to non-controlling interests		—			995			7,624			—			8,619
Net income attributable to Select Medical Corporation	$	116,580		$	130,002		$	14,530		$	(144,532	)	$	116,580

(a)           Elimination of equity in earnings of subsidiaries.

Schedule of Consolidating Statement of Cash Flows

Select Medical Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2015

	Select (Parent Company Only)			Subsidiary Guarantors			Non- Guarantor Subsidiaries			Non- Guarantor Concentra			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Operating activities
Net income	$	130,737		$	138,567		$	18,334		$	(10,005	)	$	(141,637)	(a)	$	135,996
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions from unconsolidated subsidiaries		—			13,870			99			—			—			13,969
Depreciation and amortization		4,292			56,447			10,598			33,644			—			104,981
Provision for bad debts		—			40,541			9,240			9,591			—			59,372
Equity in earnings of unconsolidated subsidiaries		—			(16,719	)		(92	)		—			—			(16,811	)
Loss (gain) on sale of assets and businesses		—			(1,128	)		16			14			—			(1,098	)
Gain on sale of equity investment		—			(29,647	)		—			—			—			(29,647	)
Stock compensation expense		13,969			—			—			1,016			—			14,985
Amortization of debt discount and issuance costs		7,404			—			—			2,139			—			9,543
Deferred income taxes		(3,484	)		—			—			1,426			—			(2,058	)
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries		(132,520	)		(9,117	)		—			—			141,637	(a)		—
Accounts receivable		—			(83,142	)		(10,255	)		825			—			(92,572	)
Other current assets		(2,661	)		(2,236	)		(396	)		2,790			—			(2,503	)
Other assets		10,840			(6,415	)		288			—			—			4,713
Accounts payable		560			8,569			2,654			(9,438	)		—			2,345
Accrued expenses		(1,508	)		9,569			5,696			(6,557	)		—			7,200
Net cash provided by operating activities		27,629			119,159			36,182			25,445			—			208,415
Investing activities
Purchases of property and equipment		(10,890	)		(134,002	)		(10,979	)		(26,771	)		—			(182,642	)
Proceeds from sale of assets		—			1,742			24			1			—			1,767
Investment in businesses		—			(2,347	)		—			—			—			(2,347	)
Proceeds from sale of equity method investment		—			33,096			—			—			—			33,096
Acquisition of businesses, net of cash acquired		—			—			(8,832	)		(1,052,796	)		—			(1,061,628	)
Net cash used in investing activities		(10,890	)		(101,511	)		(19,787	)		(1,079,566	)		—			(1,211,754	)
Financing activities
Borrowings on revolving facilities		1,115,000			—			—			20,000			—			1,135,000
Payments on revolving facilities		(880,000	)		—			—			(15,000	)		—			(895,000	)
Proceeds from term loans, net of discounts		—			—			—			646,875			—			646,875
Payments on term loans		(26,884	)		—			—			(2,250	)		—			(29,134	)
Borrowings of other debt		8,684			—			1,681			3,009			—			13,374
Principal payments on other debt		(11,923	)		(2,736	)		(1,513	)		(1,964	)		—			(18,136	)
Debt issuance costs		—			—			—			(23,300	)		—			(23,300	)
Proceeds from bank overdrafts		6,869			—			—			—			—			6,869
Equity investment by Holdings		1,649			—			—			—			—			1,649
Dividends paid to Holdings		(28,956	)		—			—			—			—			(28,956	)
Intercompany		(199,024	)		(13,660	)		(5,251	)		217,935			—			—
Purchase of non-controlling interests		—			—			(1,095	)		—			—			(1,095	)
Proceeds from issuance of non-controlling interests		—			—			—			217,065			—			217,065
Tax benefit from stock based awards		1,846			—			—			—			—			1,846
Distributions to non-controlling interests		—			—			(10,422	)		(2,215	)		—			(12,637	)
Net cash provided by (used in) financing activities		(12,739	)		(16,396	)		(16,600	)		1,060,155			—			1,014,420
Net increase (decrease) in cash and cash equivalents		4,000			1,252			(205	)		6,034			—			11,081
Cash and cash equivalents at beginning of period		70			2,454			830			—			—			3,354
Cash and cash equivalents at end of period	$	4,070		$	3,706		$	625		$	6,034		$	—		$	14,435

(a) Elimination of equity in earnings of consolidated subsidiaries.

Select Medical Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2014

	Select (Parent Company Only)			Subsidiary Guarantors			Non-Guarantor Subsidiaries			Eliminations			Consolidated Select Medical Corporation
	(in thousands)
Operating activities
Net income	$	120,627		$	127,333		$	15,629		$	(135,414	)(a)	$	128,175
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions from unconsolidated subsidiaries		—			11,889			65						11,954
Depreciation and amortization		3,723			54,876			9,755			—			68,354
Provision for bad debts		—			38,052			6,548			—			44,600
Equity in earnings of unconsolidated subsidiaries		—			(6,958	)		(86	)		—			(7,044	)
Loss on early retirement of debt		2,277			—			—			—			2,277
Gain on disposal or sale of assets		—			(1,168	)		120			—			(1,048	)
Stock compensation expense		11,186			—			—			—			11,186
Amortization of debt discount and issuance costs		7,553			—			—			—			7,553
Deferred income taxes		14,311			—			—			—			14,311
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries		(126,419	)		(8,995	)		—			135,414	(a)		—
Accounts receivable		—			(80,394	)		(17,408	)		—			(97,802	)
Other current assets		1,885			(4,004	)		390			—			(1,729	)
Other assets		2,811			(2,566	)		(348	)		—			(103	)
Accounts payable		3,136			2,440			421			—			5,997
Accrued expenses		(6,353	)		(9,407	)		(279	)		—			(16,039	)
Net cash provided by operating activities		34,737			121,098			14,807			—			170,642
Investing activities
Purchases of property and equipment		(4,674	)		(79,600	)		(10,972	)		—			(95,246	)
Investment in businesses		—			(4,634	)		—			—			(4,634	)
Acquisition of businesses, net of cash acquired		—			(397	)		(814	)		—			(1,211	)
Net cash used in investing activities		(4,674	)		(84,631	)		(11,786	)		—			(101,091	)
Financing activities
Borrowings on revolving facilities		910,000			—			—			—			910,000
Payments on revolving facilities		(870,000	)		—			—			—			(870,000	)
Payments on term loans		(33,994	)		—			—			—			(33,994	)
Issuance of 6.375% senior notes		111,650			—			—			—			111,650
Borrowings of other debt		8,151			—			925			—			9,076
Principal payments on other debt		(9,213	)		(2,058	)		(3,402	)		—			(14,673	)
Debt issuance costs		(4,434	)		—			—			—			(4,434	)
Proceeds from bank overdrafts		9,240			—			—			—			9,240
Purchase of non-controlling interests		—			(9,961	)		—			—			(9,961	)
Equity investment by Holdings		7,355			—			—			—			7,355
Dividends paid to Holdings		(184,100	)		—			—			—			(184,100	)
Intercompany		22,162			(25,092	)		2,930			—			—
Proceeds from issuance of non-controlling interests		—			—			185			—			185
Tax benefit from stock based awards		3,119			—			—			—			3,119
Distributions to non-controlling interests		—			—			(3,979	)		—			(3,979	)
Net cash used in financing activities		(30,064	)		(37,111	)		(3,341	)		—			(70,516	)
Net decrease in cash and cash equivalents		(1	)		(644	)		(320	)		—			(965	)
Cash and cash equivalents at beginning of period		71			3,098			1,150			—			4,319
Cash and cash equivalents at end of period	$	70		$	2,454		$	830		$	—		$	3,354

(a) Elimination of equity in earnings of consolidated subsidiaries.

Select Medical Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2013

	Select Medical Corporation (Parent Company Only)			Subsidiary Guarantors				Non- Guarantor Subsidiaries				Eliminations					Consolidated
	(in thousands)
Operating activities
Net income	$	116,580		$	130,997			$	22,154			$	(144,532)			(a)	$	125,199
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,746			51,825				8,821				—					64,392
Provision for bad debts		—			31,173				6,250				—					37,423
Equity in earnings of unconsolidated subsidiaires		—			(2,384		)		(92		)		—					(2,476	)
Loss on early retirement of debt		17,788			—				—				—					17,788
Gain on disposal or sale of assets		—			(463		)		(118		)		—					(581	)
Stock compensation expense		7,033			—				—				—					7,033
Amortization of debt discount and issuance costs		8,344			—				—				—					8,344
Deferred income taxes		7,032			—				—				—					7,032
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries		(129,971	)		(14,561		)		—				144,532			(a)		—
Accounts receivable		—			(60,460		)		(6,685		)		—					(67,145	)
Other current assets		(4,145	)		(5,849		)		1,827				—					(8,167	)
Other assets		(6,594	)		3,026				84				—					(3,484	)
Accounts payable		2,075			(3,746		)		388				—					(1,283	)
Due to third-party payors		—			3,067				(4,108		)		—					(1,041	)
Accrued expenses		(4,929	)		20,843				(846		)		—					15,068
Net cash provided by operating activities		16,959			153,468				27,675				—					198,102
Investing activities
Purchases of property and equipment		(3,024	)		(60,532		)		(10,104		)		—					(73,660	)
Investment in businesses, net of distributions		—			(34,893		)		—				—					(34,893	)
Acquisition of businesses, net of cash acquired		—			(1,665		)		—				—					(1,665	)
Proceeds from sale of assets		—			2,456				456				—					2,912
Net cash used in investing activities		(3,024	)		(94,634		)		(9,648		)		—					(107,306	)
Financing activities
Borrowings on revolving facilities			690,000				—				—				—			690,000
Payments on revolving facilities			(800,000		)		—				—				—			(800,000	)
Borrowings on term loans, net of discount			298,500				—				—				—			298,500
Payments on term loans			(596,720		)		—				—				—			(596,720	)
Issuance of 6.375% senior notes			600,000				—				—				—			600,000
Repurchase of 75/8% senior subordinated notes, net of premiums			(70,000		)		—				—				—			(70,000	)
Borrowings of other debt			8,923				5,303				1,084				—			15,310
Principal payments on other debt			(7,752		)		(873		)		(2,209		)		—			(10,834	)
Debt issuance costs			(18,914		)		—				—				—			(18,914	)
Repayments of bank overdrafts			(5,330		)		—				—				—			(5,330	)
Equity investment by Holdings			1,525				—				—				—			1,525
Dividends paid to Holdings			(226,621		)		—				—				—			(226,621	)
Intercompany			77,455				(63,900		)		(13,555		)		—			—
Distributions to non-controlling interests			—				—				(3,537		)		—			(3,537	)
Net cash used in financing activities			(48,934		)		(59,470		)		(18,217		)		—			(126,621	)
Net decrease in cash and cash equivalents			(34,999		)		(636		)		(190		)		—			(35,825	)
Cash and cash equivalents at beginning of period			35,070				3,734				1,340				—			40,144
Cash and cash equivalents at end of period		$	71			$	3,098			$	1,150			$	—		$	4,319

(a)           Elimination of equity in earnings of consolidated subsidiaries.

XML

Selected Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information

Schedule of selected unaudited quarterly financial data

	Holdings
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands, except per share amounts)
Year ended December 31, 2014
Net operating revenues	$	762,578	$	772,762	$	758,069	$	771,608
Income from operations		78,444		82,193		66,017		57,822
Net income attributable to Select Medical Holdings Corporation	$	33,044	$	35,341	$	26,530	$	25,712
Income per common share(1):
Basic	$	0.24	$	0.27	$	0.20	$	0.20
Diluted	$	0.24	$	0.27	$	0.20	$	0.20

	Holdings
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands, except per share amounts)
Year ended December 31, 2015
Net operating revenues	$	795,343	$	887,065	$	1,021,123	$	1,039,205
Income from operations		79,265		85,011		48,214		62,300
Net income attributable to Select Medical Holdings Corporation	$	35,063	$	36,940	$	29,406	$	29,327
Income per common share(1):
Basic	$	0.27	$	0.28	$	0.22	$	0.22
Diluted	$	0.27	$	0.28	$	0.22	$	0.22

(1)           Due to rounding, the summation of quarterly Income per share balances may not equal year to date equivalents.

Select

Quarterly Financial Information

Schedule of selected unaudited quarterly financial data

	Select
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands)
Year ended December 31, 2014
Net operating revenues	$	762,578	$	772,762	$	758,069	$	771,608
Income from operations		78,444		82,193		66,017		57,822
Net income attributable to Select Medical Corporation	$	33,044	$	35,341	$	26,530	$	25,712

	Select
	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in thousands)
Year ended December 31, 2015
Net operating revenues	$	795,343	$	887,065	$	1,021,123	$	1,039,205
Income from operations		79,265		85,011		48,214		62,300
Net income attributable to Select Medical Corporation	$	35,063	$	36,940	$	29,406	$	29,327

(1)           Due to rounding, the summation of quarterly Income per share balances may not equal year to date equivalents.

XML

Organization and Significant Accounting Policies - Business Description, Accounts Receivable and Allowance for Doubtful Accounts (Details)	12 Months Ended
	Dec. 31, 2015 segment item	Dec. 31, 2014 item	Dec. 31, 2013 item
Business Description
Number of Operating Segments | segment	3
Number of specialty hospitals operated by the entity	127	129	123
Number of outpatient clinics operated by the entity	1,038	1,023	1,006
Number of freestanding medical centers	300
Number of medical facilities	138
Number of Department of Veterans Affairs community-based outpatient clinics	33
Number of states in which the entity had operations	46
Accounts Receivable and Allowance for Doubtful Accounts
Deductibles, co-payments and self-insured amounts as a percentage of net accounts receivable balance before doubtful accounts	1.20%	0.20%
Minimum period from date of discharge that outstanding governmental accounts are reserved as uncollectible	365 days
Minimum period from date of discharge that outstanding non-governmental accounts are reserved as uncollectible	180 days

XML

Organization and Significant Accounting Policies - Property and Equipment (Details)	12 Months Ended
	Dec. 31, 2015
Leasehold improvements | Minimum
Property and equipment
Estimated useful lives	5 years
Leasehold improvements | Maximum
Property and equipment
Estimated useful lives	15 years
Furniture and equipment | Minimum
Property and equipment
Estimated useful lives	3 years
Furniture and equipment | Maximum
Property and equipment
Estimated useful lives	20 years
Buildings
Property and equipment
Estimated useful lives	40 years
Building improvements | Minimum
Property and equipment
Estimated useful lives	5 years
Building improvements | Maximum
Property and equipment
Estimated useful lives	25 years
Land improvements | Minimum
Property and equipment
Estimated useful lives	2 years
Land improvements | Maximum
Property and equipment
Estimated useful lives	25 years

XML

Organization and Significant Accounting Policies - Intangible Assets and Liabilities (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2015
Intangible Assets
Impairment to goodwill or other recorded intangible assets	$ 0.0
Customer relationships | Minimum
Intangible Assets and Liabilities
Useful life of intangible assets		9 years
Customer relationships | Maximum
Intangible Assets and Liabilities
Useful life of intangible assets		17 years
Leasehold interests | Minimum
Intangible Assets and Liabilities
Useful life of intangible assets		2 years
Leasehold interests | Maximum
Intangible Assets and Liabilities
Useful life of intangible assets		10 years

XML

Organization and Significant Accounting Policies - Insurance Risk Programs (Details) - Insurance Risk Programs - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Insurance risk programs
Discount rate for provisions for losses for professional liability (as a percent)	3.00%	3.00%
Liability recorded after discounting	$ 157.4	$ 101.9
Value of aggregate liability, if the entity did not discount the provisions for losses	$ 165.8	$ 105.5

XML

Organization and Significant Accounting Policies - Equity Method Investments, Non-Controlling Interests and Revenue Recognition (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Redeemable Non-Controlling Interests
Non-controlling interests	$ 49,264	$ 35,725
Redeemable Non-controlling interests
Beginning balance	10,985	11,584
Issuance of ownership interests in Concentra	218,005
Ownership interests acquired in business combination	14,196
Repurchase of ownership interests	(876)
Changes in the redemption amounts	1,010	(923)
Net income (loss)	(2,190)	1,410
Distributions	(2,909)	(1,086)
Ending balance	238,221	10,985	$ 11,584
Revenue recognition
Equity method investments	101,400	99,600
Equity in earnings of unconsolidated subsidiaries	16,811	7,044	2,476
Debt Issuance Costs	38,000
Net income (loss) attributable to non-controlling interests
Net income (loss) attributable to non-controlling interests classified as redeemable non-controlling interests	(2,190)	1,410	3,063
Net income attributable to non-controlling interests classified as equity	138,186	126,765	119,946
Net income attributable to non-controlling interests	5,260	7,548	8,619
Non-controlling Interests
Net income (loss) attributable to non-controlling interests
Net income attributable to non-controlling interests classified as equity	$ 7,450	$ 6,138	$ 5,556
Net operating revenues | Customer concentration | Medicare program
Revenue recognition
Percentage of concentration risk	36.00%	45.00%	46.00%
Accounts receivable | Customer concentration | Medicare program
Revenue recognition
Percentage of concentration risk	24.00%	32.00%
BIR JV, LLP
Revenue recognition
Percentage of ownership	49.00%	49.00%
OHRH, LLC
Revenue recognition
Percentage of ownership	49.00%	49.00%
Global Rehab - Scottsdale, LLC
Revenue recognition
Percentage of ownership	49.00%	49.00%
Rehabilitation Institute of Denton, LLC
Revenue recognition
Percentage of ownership	50.00%	50.00%
ES Rehabilitation LLC
Revenue recognition
Percentage of ownership	49.00%	49.00%

XML

Acquisitions - Concentra Acquisition (Details) $ in Thousands		3 Months Ended	12 Months Ended
	Jun. 01, 2015 USD ($)	Dec. 31, 2015 USD ($) state item	Dec. 31, 2015 USD ($) state item	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)
Acquisition
Non-controlling interests		$ 49,264	$ 49,264	$ 35,725
Number of freestanding medical centers | item			300
Number of states in which the entity had operations | item		46	46
Number of medical facilities | item			138
Number of Department of Veterans Affairs CBOCs | item			33
Fair value of identifiable assets acquired and liabilities assumed:
Goodwill		$ 2,314,624	$ 2,314,624	1,642,083	$ 1,642,633
Net cash paid			$ 1,061,628	1,211	1,665
MJ Acquisition Corporation
Acquisition
Amount borrowed under credit agreement	$ 650,000
Concentra Inc
Acquisition
Number of freestanding medical centers | item			300
Number of states in which the entity had operations | state		38	38
Number of medical facilities | item			138
Number of Department of Veterans Affairs CBOCs | item			33
Select
Acquisition
Non-controlling interests		$ 49,264	$ 49,264	35,725
Fair value of identifiable assets acquired and liabilities assumed:
Goodwill		2,314,624	2,314,624	1,642,083
Net cash paid			1,061,628	$ 1,211	$ 1,665
Concentra Inc
Fair value of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents acquired		3,772	3,772
Identifiable tangible assets, excluding cash and cash equivalents		405,428	405,428
Identifiable intangible assets		254,990	254,990
Goodwill		646,466	646,466
Total assets		1,310,656	1,310,656
Total current liabilities		90,188	90,188
Total non-current liabilities		152,425	152,425
Acquired non-controlling interests		17,084	17,084
Total liabilities		242,613	242,613
Net assets acquired		1,050,959	$ 1,050,959
Net cash paid		$ 1,047,187
Concentra Inc | Humana | MJ Acquisition Corporation
Acquisition
Voting equity interests acquired	100.00%
Fair value of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents acquired	$ 3,800
Net cash paid	1,047,200
Group Holdings | MJ Acquisition Corporation
Acquisition
Contributed equity funds	$ 435,000
Group Holdings | Class A interests | Select
Acquisition
Voting equity interests acquired	50.10%
Aggregate purchase price	$ 217,900
Group Holdings | Other members of Group Holdings | Class A interests | WCAS
Acquisition
Voting equity interests acquired	49.90%
Aggregate purchase price	$ 217,100

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Acquisitions - Intangible Assets, Proforma Results and Other Acquisitions (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	7 Months Ended	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2015	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	May. 31, 2015
Acquisition
Intangible assets acquired	$ 254,990	$ 254,990	$ 254,990
Acquired unfavorable leasehold interests	3,300	3,300	$ 3,300
Weighted average amortization period of intangible liabilities (in years)			4 years 4 months 24 days
Income per common share
Net cash paid			$ 1,061,628	$ 1,211	$ 1,665
Issuance of non-controlling interest			14,569	1,693
Goodwill	2,314,624	2,314,624	2,314,624	1,642,083	1,642,633
Specialty Hospitals
Income per common share
Goodwill	1,357,379	1,357,379	1,357,379	1,335,460	1,334,615
Concentra
Income per common share
Goodwill	650,650	650,650	650,650
Concentra Inc
Acquisition
Estimated value of goodwill, deductible for tax purposes						$ 23,900
Income per common share
Depreciation			1,200	3,000
Trademarks
Acquisition
Intangible assets acquired	104,900	104,900	104,900
Customer relationships
Acquisition
Intangible assets acquired	141,265	141,265	$ 141,265
Weighted Average Amortization Period			10 years 2 months 12 days
Leasehold interests
Acquisition
Intangible assets acquired	8,825	8,825	$ 8,825
Weighted Average Amortization Period			6 years 3 months 18 days
Concentra Inc
Acquisition
Contributed net revenue		585,200
Contributed net loss		12,200
Acquisition costs			$ 4,700	4,700
Pro forma results of operations
Net revenue			4,154,941	4,063,218
Net income			$ 129,737	$ 106,945
Income per common share
Basic (in dollars per share)			$ 1.00	$ 0.81
Diluted (in dollars per share)			$ 0.99	$ 0.80
Interest Expense			$ 19,800	$ 48,100
Income tax benefit			11,400	15,500
Net loss attributable to non-controlling interest			(4,800)	8,300
Rent expense			1,800	4,000
Seller costs excluded from pro forma results			6,000
Acquisition expense excluded from pro forma results			4,700
Amortization expense excluded from pro forma results			800	2,300
Net cash paid	1,047,187
Fair value of assets acquired, principally accounts receivable and property and equipment	1,050,959	1,050,959	1,050,959
Goodwill	646,466	646,466	646,466
Other Acquisitions
Income per common share
Total consideration (net of cash acquired)			30,200	3,200	5,600
Net cash paid			14,400	1,100	1,700
Issuance of non-controlling interest			14,700
Fair value of assets acquired, principally accounts receivable and property and equipment	4,100	4,100	4,100	1,300	3,500
Goodwill				$ 1,900	$ 2,100
Other Acquisitions | Specialty Hospitals
Income per common share
Goodwill	21,900	21,900	21,900
Other Acquisitions | Concentra
Income per common share
Goodwill	$ 4,200	$ 4,200	$ 4,200

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Property and Equipment (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Property and equipment
Total property and equipment	$ 1,312,847	$ 937,660
Accumulated depreciation	(448,723)	(395,350)
Property and equipment, net	864,124	542,310
Depreciation expense	96,100	67,900	$ 63,900
Land
Property and equipment
Total property and equipment	76,118	71,635
Leasehold improvements
Property and equipment
Total property and equipment	295,647	155,648
Buildings
Property and equipment
Total property and equipment	411,376	396,228
Furniture and equipment
Property and equipment
Total property and equipment	382,838	272,919
Construction-in-progress
Property and equipment
Total property and equipment	$ 146,868	$ 41,230

XML

Intangible Assets and Liabilities - Carrying Value and Amortization (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Intangible Assets, (including Goodwill)
Goodwill	$ 2,314,624	$ 1,642,083	$ 1,642,633
Total identifiable intangibles	2,633,299	1,714,602
Estimated amortization expense
Carrying value of unfavorable leasehold interests	3,000
Increased rent expense	300
Customer relationships
Intangible Assets, (including Goodwill)
Total identifiable intangibles - Finite lived assets	132,751
Amortized intangible assets:
Amortization expense	8,500
Estimated amortization expense
2016	14,600
2017	14,600
2018	14,600
2019	14,600
2020	14,600
Leasehold interests
Intangible Assets, (including Goodwill)
Total identifiable intangibles - Finite lived assets	8,248
Trademarks
Intangible Assets, (including Goodwill)
Total identifiable intangibles - Indefinite lived assets	$ 162,609	57,709
Weighted average time until next renewal	3 years 9 months 18 days
Certificates of need
Intangible Assets, (including Goodwill)
Total identifiable intangibles - Indefinite lived assets	$ 13,022	12,727
Accreditations
Intangible Assets, (including Goodwill)
Total identifiable intangibles - Indefinite lived assets	$ 2,045	$ 2,083
Weighted average time until next renewal	1 year 6 months

XML

Intangible Assets and Liabilities - Carrying Amount of Goodwill (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Goodwill
Balance at the beginning of the year	$ 1,642,083	$ 1,642,633
Goodwill acquired during year	723,995	1,866
Goodwill allocated to contributed business		(2,406)
Purchase accounting adjustment		(10)
Measurement period adjustment	(51,426)
Disposal of business	(28)
Balance at the end of the year	2,314,624	1,642,083
Specialty Hospitals
Goodwill
Balance at the beginning of the year	1,335,460	1,334,615
Goodwill acquired during year	21,972	855
Purchase accounting adjustment		(10)
Measurement period adjustment	(53)
Balance at the end of the year	1,357,379	1,335,460
Outpatient Rehabilitation
Goodwill
Balance at the beginning of the year	306,623	308,018
Goodwill acquired during year		1,011
Goodwill allocated to contributed business		(2,406)
Disposal of business	(28)
Balance at the end of the year	306,595	$ 306,623
Concentra
Goodwill
Goodwill acquired during year	702,023
Measurement period adjustment	(51,373)
Balance at the end of the year	$ 650,650

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Investments in Unconsolidated Subsidiaries (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2015 USD ($)
Investments in Unconsolidated Subsidiaries
Proceeds from sale of equity investment	$ 33,096
Gain on sale of equity investment	$ 29,647

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Long-Term Debt and Notes Payable (Details) $ in Thousands											3 Months Ended					9 Months Ended	12 Months Ended
	Dec. 11, 2015 USD ($)	Dec. 10, 2015	Jun. 01, 2015 USD ($)	Mar. 04, 2015 USD ($)	Oct. 23, 2014 USD ($) item	Mar. 11, 2014 USD ($)	Mar. 04, 2014 USD ($)	Mar. 03, 2014	Jun. 03, 2013 USD ($)	Jun. 02, 2013	Dec. 31, 2015 USD ($)	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Mar. 31, 2014	Sep. 30, 2015	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	May. 20, 2015 USD ($)	May. 28, 2013 USD ($)	Mar. 22, 2013	Feb. 20, 2013 USD ($)	Aug. 13, 2012 USD ($)	Jun. 01, 2011 USD ($)
Long-term debt and notes payable
Total debt											$ 2,423,884						$ 2,423,884	$ 1,552,976
Less: current maturities											233,570						233,570	10,874
Long-term debt, net of current portion											$ 2,190,314						$ 2,190,314	1,542,102
Gross proceeds from issuance of additional notes																		111,650	$ 600,000
Maturities of Long-Term Debt and Notes Payable
Loss recognized associated with refinancing activities																		$ 2,277	18,747
6.375% senior notes
Long-term debt and notes payable
Interest rate of debt (as a percent)											6.375%						6.375%	6.375%
7 5/8% senior subordinated notes
Long-term debt and notes payable
Interest rate of debt (as a percent)																							7.625%
10% senior subordinated notes
Long-term debt and notes payable
Interest rate of debt (as a percent)																							10.00%
Select
Long-term debt and notes payable
Less: current maturities											$ 233,570						$ 233,570	$ 10,874
Long-term debt, net of current portion											2,190,314						2,190,314	1,542,102
Gross proceeds from issuance of additional notes																		111,650	600,000
Maturities of Long-Term Debt and Notes Payable
2016											233,570						233,570
2017											11,120						11,120
2018											824,837						824,837
2019											6,671						6,671
2020											9,455						9,455
2021 and beyond											1,338,231						1,338,231
Total											$ 2,423,884						$ 2,423,884
Loss recognized associated with refinancing activities																		2,277	$ 17,788
Select | 6.375% senior notes
Long-term debt and notes payable
Interest rate of debt (as a percent)											6.375%						6.375%				6.375%
Total debt											$ 711,235						$ 711,235	711,465
Aggregate principal amount																					$ 600,000
Select | 6.375% senior notes | Prior to June 1, 2016
Long-term debt and notes payable
Percentage of the principal amount representing the redemption price of notes which may be redeemed with proceeds from certain equity offerings																	106.375%
Percentage of principal amount at which notes may be required to be repurchased in event of change of control by the entity																	101.00%
Select | 6.375% senior notes | Maximum | Prior to June 1, 2016
Long-term debt and notes payable
Percentage of the principal amount of the debt instrument which the entity may redeem with the proceeds from certain equity offerings																	35.00%
Select | Senior secured credit facility
Long-term debt and notes payable
Maximum borrowing capacity																									$ 1,150,000
Select | Senior secured credit facility | Adjusted LIBO | Adjusted one-month LIBO
Long-term debt and notes payable
Variable rate basis																	Adjusted LIBO
Select | Senior secured credit facility | Alternate base rate | Adjusted one-month LIBO
Long-term debt and notes payable
Variable rate basis																	Adjusted LIBO
Interest rate margin (as a percent)																	1.00%
Select | Senior secured credit facility | Alternate base rate | JP Morgan Chase Bank, N.A's Prime Rate
Long-term debt and notes payable
Variable rate basis																	JPMorgan Chase Bank, N.A.'s prime rate
Select | Senior secured credit facility | Alternate base rate | Federal Funds Effective Rate
Long-term debt and notes payable
Variable rate as a portion of 1% over weighted average rate on overnight Federal Funds (as a percent)											50.00%						50.00%
Select | Senior secured credit facility | Maximum | Proforma ratio less than or equal to 2.75 to 1.00
Long-term debt and notes payable
Pro forma ratio of total indebtedness to Consolidated EBITDA									2.75
Select | Senior secured credit facility | Maximum | Leverage ratio equal to 4.50 to 1.00
Long-term debt and notes payable
Leverage ratio of financial maintenance covenant																			4.50%
Select | Senior secured credit facility | Maximum | Leverage ratio equal to 5.00 to 1.00
Long-term debt and notes payable
Leverage ratio of financial maintenance covenant																5.00%
Select | Revolving credit facility
Long-term debt and notes payable
Total debt											$ 295,000						$ 295,000	60,000
Number of credit extension amendments | item					2
Future principal prepayments from excess cash flow																	$ 10,200
Commitment fee (as a percent)																	0.50%
Percentage of excess cash flow to be used for prepayment of debt																	50.00%
Current borrowing capacity											116,100						$ 116,100
Outstanding letters of credit											38,900						$ 38,900
Select | Revolving credit facility | Adjusted LIBO
Long-term debt and notes payable
Variable rate basis																	Adjusted LIBO
Interest rate margin (as a percent)																	3.75%
Select | Revolving credit facility | Alternate base rate
Long-term debt and notes payable
Variable rate basis																	Alternate Base Rate plus
Interest rate margin (as a percent)																	2.75%
Select | Revolving credit facility | Maximum | Adjusted LIBO
Long-term debt and notes payable
Interest rate margin (as a percent)																	3.75%
Select | Revolving credit facility | Maximum | Alternate base rate
Long-term debt and notes payable
Interest rate margin (as a percent)																	2.75%
Select | Revolving credit facility | Minimum | Adjusted LIBO
Long-term debt and notes payable
Interest rate margin (as a percent)																	2.75%
Select | Revolving credit facility | Minimum | Alternate base rate
Long-term debt and notes payable
Interest rate margin (as a percent)																	1.75%
Select | Revolving credit facility that matures on March 1, 2018
Long-term debt and notes payable
Maximum borrowing capacity											450,000						$ 450,000
Extended amount of revolving credit facility					$ 6,750
Amount of incremental revolving commitments					$ 50,000															$ 100,000
Select | Revolving credit facility that matures on June 1, 2016
Long-term debt and notes payable
Maximum borrowing capacity									$ 300,000
Extended amount of revolving credit facility									$ 293,300
Select | Term loans
Long-term debt and notes payable
Unamortized discounts											2,800						2,800	4,200
Outstanding borrowing on term loan											753,300						$ 753,300
Principal prepayments from excess cash flow							$ 34,000
Percentage of aggregate principal amount in which term loans amortize quarterly																	0.25%
Percentage of excess cash flow to be used for prepayment of debt																	50.00%
Percentage of net cash proceeds received from non-ordinary course asset sales or other dispositions, or as a result of a casualty or condemnation to be used for prepayment of debt																	100.00%
Percentage of net proceeds received from the issuance of debt obligations other than certain permitted debt obligations to be used for prepayment of debt																	100.00%
Maturities of Long-Term Debt and Notes Payable
Loss recognized associated with refinancing activities																		2,300
Select | Series A Term Loan
Long-term debt and notes payable
Borrowing on credit extension on term loan																								$ 275,000
Select | Series A Term Loan | Adjusted LIBO
Long-term debt and notes payable
Variable rate basis										Adjusted LIBO
Interest rate margin (as a percent)										3.75%
Select | Series A Term Loan | Alternate base rate
Long-term debt and notes payable
Variable rate basis										Alternate Base
Interest rate margin (as a percent)										2.75%
Select | Series B Term Loan
Long-term debt and notes payable
Borrowing on credit extension on term loan																							$ 300,000
Select | Series B Term Loan | Adjusted LIBO
Long-term debt and notes payable
Variable rate basis								Adjusted LIBO		Adjusted LIBO
Interest rate margin (as a percent)								3.25%		3.75%
Select | Series B Term Loan | Alternate base rate
Long-term debt and notes payable
Variable rate basis								Alternate Base Rate		Alternate Base Rate
Interest rate margin (as a percent)								2.25%		2.75%
Select | Series C Term Loan | Adjusted LIBO
Long-term debt and notes payable
Variable rate basis								Adjusted LIBO
Interest rate margin (as a percent)								3.00%
Select | Series C Term Loan | Alternate base rate
Long-term debt and notes payable
Variable rate basis								Alternate Base Rate
Interest rate margin (as a percent)								2.00%
Select | Series C Term Loan | Adjusted LIBO rate floor
Long-term debt and notes payable
Interest rate of debt (as a percent)										1.75%
Variable rate basis								Adjusted LIBO rate floor
Interest rate margin (as a percent)								1.00%
Select | Series D Term Loan
Long-term debt and notes payable
Outstanding borrowing on term loan											218,600						$ 218,600
Select | Series D Term Loan | Adjusted LIBO
Long-term debt and notes payable
Variable rate basis		Adjusted LIBO
Interest rate margin (as a percent)		2.75%
Select | Series D Term Loan | Alternate base rate
Long-term debt and notes payable
Variable rate basis		Alternative Base
Interest rate margin (as a percent)		1.75%
Select | Series D Term Loan | Adjusted LIBO rate floor
Long-term debt and notes payable
Variable rate basis		Adjusted LIBO rate floor
Interest rate margin (as a percent)		1.00%
Select | Series E Term Loan
Long-term debt and notes payable
Outstanding borrowing on term loan											534,700						534,700
Extended amount of borrowing on term loan	$ 56,200
Select | Letters of credit
Long-term debt and notes payable
Maximum borrowing capacity											75,000						75,000
Select | Swingline loans
Long-term debt and notes payable
Maximum borrowing capacity											$ 25,000						$ 25,000
Select | Additional Notes
Long-term debt and notes payable
Interest rate of debt (as a percent)						6.375%
Aggregate principal amount						$ 110,000
Issue price (as a percent)						101.50%
Gross proceeds from issuance of additional notes						$ 111,700
Select | 7 5/8% senior subordinated notes
Long-term debt and notes payable
Interest rate of debt (as a percent)																						0.7625%
Select | Amended senior secured facilities | Senior secured credit facility | Leverage Ratio Equal To 4.78 To 1.00
Long-term debt and notes payable
Leverage ratio of financial maintenance covenant																	4.78%
Select | Amended senior secured facilities | Senior secured credit facility | Maximum | Leverage ratio equal to 5.00 to 1.00
Long-term debt and notes payable
Leverage ratio of financial maintenance covenant												5.00%	5.00%	5.00%	5.00%
Select | Amended senior secured facilities | Senior secured credit facility | Maximum | Leverage ratio equal to 5.75 to 1.00
Long-term debt and notes payable
Leverage ratio of financial maintenance covenant											5.75%
Select | Amended senior secured facilities | Series B Term Loan | Adjusted LIBO
Long-term debt and notes payable
Variable rate basis									Adjusted LIBO
Interest rate margin (as a percent)									3.25%
Select | Amended senior secured facilities | Series B Term Loan | Alternate base rate
Long-term debt and notes payable
Variable rate basis									Alternate Base Rate
Interest rate margin (as a percent)									2.25%
Select | Amended senior secured facilities | Series C Term Loan | Adjusted LIBO
Long-term debt and notes payable
Variable rate basis									Adjusted LIBO
Interest rate margin (as a percent)									3.00%
Select | Amended senior secured facilities | Series C Term Loan | Alternate base rate
Long-term debt and notes payable
Variable rate basis									Alternate Base Rate
Interest rate margin (as a percent)									2.00%
Select | Amended senior secured facilities | Series C Term Loan | Adjusted LIBO rate floor
Long-term debt and notes payable
Interest rate of debt (as a percent)									1.00%
Select | Amended senior secured facilities | Series D Term Loan | Adjusted LIBO
Long-term debt and notes payable
Variable rate basis							Adjusted LIBO										Adjusted LIBO
Interest rate margin (as a percent)							2.75%										2.75%
Select | Amended senior secured facilities | Series D Term Loan | Alternate base rate
Long-term debt and notes payable
Variable rate basis							Alternate Base Rate										Alternate Base
Interest rate margin (as a percent)							1.75%										1.75%
Select | Amended senior secured facilities | Series E Term Loan | Prior to March 4, 2015
Long-term debt and notes payable
Prepayment premium (as a percent)							1.00%
Select | Amended senior secured facilities | Series E Term Loan | Adjusted LIBO
Long-term debt and notes payable
Variable rate basis	Adjusted LIBO						Adjusted LIBO										Adjusted LIBO
Interest rate margin (as a percent)	4.00%						2.75%										4.00%
Select | Amended senior secured facilities | Series E Term Loan | Alternate base rate
Long-term debt and notes payable
Variable rate basis	Alternative Base Rate						Alternate Base Rate										Alternate Base Rate
Interest rate margin (as a percent)	3.00%						1.75%										3.00%
Select | Amended senior secured facilities | Series E Term Loan | Adjusted LIBO rate floor
Long-term debt and notes payable
Variable rate basis	an Adjusted LIBO rate floor						Adjusted LIBO rate floor
Interest rate margin (as a percent)	1.00%						1.00%										1.00%
Select | Amended senior secured facilities | Series E Term Loan | Alternate base rate
Long-term debt and notes payable
Interest rate margin (as a percent)	3.00%
Concentra Inc
Long-term debt and notes payable
Total debt											$ 655,177						$ 655,177
Less: current maturities											5,254						5,254
Long-term debt, net of current portion											649,923						649,923
Maturities of Long-Term Debt and Notes Payable
2016											5,254						5,254
2017											4,168						4,168
2018											4,186						4,186
2019											4,206						4,206
2020											9,227						9,227
2021 and beyond											628,136						628,136
Total											655,177						655,177
Concentra Inc | Revolving credit facility
Long-term debt and notes payable
Total debt											5,000						5,000
Concentra Inc | Term loans
Long-term debt and notes payable
Total debt											644,865						644,865
Unamortized discounts											2,900						2,900
Concentra Inc | Other
Long-term debt and notes payable
Total debt											5,312						$ 5,312
Concentra Inc | First Lien Credit Agreement
Long-term debt and notes payable
Maximum borrowing capacity			$ 500,000
Concentra Inc | First Lien Credit Agreement - Term Loan
Long-term debt and notes payable
Aggregate principal amount			$ 450,000
Debt instrument term			7 years
Percentage of amortization of term loan			0.25%
Concentra Inc | First Lien Credit Agreement - Term Loan | Adjusted LIBO
Long-term debt and notes payable
Variable rate basis																	Adjusted LIBO
Interest rate margin (as a percent)																	3.00%
Concentra Inc | First Lien Credit Agreement - Term Loan | Alternate base rate
Long-term debt and notes payable
Variable rate basis																	Alternate Base Rate
Concentra Inc | First Lien Credit Agreement - Term Loan | Adjusted LIBO rate floor
Long-term debt and notes payable
Interest rate margin (as a percent)																	1.00%
Concentra Inc | First Lien Credit Agreement - Term Loan | Alternate base rate floor
Long-term debt and notes payable
Interest rate margin (as a percent)																	2.00%
Concentra Inc | First Lien Credit Agreement - Term Loan | Alternate base rate
Long-term debt and notes payable
Interest rate margin (as a percent)																	2.00%
Concentra Inc | First Lien Credit Agreement - Revolving Facility
Long-term debt and notes payable
Maximum borrowing capacity			$ 50,000
Debt instrument term			5 years
Concentra Inc | First Lien Credit Agreement - Revolving Facility | Adjusted LIBO
Long-term debt and notes payable
Variable rate basis																	Adjusted LIBO
Concentra Inc | First Lien Credit Agreement - Revolving Facility | Alternate base rate
Long-term debt and notes payable
Variable rate basis																	Alternate Base Rate
Concentra Inc | First Lien Credit Agreement - Revolving Facility | Maximum | Adjusted LIBO
Long-term debt and notes payable
Interest rate margin (as a percent)																	3.00%
Concentra Inc | First Lien Credit Agreement - Revolving Facility | Maximum | Alternate base rate
Long-term debt and notes payable
Interest rate margin (as a percent)																	2.00%
Concentra Inc | First Lien Credit Agreement - Revolving Facility | Minimum | Adjusted LIBO
Long-term debt and notes payable
Interest rate margin (as a percent)																	2.75%
Concentra Inc | First Lien Credit Agreement - Revolving Facility | Minimum | Alternate base rate
Long-term debt and notes payable
Interest rate margin (as a percent)																	1.75%
Concentra Inc | Second Lien Credit Agreement
Long-term debt and notes payable
Aggregate principal amount			$ 200,000
Debt instrument term			8 years
Concentra Inc | Second Lien Credit Agreement | Prior to June 1, 2016
Long-term debt and notes payable
Prepayment premium (as a percent)			2.00%
Concentra Inc | Second Lien Credit Agreement | Prior to June 1, 2017
Long-term debt and notes payable
Prepayment premium (as a percent)			1.00%
Concentra Inc | Second Lien Credit Agreement | Adjusted LIBO
Long-term debt and notes payable
Variable rate basis																	Adjusted LIBO Rate
Interest rate margin (as a percent)																	8.00%
Concentra Inc | Second Lien Credit Agreement | Alternate base rate
Long-term debt and notes payable
Variable rate basis																	Alternate Base Rate
Concentra Inc | Second Lien Credit Agreement | Adjusted LIBO rate floor
Long-term debt and notes payable
Interest rate margin (as a percent)																	1.00%
Concentra Inc | Second Lien Credit Agreement | Alternate base rate floor
Long-term debt and notes payable
Interest rate margin (as a percent)																	2.00%
Concentra Inc | Second Lien Credit Agreement | Alternate base rate
Long-term debt and notes payable
Interest rate margin (as a percent)																	7.00%
Select Excluding Concentra
Long-term debt and notes payable
Total debt											1,768,707						$ 1,768,707	1,552,976
Less: current maturities											228,316						228,316	10,874
Long-term debt, net of current portion											1,540,391						1,540,391	1,542,102
Maturities of Long-Term Debt and Notes Payable
2016											228,316						228,316
2017											6,952						6,952
2018											820,651						820,651
2019											2,465						2,465
2020											228						228
2021 and beyond											710,095						710,095
Total											1,768,707						1,768,707
Select Excluding Concentra | 6.375% senior notes
Long-term debt and notes payable
Unamortized premiums											1,200						1,200	1,500
Select Excluding Concentra | Term loans
Long-term debt and notes payable
Total debt											750,485						750,485	775,996
Principal prepayments from excess cash flow				$ 26,900
Select Excluding Concentra | Other
Long-term debt and notes payable
Total debt											$ 11,987						$ 11,987	$ 5,515

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Stockholders' Equity (Details) $ in Millions	12 Months Ended
	Dec. 31, 2015 USD ($) item shares	Dec. 31, 2014 USD ($) shares	Dec. 31, 2013 USD ($) shares
Stockholders' Equity
Maximum amount authorized to be repurchased under the common stock repurchase program | $	$ 500.0
Number of shares repurchased under the program	1,032,334	11,285,714	1,115,691
Value of shares repurchased under the program | $	$ 13.6	$ 127.5	$ 10.0
Number of directors who are affiliated with other entities | item	2
Repurchase program available capacity | $	$ 185.2
Shares of restricted stock granted	1,384,954	1,585,775	952,500
Shares of common stock related to the exercise of stock options issued	183,450	974,969	166,600
Shares of common stock forfeited	486,580	302,690	331,697

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Stock-based Compensation - Equity Incentive Plans and Restricted Stock Awards (Details) - $ / shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Aug. 12, 2009
Options
Stock based Compensation
Vesting period	5 years
Expiration term	10 years
Number of Options Granted (in shares)	0
Restricted stock awards
Shares
Unvested Balance, at beginning of the year	3,728,000
Granted	1,385,000
Vested	(992,000)
Forfeited	(304,000)
Unvested Balance, at end of the year	3,817,000	3,728,000
Weighted Average Grant Date Fair Value
Unvested Balance, at beginning of the year (in dollars per share)	$ 10.82
Granted (in dollars per share)	13.94	$ 13.61	$ 8.48
Vested (in dollars per share)	9.07
Forfeited (in dollars per share)	12.28
Unvested Balance, at end of the year (in dollars per share)	$ 12.29	$ 10.82
Director Plan | Options
Stock based Compensation
Number of shares authorized				75,000
Director Plan | Restricted stock awards
Stock based Compensation
Number of shares authorized				150,000

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Stock-based Compensation - Restricted Stock Transactions (Details) - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Options
Stock based Compensation
Number of options outstanding (in shares)	743,000
Number of options exercisable (in shares)	728,000
Weighted average exercise price (in dollars per share)	$ 8.85
Weighted average remaining contractual term for all outstanding options	2 years 10 months 13 days
Weighted average remaining contractual term of exercisable options	2 years 10 months 13 days
Total intrinsic value of options exercised (in dollars)	$ 1.0	$ 6.0	$ 0.2
Aggregate intrinsic value of options outstanding (in dollars)	$ 2.3
Restricted stock awards
Stock based Compensation
Weighted average grant date fair value of shares awarded	$ 13.94	$ 13.61	$ 8.48
Weighted average grant date fair value of vested shares	$ 9.0	$ 7.4	$ 4.6

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Stock-based Compensation - Stock Compensation Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Stock based Compensation
Total	$ 14,679	$ 11,042	$ 7,033
Stock compensation expense for each of the next five years, based on restricted stock awards granted
2016	15,532
2017	10,610
2018	5,204
2019	1,406
2020	324
Included in general and administrative
Stock based Compensation
Total	11,633	9,027	5,276
Included in cost of services
Stock based Compensation
Total	$ 3,046	$ 2,015	$ 1,757

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Income Taxes - Tax Provision Components and Reconciliation to Federal Statutory Rate (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Current:
Federal	$ 63,626	$ 52,063	$ 55,847
State and local	10,868	9,248	11,913
Total current	74,494	61,311	67,760
Deferred	(2,058)	14,311	7,032
Total income tax provision	$ 72,436	$ 75,622	$ 74,792
Differences between the expected income tax provision and income taxes computed at the federal statutory rate
Expected federal tax rate (as a percent)	35.00%	35.00%	35.00%
State and local taxes, net of federal benefit (as a percent)	4.00%	4.20%	4.60%
Other permanent differences (as a percent)	1.40%	0.80%	1.10%
Valuation allowance (as a percent)	(0.90%)	(0.40%)	(0.70%)
Uncertain tax positions (as a percent)	(2.30%)	(0.30%)	(0.60%)
IRS audit settlements (as a percent)	(0.10%)	(0.40%)
Non-controlling interest (as a percent)	(2.00%)	(1.50%)	(1.70%)
Other (as a percent)	(0.30%)	(0.30%)	0.10%
Total (as a percent)	34.80%	37.10%	37.80%
Select
Current:
Federal	$ 63,626	$ 52,063	$ 57,026
State and local	10,868	9,248	11,913
Total current	74,494	61,311	68,939
Deferred	(2,058)	14,311	7,032
Total income tax provision	$ 72,436	$ 75,622	$ 75,971
Differences between the expected income tax provision and income taxes computed at the federal statutory rate
Expected federal tax rate (as a percent)	35.00%	35.00%	35.00%
State and local taxes, net of federal benefit (as a percent)	4.00%	4.20%	4.50%
Other permanent differences (as a percent)	1.40%	0.80%	1.10%
Valuation allowance (as a percent)	(0.90%)	(0.40%)	(0.60%)
Uncertain tax positions (as a percent)	(2.30%)	(0.30%)	(0.60%)
IRS audit settlements (as a percent)	(0.10%)	(0.40%)
Non-controlling interest (as a percent)	(2.00%)	(1.50%)	(1.70%)
Other (as a percent)	(0.30%)	(0.30%)	0.10%
Total (as a percent)	34.80%	37.10%	37.80%

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Income Taxes - Summary of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Deferred tax assets
Allowance for doubtful accounts, Total	$ 9,153	$ 701
Allowance for doubtful accounts, Current	9,153	701
Compensation and benefit related accruals, Total	61,111	49,373
Compensation and benefit related accruals, Current	50,303	38,722
Compensation and benefit related accruals, Non-Current	10,808	10,651
Professional malpractice liability insurance, Total	19,654	17,934
Professional malpractice liability insurance, Current	4,642	4,732
Professional malpractice liability insurance, Non-Current	15,012	13,202
Restructuring reserve, Total		333
Restructuring reserve, Current		333
Deferred revenue, Total	(1,009)	(829)
Deferred revenue, Current	(1,009)	(829)
State net operating loss carryforwards, Total	21,591	21,555
State net operating loss carryforwards, Current	445	436
State net operating loss carryforwards, Non-Current	21,146	21,119
Other, Total	1,273	552
Other, Current	357	552
Other, Non-Current	916
Stock options, Total	6,061	5,336
Stock options, Non-Current	6,061	5,336
Equity investments, Total	3,939	3,475
Equity investments, Non-Current	3,939	3,475
Uncertain tax positions, Total	641	1,632
Uncertain tax positions, Non-Current	641	1,632
Total deferred tax assets, Total	122,414	100,062
Total deferred tax assets, Current	63,891	44,647
Total deferred tax assets, Non-Current	58,523	55,415
Deferred tax liabilities
Deferred income, Total	(31,375)	(31,190)
Deferred income, Current	(27,221)	(25,651)
Deferred income, Non-Current	(4,154)	(5,539)
Investment in unconsolidated affiliates, Total	(4,302)	(3,659)
Investment in unconsolidated affiliates, Non-Current	(4,302)	(3,659)
Other, Total	(8,444)	(1,587)
Other, Current	(6,072)	(1,093)
Other, Non-Current	(2,372)	(494)
Depreciation and amortization, Total	(260,724)	(147,197)
Depreciation and amortization, Non-Current	(260,724)	(147,197)
Total deferred tax liabilities, Total	(304,845)	(183,633)
Total deferred tax liabilities, Current	(33,293)	(26,744)
Total deferred tax liabilities, Non-Current	(271,552)	(156,889)
Net deferred taxes before valuation allowance, Total	(182,431)	(83,571)
Net deferred taxes before valuation allowance, Current	30,598	17,903
Net deferred taxes before valuation allowance, Non-Current	(213,029)	(101,474)
Valuation allowance, Total	(7,586)	(9,641)
Valuation allowance, Current	(1,910)	(1,912)
Valuation allowance, Non-Current	(5,676)	(7,729)
Net deferred taxes, Total	(190,017)	(93,212)
Net deferred taxes, Current	28,688	15,991
Net deferred taxes, Non-Current	$ (218,705)	$ (109,203)
Additional information related to valuation allowance
Period of review for assessment of deferred tax assets	3 years

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Income Taxes - Expiration of State NOL's and Gross Valuation Allowances (Details) - State $ in Thousands	Dec. 31, 2015 USD ($)
Net operating loss carry forwards
Net operating losses	$ 465,600
State Net Operating Losses
2016	6,479
2017	10,818
2018	7,319
2019	7,948
Thereafter through 2035	433,068
Gross Valuation Allowance
2016	5,891
2017	9,828
2018	4,574
2019	7,927
Thereafter through 2035	$ 333,817

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Income Taxes Reserves for Uncertain Tax Positions (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Reconciliation of the Company's unrecognized tax benefits
Gross tax contingencies at the beginning of the period	$ 10,667	$ 12,026	$ 13,890
Reductions for tax positions taken in prior periods due primarily to statute expiration	(3,309)	(1,632)	(2,299)
Additions for existing tax positions taken	373	273	435
Reductions for settlements with taxing authorities	(770)
Reductions for tax positions taken in prior periods due to change in estimate	(1,395)
Gross tax contingencies at the end of the period	5,566	10,667	12,026
Unrecognized tax benefits, if fully recognized, would affect effective income tax rate	5,600	10,700
Amount of unrecognized tax benefits eligible for release in the next 12 months	2,600
Accrued interest related to income taxes	600	1,900
Interest recognized	$ 300	$ 500	$ 500
Minimum | State
Reconciliation of the Company's unrecognized tax benefits
Period of limitations for tax returns	3 years
Maximum | State
Reconciliation of the Company's unrecognized tax benefits
Period of limitations for tax returns	5 years

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Retirement Savings Plan (Details) - USD ($) $ in Millions	7 Months Ended	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Retirement savings plan
Employer matching contribution, percent of match		25.00%
Vesting period		3 years
Expense incurred		$ 10.0	$ 9.3	$ 8.7
Maximum
Retirement savings plan
Percent of employee's gross pay that is matched by the employer		6.00%
Concentra
Retirement savings plan
Expense incurred	$ 8.8
Employees who are not classified as HCE's | Maximum
Retirement savings plan
Maximum annual contribution per employee (as a percent)		30.00%
HCE | Maximum
Retirement savings plan
Maximum annual contribution per employee (as a percent)		7.00%

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Segment Information - Selected Financial Data (Details) $ in Thousands	3 Months Ended								7 Months Ended	12 Months Ended
	Dec. 31, 2015 USD ($)	Sep. 30, 2015 USD ($)	Jun. 30, 2015 USD ($)	Mar. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Sep. 30, 2014 USD ($)	Jun. 30, 2014 USD ($)	Mar. 31, 2014 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2015 USD ($) segment item	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)
Segment information
Number of operating segments | segment										3
Summary of selected financial data
Net revenue	$ 1,039,205	$ 1,021,123	$ 887,065	$ 795,343	$ 771,608	$ 758,069	$ 772,762	$ 762,578		$ 3,742,736	$ 3,065,017	$ 2,975,648
Adjusted EBITDA										399,165	363,872	372,861
Total assets	4,426,666				2,924,809				$ 4,426,666	4,426,666	2,924,809	2,817,622
Capital expenditures										182,642	95,246	73,660
Specialty Hospitals
Summary of selected financial data
Real estate assets held for sale	2,700				2,700				2,700	2,700	2,700	2,700
Operating Segments | Specialty Hospitals
Summary of selected financial data
Net revenue										2,346,781	2,244,899	2,198,121
Adjusted EBITDA										327,623	341,787	353,843
Total assets	2,425,113				2,279,665				2,425,113	2,425,113	2,279,665	2,205,921
Capital expenditures										$ 126,014	77,742	56,523
Operating Segments | Outpatient Rehabilitation
Segment information
Number of operating segments | item										2
Summary of selected financial data
Net revenue										$ 810,009	819,397	777,177
Adjusted EBITDA										98,220	97,584	90,313
Total assets	548,242				532,685				548,242	548,242	532,685	512,539
Capital expenditures										17,768	12,506	14,113
Operating Segments | Concentra
Summary of selected financial data
Net revenue									585,222
Adjusted EBITDA									48,301
Total assets	1,331,837								1,331,837	1,331,837
Capital expenditures									26,771
Other
Summary of selected financial data
Net revenue										724	721	350
Adjusted EBITDA										(74,979)	(75,499)	(71,295)
Total assets	$ 121,474				$ 112,459				$ 121,474	121,474	112,459	99,162
Capital expenditures										$ 12,089	$ 4,998	$ 3,024

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Segment Information - Reconciliation of Adjusted EBITDA to Income Before Taxes (Details) - USD ($) $ in Thousands	3 Months Ended								7 Months Ended	12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Segment information
Adjusted EBITDA										$ 399,165	$ 363,872	$ 372,861
Depreciation and amortization										(104,981)	(68,354)	(64,392)
Stock compensation expense										(14,679)	(11,042)	(7,033)
Income (loss) from operations	$ 62,300	$ 48,214	$ 85,011	$ 79,265	$ 57,822	$ 66,017	$ 82,193	$ 78,444		274,790	284,476	301,436
Loss on early retirement of debt											(2,277)	(18,747)
Gain on sale of equity investment										29,647
Equity in earnings of unconsolidated subsidiaries										16,811	7,044	2,476
Interest expense										(112,816)	(85,446)	(87,364)
Income before income taxes										208,432	203,797	197,801
Select
Segment information
Depreciation and amortization										(104,981)	(68,354)	(64,392)
Income (loss) from operations	$ 62,300	$ 48,214	$ 85,011	$ 79,265	$ 57,822	$ 66,017	$ 82,193	$ 78,444		274,790	284,476	301,436
Loss on early retirement of debt											(2,277)	(17,788)
Gain on sale of equity investment										29,647
Equity in earnings of unconsolidated subsidiaries										16,811	7,044	2,476
Interest expense										(112,816)	(85,446)	(84,954)
Income before income taxes										208,432	203,797	201,170
Operating Segments | Specialty Hospitals
Segment information
Adjusted EBITDA										327,623	341,787	353,843
Depreciation and amortization										(53,992)	(51,786)	(48,621)
Income (loss) from operations										273,631	290,001	305,222
Operating Segments | Outpatient Rehabilitation
Segment information
Adjusted EBITDA										98,220	97,584	90,313
Depreciation and amortization										(13,053)	(12,845)	(12,024)
Income (loss) from operations										85,167	84,739	78,289
Operating Segments | Concentra
Segment information
Adjusted EBITDA									$ 48,301
Depreciation and amortization									(33,644)
Stock compensation expense									(1,016)
Concentra acquisition costs									(4,715)
Income (loss) from operations									$ 8,926
Other
Segment information
Adjusted EBITDA										(74,979)	(75,499)	(71,295)
Depreciation and amortization										(4,292)	(3,723)	(3,747)
Stock compensation expense										(13,663)	(11,042)	(7,033)
Income (loss) from operations										$ (92,934)	$ (90,264)	$ (82,075)

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Income per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income per Share
Contractual dividends									$ 0	$ 0	$ 0
Numerator:
Net income attributable to Select Medical Holdings Corporation	$ 29,327	$ 29,406	$ 36,940	$ 35,063	$ 25,712	$ 26,530	$ 35,341	$ 33,044	130,736	120,627	114,390
Less: Earnings allocated to unvested restricted stockholders									3,830	3,337	2,450
Net income available to common stockholders									$ 126,906	$ 117,290	$ 111,940
Denominator:
Basic									127,478	129,026	136,879
Effect of dilutive securities: Stock options (in shares)									274	439	168
Weighted average shares - diluted									127,752	129,465	137,047
Income per common share
Basic income per common share (in dollars per share)	$ 0.22	$ 0.22	$ 0.28	$ 0.27	$ 0.20	$ 0.20	$ 0.27	$ 0.24	$ 1.00	$ 0.91	$ 0.82
Diluted income per common share (in dollars per share)	$ 0.22	$ 0.22	$ 0.28	$ 0.27	$ 0.20	$ 0.20	$ 0.27	$ 0.24	$ 0.99	$ 0.91	$ 0.82
Anti-dilutive securities excluded from computation of earnings per share
Stock options (in shares)										6	1,474

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Fair Value (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Fair Value
Carrying value	$ 2,190,314	$ 1,542,102
Select
Fair Value
Carrying value	2,190,314	$ 1,542,102
Concentra Inc
Fair Value
Carrying value	$ 649,923
6.375% senior notes
Fair Value
Interest rate of debt (as a percent)	6.375%	6.375%	6.375%
6.375% senior notes | Select
Fair Value
Interest rate of debt (as a percent)	6.375%
Carrying value	$ 711,200	$ 711,500
Fair value	623,900	722,400
Credit facility | Select
Fair Value
Carrying value	1,045,500	836,000
Fair value	1,023,600	$ 816,600
Credit facility | Concentra Inc
Fair Value
Carrying value	649,900
Fair value	$ 645,400

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Related Party Transactions (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2015 USD ($) item	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)
Related party transactions
Number of directors who are affiliated with other entities | item	2
Net operating revenues from contracted services and management fees to related parties	$ 146,033	$ 129,267	$ 110,136
Future rental commitments under outstanding agreements
2016	205,030
2017	176,124
2018	144,561
2019	115,487
2020	91,560
Thereafter	409,723
Total	1,142,485
Affiliated companies
Related party transactions
Payments for office rent, leasehold improvements and miscellaneous expenses	4,700	4,400	4,200
Future rental commitments under outstanding agreements
2016	4,174
2017	4,221
2018	4,318
2019	4,421
2020	4,526
Thereafter	9,385
Total	31,045
BIR JV, LLP
Related party transactions
Net operating revenues from contracted services and management fees to related parties	112,273	101,385	96,465
Rehabilitation Institute of Denton, LLC
Related party transactions
Net operating revenues from contracted services and management fees to related parties	9,560	8,337	7,163
OHRH, LLC
Related party transactions
Net operating revenues from contracted services and management fees to related parties	10,010	8,280	2,069
Global Rehab - Scottsdale, LLC
Related party transactions
Net operating revenues from contracted services and management fees to related parties	12,155	10,747	4,129
Other
Related party transactions
Net operating revenues from contracted services and management fees to related parties	$ 2,035	$ 518	$ 310

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Commitment and Contingencies - Leases and Construction Commitments (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Minimum future lease obligations on long-term non-cancelable operating leases
2016	$ 205,030
2017	176,124
2018	144,561
2019	115,487
2020	91,560
Thereafter	409,723
Total	1,142,485
Total rent expense for operating leases	212,900	$ 169,100	$ 164,600
Property rent expense to unrelated parties	163,400	$ 124,400	$ 119,500
Construction Commitments
Construction Commitments
Commitments under construction contracts	15,700
Select
Minimum future lease obligations on long-term non-cancelable operating leases
2016	145,185
2017	122,606
2018	99,873
2019	79,002
2020	61,462
Thereafter	348,222
Total	856,350
Construction Commitments
Commitments under construction contracts	2,423,884
Concentra Inc
Construction Commitments
Commitments under construction contracts	655,177
Concentra
Minimum future lease obligations on long-term non-cancelable operating leases
2016	59,845
2017	53,518
2018	44,688
2019	36,485
2020	30,098
Thereafter	61,501
Total	286,135
Total rent expense for operating leases	34,900
Property rent expense to unrelated parties	$ 32,900

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Commitment and Contingencies - Other Commitments (Details) - Naming, promotional and sponsorship agreement - Select $ in Millions	Dec. 31, 2015 USD ($)
Commitments and Contingencies
Amount expected to be paid in next year	$ 3.1
Increase in successive annual payment (as a percent)	2.30%

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Commitments and Contingencies - Litigation (Details) $ in Millions		12 Months Ended
	Jan. 08, 2013 item	Dec. 31, 2015 USD ($)
Professional liability claims
Commitments and Contingencies
Self insurance retention per occurrence		$ 2.0
General liability claims
Commitments and Contingencies
Self insurance retention per occurrence		$ 2.0
Amended complaint | SSH-Evansville
Commitments and Contingencies
Number of case managers identified as plaintiff | item	2

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Supplemental Disclosures of Cash Flow Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Supplemental Disclosures of Cash Flow Information
Notes issued with acquisitions	$ 12	$ 327	$ 3,283
Liabilities assumed with acquisitions	298	122	885
Contingent consideration related to acquisitions			100
Liability for property and equipment	$ 36,744	$ 14,230
Notes issued to acquire non-consolidating interest			$ 3,399

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Subsequent Events (Details) - Select - Subsequent Event $ in Millions	Jan. 22, 2016 USD ($)
Physiotherapy Associates Holdings, Inc.
Subsequent Event
Reverse termination fee	$ 24.0
$400.0 million senior secured incremental term facility
Subsequent Event
Maximum borrowing capacity	400.0
Physiotherapy Associates Holdings, Inc.
Subsequent Event
Purchase consideration in cash	$ 400.0

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Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes (Details) - 6.375% senior notes	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Financial information for subsidiary guarantors and non-guarantor subsidiaries under select's 6.375% senior notes
Interest rate of debt (as a percent)	6.375%	6.375%	6.375%
Select
Financial information for subsidiary guarantors and non-guarantor subsidiaries under select's 6.375% senior notes
Interest rate of debt (as a percent)	6.375%

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Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes - Consolidating Balance Sheet (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Current Assets:
Cash and cash equivalents	$ 14,435	$ 3,354	$ 4,319	$ 40,144
Accounts receivable, net	603,558	444,269
Current deferred tax asset	28,688	15,991
Prepaid income taxes	16,694	17,888
Other current assets	85,779	46,142
Total Current Assets	749,154	527,644
Property and equipment, net	864,124	542,310
Goodwill	2,314,624	1,642,083	1,642,633
Other identifiable intangibles	318,675	72,519
Other assets	180,089	140,253
Total Assets	4,426,666	2,924,809	2,817,622
Current Liabilities:
Bank overdrafts	28,615	21,746
Current portion of long-term debt and notes payable	233,570	10,874
Accounts payable	137,409	108,532
Accrued payroll	120,989	97,090
Accrued vacation	73,977	63,132
Accrued interest	9,401	10,674
Accrued other	133,728	82,376
Total Current Liabilities	737,689	394,424
Long-term debt, net of current portion	2,190,314	1,542,102
Non-current deferred tax liability	218,705	109,203
Other non-current liabilities	133,220	92,855
Total Liabilities	3,279,928	2,138,584
Redeemable non-controlling interests	238,221	10,985	11,584
Stockholder's Equity:
Common stock of Select, $0.01 par value, 100 shares issued and outstanding	131	131
Capital in excess of par	424,506	413,706
Retained earnings (accumulated deficit)	434,616	325,678
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity	859,253	739,515
Non-controlling interests	49,264	35,725
Total Equity	908,517	775,240	818,642	745,478
Total Liabilities and Equity	4,426,666	2,924,809
Select
Current Assets:
Cash and cash equivalents	14,435	3,354	4,319	40,144
Accounts receivable, net	603,558	444,269
Current deferred tax asset	28,688	15,991
Prepaid income taxes	16,694	17,888
Other current assets	85,779	46,142
Total Current Assets	749,154	527,644
Property and equipment, net	864,124	542,310
Goodwill	2,314,624	1,642,083
Other identifiable intangibles	318,675	72,519
Other assets	180,089	140,253
Total Assets	4,426,666	2,924,809
Current Liabilities:
Bank overdrafts	28,615	21,746
Current portion of long-term debt and notes payable	233,570	10,874
Accounts payable	137,409	108,532
Accrued payroll	120,989	97,090
Accrued vacation	73,977	63,132
Accrued interest	9,401	10,674
Accrued other	133,728	82,376
Total Current Liabilities	737,689	394,424
Long-term debt, net of current portion	2,190,314	1,542,102
Non-current deferred tax liability	218,705	109,203
Other non-current liabilities	133,220	92,855
Total Liabilities	3,279,928	2,138,584
Redeemable non-controlling interests	238,221	10,985
Stockholder's Equity:
Common stock of Select, $0.01 par value, 100 shares issued and outstanding	0	0
Capital in excess of par	904,375	885,407
Retained earnings (accumulated deficit)	(45,122)	(145,892)
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity	859,253	739,515
Non-controlling interests	49,264	35,725
Total Equity	908,517	775,240	818,642	909,747
Total Liabilities and Equity	4,426,666	2,924,809
Select | Reportable legal entities | Select Medical Corporation (Parent Company Only)
Current Assets:
Cash and cash equivalents	4,070	70	71	35,070
Current deferred tax asset	11,556	10,186
Prepaid income taxes	7,979	17,888
Other current assets	10,521	7,860
Total Current Assets	34,126	36,004
Property and equipment, net	38,872	17,521
Investment in affiliates	4,107,930	3,741,085
Non-current deferred tax asset	12,297	11,230
Other assets	21,623	32,463
Total Assets	4,214,848	3,838,303
Current Liabilities:
Bank overdrafts	28,615	21,746
Current portion of long-term debt and notes payable	227,180	8,496
Accounts payable	10,445	9,885
Intercompany payables	1,970,477	1,835,217
Accrued payroll	22,970	17,410
Accrued vacation	6,406	5,070
Accrued interest	6,315	10,596
Accrued other	38,883	39,801
Total Current Liabilities	2,311,291	1,948,221
Long-term debt, net of current portion	997,114	1,098,151
Other non-current liabilities	47,190	52,416
Total Liabilities	3,355,595	3,098,788
Stockholder's Equity:
Common stock of Select, $0.01 par value, 100 shares issued and outstanding	0	0
Capital in excess of par	904,375	885,407
Retained earnings (accumulated deficit)	(45,122)	(145,892)
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity	859,253	739,515
Total Equity	859,253	739,515
Total Liabilities and Equity	4,214,848	3,838,303
Select | Reportable legal entities | Subsidiary Guarantors
Current Assets:
Cash and cash equivalents	3,706	2,454	3,098	3,734
Accounts receivable, net	419,382	376,780
Current deferred tax asset	6,708	2,458
Intercompany receivables	1,970,477	1,728,708
Other current assets	34,859	32,919
Total Current Assets	2,435,132	2,143,319
Property and equipment, net	548,809	468,138
Investment in affiliates	75,027	67,575
Goodwill	1,663,974	1,642,083
Other identifiable intangibles	72,776	72,519
Other assets	108,524	106,843
Total Assets	4,904,242	4,500,477
Current Liabilities:
Current portion of long-term debt and notes payable	197	1,844
Accounts payable	101,156	84,304
Intercompany payables	137,512
Accrued payroll	66,892	76,670
Accrued vacation	50,194	49,315
Accrued interest	3	76
Accrued other	42,939	36,874
Total Current Liabilities	398,893	249,083
Long-term debt, net of current portion	452,417	364,794
Non-current deferred tax liability	113,977	112,013
Other non-current liabilities	41,904	35,576
Total Liabilities	1,007,191	761,466
Stockholder's Equity:
Retained earnings (accumulated deficit)	1,187,022	1,048,455
Subsidiary investment	2,710,029	2,690,556
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity	3,897,051	3,739,011
Total Equity	3,897,051	3,739,011
Total Liabilities and Equity	4,904,242	4,500,477
Select | Reportable legal entities | Non-Guarantor Subsidiaries
Current Assets:
Cash and cash equivalents	625	830	$ 1,150	$ 1,340
Accounts receivable, net	68,504	67,489
Current deferred tax asset	4,786	3,347
Intercompany receivables	137,512	106,509
Other current assets	5,759	5,363
Total Current Assets	217,186	183,538
Property and equipment, net	61,137	56,651
Other assets	659	947
Total Assets	278,982	241,136
Current Liabilities:
Current portion of long-term debt and notes payable	939	534
Accounts payable	16,997	14,343
Accrued payroll	3,932	3,010
Accrued vacation	9,423	8,747
Accrued interest		2
Accrued other	9,866	5,701
Total Current Liabilities	41,157	32,337
Long-term debt, net of current portion	90,860	79,157
Non-current deferred tax liability	9,656	8,420
Other non-current liabilities	4,798	4,863
Total Liabilities	146,471	124,777
Redeemable non-controlling interests	12,094	10,985
Stockholder's Equity:
Retained earnings (accumulated deficit)	(1,006)	8,366
Subsidiary investment	75,097	61,283
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity	74,091	69,649
Non-controlling interests	46,326	35,725
Total Equity	120,417	105,374
Total Liabilities and Equity	278,982	241,136
Select | Reportable legal entities | Non-Guarantor Concentra
Current Assets:
Cash and cash equivalents	6,034
Accounts receivable, net	115,672
Current deferred tax asset	5,638
Prepaid income taxes	8,715
Other current assets	34,640
Total Current Assets	170,699
Property and equipment, net	215,306
Goodwill	650,650
Other identifiable intangibles	245,899
Other assets	49,283
Total Assets	1,331,837
Current Liabilities:
Current portion of long-term debt and notes payable	5,254
Accounts payable	8,811
Accrued payroll	27,195
Accrued vacation	7,954
Accrued interest	3,083
Accrued other	42,040
Total Current Liabilities	94,337
Long-term debt, net of current portion	649,923
Non-current deferred tax liability	107,369
Other non-current liabilities	39,328
Total Liabilities	890,957
Redeemable non-controlling interests	226,127
Stockholder's Equity:
Retained earnings (accumulated deficit)	(6,120)
Subsidiary investment	217,935
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity	211,815
Non-controlling interests	2,938
Total Equity	214,753
Total Liabilities and Equity	1,331,837
Select | Eliminations
Current Assets:
Intercompany receivables	(2,107,989)	(1,835,217)
Total Current Assets	(2,107,989)	(1,835,217)
Investment in affiliates	(4,182,957)	(3,808,660)
Non-current deferred tax asset	(12,297)	(11,230)
Total Assets	(6,303,243)	(5,655,107)
Current Liabilities:
Intercompany payables	(2,107,989)	(1,835,217)
Total Current Liabilities	(2,107,989)	(1,835,217)
Non-current deferred tax liability	(12,297)	(11,230)
Total Liabilities	(2,120,286)	(1,846,447)
Stockholder's Equity:
Retained earnings (accumulated deficit)	(1,179,896)	(1,056,821)
Subsidiary investment	(3,003,061)	(2,751,839)
Total Select Medical Holdings Corporation and Select Medical Corporation Stockholders' Equity	(4,182,957)	(3,808,660)
Total Equity	(4,182,957)	(3,808,660)
Total Liabilities and Equity	$ (6,303,243)	$ (5,655,107)

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Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes - Consolidating Statement of Operations (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Condensed Consolidating Statement of Operations
Net operating revenues	$ 1,039,205	$ 1,021,123	$ 887,065	$ 795,343	$ 771,608	$ 758,069	$ 772,762	$ 762,578	$ 3,742,736	$ 3,065,017	$ 2,975,648
Costs and expenses:
Cost of services									3,211,541	2,582,340	2,495,476
General and administrative									92,052	85,247	76,921
Bad debt expense									59,372	44,600	37,423
Depreciation and amortization									104,981	68,354	64,392
Total costs and expenses									3,467,946	2,780,541	2,674,212
Income (loss) from operations	62,300	48,214	85,011	79,265	57,822	66,017	82,193	78,444	274,790	284,476	301,436
Other income and expense:
Gain on sale of equity investment									29,647
Equity in earnings of unconsolidated subsidiaries									16,811	7,044	2,476
Loss on early retirement of debt										(2,277)	(18,747)
Interest expense									(112,816)	(85,446)	(87,364)
Income before income taxes									208,432	203,797	197,801
Income tax expense (benefit)									72,436	75,622	74,792
Net income									135,996	128,175	123,009
Less: Net income attributable to non-controlling interests									5,260	7,548	8,619
Net income attributable to Select Medical Holdings Corporation and Select Medical Corporation	29,327	29,406	36,940	35,063	25,712	26,530	35,341	33,044	130,736	120,627	114,390
Select
Condensed Consolidating Statement of Operations
Net operating revenues	1,039,205	1,021,123	887,065	795,343	771,608	758,069	772,762	762,578	3,742,736	3,065,017	2,975,648
Costs and expenses:
Cost of services									3,211,541	2,582,340	2,495,476
General and administrative									92,052	85,247	76,921
Bad debt expense									59,372	44,600	37,423
Depreciation and amortization									104,981	68,354	64,392
Total costs and expenses									3,467,946	2,780,541	2,674,212
Income (loss) from operations	62,300	48,214	85,011	79,265	57,822	66,017	82,193	78,444	274,790	284,476	301,436
Other income and expense:
Gain on sale of equity investment									29,647
Equity in earnings of unconsolidated subsidiaries									16,811	7,044	2,476
Loss on early retirement of debt										(2,277)	(17,788)
Interest expense									(112,816)	(85,446)	(84,954)
Income before income taxes									208,432	203,797	201,170
Income tax expense (benefit)									72,436	75,622	75,971
Net income									135,996	128,175	125,199
Less: Net income attributable to non-controlling interests									5,260	7,548	8,619
Net income attributable to Select Medical Holdings Corporation and Select Medical Corporation	$ 29,327	$ 29,406	$ 36,940	$ 35,063	$ 25,712	$ 26,530	$ 35,341	$ 33,044	130,736	120,627	116,580
Select | Reportable legal entities | Select Medical Corporation (Parent Company Only)
Condensed Consolidating Statement of Operations
Net operating revenues									724	721	350
Costs and expenses:
Cost of services									2,029	2,015	1,757
General and administrative									88,227	86,311	76,709
Depreciation and amortization									4,292	3,723	3,746
Total costs and expenses									94,548	92,049	82,212
Income (loss) from operations									(93,824)	(91,328)	(81,862)
Other income and expense:
Intercompany interest and royalty fees									(1,417)	(1,142)	(1,326)
Intercompany management fees									143,939	142,273	144,447
Loss on early retirement of debt										(2,277)	(17,788)
Interest expense									(58,350)	(57,651)	(58,100)
Income before income taxes									(9,652)	(10,125)	(14,629)
Income tax expense (benefit)									(7,869)	(4,333)	(1,238)
Equity in earnings of subsidiaries									132,520	126,419	129,971
Net income									130,737	120,627	116,580
Net income attributable to Select Medical Holdings Corporation and Select Medical Corporation									130,737	120,627	116,580
Select | Reportable legal entities | Subsidiary Guarantors
Condensed Consolidating Statement of Operations
Net operating revenues									2,673,987	2,634,480	2,576,906
Costs and expenses:
Cost of services									2,266,647	2,209,724	2,155,370
General and administrative									(890)	(1,064)	212
Bad debt expense									40,541	38,052	31,173
Depreciation and amortization									56,447	54,876	51,825
Total costs and expenses									2,362,745	2,301,588	2,238,580
Income (loss) from operations									311,242	332,892	338,326
Other income and expense:
Intercompany interest and royalty fees									1,387	1,131	836
Intercompany management fees									(119,388)	(120,528)	(125,357)
Gain on sale of equity investment									29,647
Equity in earnings of unconsolidated subsidiaries									16,719	6,958	2,384
Interest expense									(24,250)	(23,367)	(22,916)
Income before income taxes									215,357	197,086	193,273
Income tax expense (benefit)									85,907	78,748	76,837
Equity in earnings of subsidiaries									9,117	8,995	14,561
Net income									138,567	127,333	130,997
Less: Net income attributable to non-controlling interests										623	995
Net income attributable to Select Medical Holdings Corporation and Select Medical Corporation									138,567	126,710	130,002
Select | Reportable legal entities | Non-Guarantor Subsidiaries
Condensed Consolidating Statement of Operations
Net operating revenues									482,803	429,816	398,392
Costs and expenses:
Cost of services									414,518	370,601	338,349
Bad debt expense									9,240	6,548	6,250
Depreciation and amortization									10,598	9,755	8,821
Total costs and expenses									434,356	386,904	353,420
Income (loss) from operations									48,447	42,912	44,972
Other income and expense:
Intercompany interest and royalty fees									30	11	490
Intercompany management fees									(24,551)	(21,745)	(19,090)
Equity in earnings of unconsolidated subsidiaries									92	86	92
Interest expense									(6,154)	(4,428)	(3,938)
Income before income taxes									17,864	16,836	22,526
Income tax expense (benefit)									(470)	1,207	372
Net income									18,334	15,629	22,154
Less: Net income attributable to non-controlling interests									9,144	6,925	7,624
Net income attributable to Select Medical Holdings Corporation and Select Medical Corporation									9,190	8,704	14,530
Select | Reportable legal entities | Non-Guarantor Concentra
Condensed Consolidating Statement of Operations
Net operating revenues									585,222
Costs and expenses:
Cost of services									528,347
General and administrative									4,715
Bad debt expense									9,591
Depreciation and amortization									33,644
Total costs and expenses									576,297
Income (loss) from operations									8,925
Other income and expense:
Interest expense									(24,062)
Income before income taxes									(15,137)
Income tax expense (benefit)									(5,132)
Net income									(10,005)
Less: Net income attributable to non-controlling interests									(3,884)
Net income attributable to Select Medical Holdings Corporation and Select Medical Corporation									(6,121)
Select | Eliminations
Other income and expense:
Equity in earnings of subsidiaries									(141,637)	(135,414)	(144,532)
Net income									(141,637)	(135,414)	(144,532)
Net income attributable to Select Medical Holdings Corporation and Select Medical Corporation									$ (141,637)	$ (135,414)	$ (144,532)

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Financial Information for Subsidiary Guarantors and Non-Guarantor Subsidiaries under Select's 6.375% Senior Notes - Consolidating Statement of Cash Flows (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Operating activities
Net income	$ 135,996	$ 128,175	$ 123,009
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Distributions from unconsolidated subsidiaries	13,969	11,954
Depreciation and amortization	104,981	68,354	64,392
Provision for bad debts	59,372	44,600	37,423
Equity in earnings of unconsolidated subsidiaries	(16,811)	(7,044)	(2,476)
Loss on early retirement of debt		2,277	18,747
Loss (gain) on sale of assets and businesses	(1,098)	(1,048)	(581)
Gain on sale of equity investment	29,647
Stock compensation expense	14,985	11,186	7,033
Amortization of debt discount, premium and issuance costs	9,543	7,553	8,433
Deferred income taxes	(2,058)	14,311	7,032
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Accounts receivable	(92,572)	(97,802)	(67,145)
Other current assets	(2,503)	(1,729)	(8,167)
Other assets	4,713	(103)	(3,484)
Accounts payable	2,345	5,997	(1,283)
Accrued expenses	7,200	(16,039)	9,590
Net cash provided by operating activities	208,415	170,642	192,523
Investing activities
Purchases of property and equipment	(182,642)	(95,246)	(73,660)
Proceeds from sale of assets	1,767		2,912
Investment in businesses	(2,347)	(4,634)	(34,893)
Proceeds from sale of equity method investment	33,096
Acquisition of businesses, net of cash acquired	(1,061,628)	(1,211)	(1,665)
Net cash used in investing activities	(1,211,754)	(101,091)	(107,306)
Financing activities
Borrowings on revolving facilities	1,135,000	910,000	690,000
Payments on revolving facilities	(895,000)	(870,000)	(800,000)
Proceeds from term loans, net of discount	646,875		298,500
Payments on term loans	(29,134)	(33,994)	(596,720)
Issuance of 6.375% senior notes, includes premium		111,650	600,000
Repurchase of 7 5/8% senior subordinated notes, net of premiums			(70,000)
Borrowings of other debt	13,374	9,076	15,310
Principle payments on other debt	(18,136)	(14,673)	(10,834)
Debt issuance costs	(23,300)	(4,434)	(18,914)
Proceeds from (repayment of) bank overdrafts	6,869	9,240	(5,330)
Purchase of non-controlling interests	(1,095)	(9,961)
Tax benefit from stock based awards	1,846	3,119
Proceeds from issuance of non-controlling interests	217,065	185
Distributions to non-controlling interests	(12,637)	(3,979)	(3,537)
Net cash provided by (used in) financing activities	1,014,420	(70,516)	(121,042)
Net increase (decrease) in cash and cash equivalents	11,081	(965)	(35,825)
Cash and cash equivalents at beginning of period	3,354	4,319	40,144
Cash and cash equivalents at end of period	14,435	3,354	4,319
Select
Operating activities
Net income	135,996	128,175	125,199
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Distributions from unconsolidated subsidiaries	13,969	11,954
Depreciation and amortization	104,981	68,354	64,392
Provision for bad debts	59,372	44,600	37,423
Equity in earnings of unconsolidated subsidiaries	(16,811)	(7,044)	(2,476)
Loss on early retirement of debt		2,277	17,788
Loss (gain) on sale of assets and businesses	(1,098)	(1,048)	(581)
Gain on sale of equity investment	29,647
Stock compensation expense	14,985	11,186	7,033
Amortization of debt discount, premium and issuance costs	9,543	7,553	8,344
Deferred income taxes	(2,058)	14,311	7,032
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Accounts receivable	(92,572)	(97,802)	(67,145)
Other current assets	(2,503)	(1,729)	(8,167)
Other assets	4,713	(103)	(3,484)
Accounts payable	2,345	5,997	(1,283)
Accrued expenses	7,200	(16,039)	14,027
Accrued expenses			15,068
Due to third-party payors			(1,041)
Net cash provided by operating activities	208,415	170,642	198,102
Investing activities
Purchases of property and equipment	(182,642)	(95,246)	(73,660)
Proceeds from sale of assets	1,767		2,912
Investment in businesses	(2,347)	(4,634)	(34,893)
Proceeds from sale of equity method investment	33,096
Acquisition of businesses, net of cash acquired	(1,061,628)	(1,211)	(1,665)
Net cash used in investing activities	(1,211,754)	(101,091)	(107,306)
Financing activities
Borrowings on revolving facilities	1,135,000	910,000	690,000
Payments on revolving facilities	(895,000)	(870,000)	(800,000)
Proceeds from term loans, net of discount	646,875		298,500
Payments on term loans	(29,134)	(33,994)	(596,720)
Issuance of 6.375% senior notes, includes premium		111,650	600,000
Repurchase of 7 5/8% senior subordinated notes, net of premiums			(70,000)
Borrowings of other debt	13,374	9,076	15,310
Principle payments on other debt	(18,136)	(14,673)	(10,834)
Debt issuance costs	(23,300)	(4,434)	(18,914)
Proceeds from (repayment of) bank overdrafts	6,869	9,240	(5,330)
Purchase of non-controlling interests	(1,095)	(9,961)
Equity investment by Holdings	1,649	7,355	1,525
Dividends paid to Holdings	(28,956)	(184,100)	(226,621)
Tax benefit from stock based awards	1,846	3,119
Proceeds from issuance of non-controlling interests	217,065	185
Distributions to non-controlling interests	(12,637)	(3,979)	(3,537)
Net cash provided by (used in) financing activities	1,014,420	(70,516)	(126,621)
Net increase (decrease) in cash and cash equivalents	11,081	(965)	(35,825)
Cash and cash equivalents at beginning of period	3,354	4,319	40,144
Cash and cash equivalents at end of period	14,435	3,354	4,319
Select | Reportable legal entities | Select Medical Corporation (Parent Company Only)
Operating activities
Net income	130,737	120,627	116,580
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	4,292	3,723	3,746
Loss on early retirement of debt		2,277	17,788
Stock compensation expense	13,969	11,186	7,033
Amortization of debt discount, premium and issuance costs	7,404	7,553	8,344
Deferred income taxes	(3,484)	14,311	7,032
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries	(132,520)	(126,419)	(129,971)
Other current assets	(2,661)	1,885	(4,145)
Other assets	10,840	2,811	(6,594)
Accounts payable	560	3,136	2,075
Accrued expenses	(1,508)	(6,353)
Accrued expenses			(4,929)
Net cash provided by operating activities	27,629	34,737	16,959
Investing activities
Purchases of property and equipment	(10,890)	(4,674)	(3,024)
Net cash used in investing activities	(10,890)	(4,674)	(3,024)
Financing activities
Borrowings on revolving facilities	1,115,000	910,000	690,000
Payments on revolving facilities	(880,000)	(870,000)	(800,000)
Proceeds from term loans, net of discount			298,500
Payments on term loans	(26,884)	(33,994)	(596,720)
Issuance of 6.375% senior notes, includes premium		111,650	600,000
Repurchase of 7 5/8% senior subordinated notes, net of premiums			(70,000)
Borrowings of other debt	8,684	8,151	8,923
Principle payments on other debt	(11,923)	(9,213)	(7,752)
Debt issuance costs		(4,434)	(18,914)
Proceeds from (repayment of) bank overdrafts	6,869	9,240	(5,330)
Equity investment by Holdings	1,649	7,355	1,525
Dividends paid to Holdings	(28,956)	(184,100)	(226,621)
Intercompany	(199,024)	22,162	77,455
Tax benefit from stock based awards	1,846	3,119
Net cash provided by (used in) financing activities	(12,739)	(30,064)	(48,934)
Net increase (decrease) in cash and cash equivalents	4,000	(1)	(34,999)
Cash and cash equivalents at beginning of period	70	71	35,070
Cash and cash equivalents at end of period	4,070	70	71
Select | Reportable legal entities | Subsidiary Guarantors
Operating activities
Net income	138,567	127,333	130,997
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Distributions from unconsolidated subsidiaries	13,870	11,889
Depreciation and amortization	56,447	54,876	51,825
Provision for bad debts	40,541	38,052	31,173
Equity in earnings of unconsolidated subsidiaries	(16,719)	(6,958)	(2,384)
Loss (gain) on sale of assets and businesses	(1,128)	(1,168)	(463)
Gain on sale of equity investment	29,647
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries	(9,117)	(8,995)	(14,561)
Accounts receivable	(83,142)	(80,394)	(60,460)
Other current assets	(2,236)	(4,004)	(5,849)
Other assets	(6,415)	(2,566)	3,026
Accounts payable	8,569	2,440	(3,746)
Accrued expenses	9,569	(9,407)
Accrued expenses			20,843
Due to third-party payors			3,067
Net cash provided by operating activities	119,159	121,098	153,468
Investing activities
Purchases of property and equipment	(134,002)	(79,600)	(60,532)
Proceeds from sale of assets	1,742		2,456
Investment in businesses	(2,347)	(4,634)	(34,893)
Proceeds from sale of equity method investment	33,096
Acquisition of businesses, net of cash acquired		(397)	(1,665)
Net cash used in investing activities	(101,511)	(84,631)	(94,634)
Financing activities
Borrowings of other debt			5,303
Principle payments on other debt	(2,736)	(2,058)	(873)
Purchase of non-controlling interests		(9,961)
Intercompany	(13,660)	(25,092)	(63,900)
Net cash provided by (used in) financing activities	(16,396)	(37,111)	(59,470)
Net increase (decrease) in cash and cash equivalents	1,252	(644)	(636)
Cash and cash equivalents at beginning of period	2,454	3,098	3,734
Cash and cash equivalents at end of period	3,706	2,454	3,098
Select | Reportable legal entities | Non-Guarantor Concentra
Operating activities
Net income	(10,005)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	33,644
Provision for bad debts	9,591
Loss (gain) on sale of assets and businesses	14
Stock compensation expense	1,016
Amortization of debt discount, premium and issuance costs	2,139
Deferred income taxes	1,426
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Accounts receivable	825
Other current assets	2,790
Accounts payable	(9,438)
Accrued expenses	(6,557)
Net cash provided by operating activities	25,445
Investing activities
Purchases of property and equipment	(26,771)
Proceeds from sale of assets	1
Acquisition of businesses, net of cash acquired	(1,052,796)
Net cash used in investing activities	(1,079,566)
Financing activities
Borrowings on revolving facilities	20,000
Payments on revolving facilities	(15,000)
Proceeds from term loans, net of discount	646,875
Payments on term loans	(2,250)
Borrowings of other debt	3,009
Principle payments on other debt	(1,964)
Debt issuance costs	(23,300)
Intercompany	217,935
Proceeds from issuance of non-controlling interests	217,065
Distributions to non-controlling interests	(2,215)
Net cash provided by (used in) financing activities	1,060,155
Net increase (decrease) in cash and cash equivalents	6,034
Cash and cash equivalents at end of period	6,034
Select | Reportable legal entities | Non-Guarantor Subsidiaries
Operating activities
Net income	18,334	15,629	22,154
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Distributions from unconsolidated subsidiaries	99	65
Depreciation and amortization	10,598	9,755	8,821
Provision for bad debts	9,240	6,548	6,250
Equity in earnings of unconsolidated subsidiaries	(92)	(86)	(92)
Loss (gain) on sale of assets and businesses	16	120	(118)
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Accounts receivable	(10,255)	(17,408)	(6,685)
Other current assets	(396)	390	1,827
Other assets	288	(348)	84
Accounts payable	2,654	421	388
Accrued expenses	5,696	(279)
Accrued expenses			(846)
Due to third-party payors			(4,108)
Net cash provided by operating activities	36,182	14,807	27,675
Investing activities
Purchases of property and equipment	(10,979)	(10,972)	(10,104)
Proceeds from sale of assets	24		456
Acquisition of businesses, net of cash acquired	(8,832)	(814)
Net cash used in investing activities	(19,787)	(11,786)	(9,648)
Financing activities
Borrowings of other debt	1,681	925	1,084
Principle payments on other debt	(1,513)	(3,402)	(2,209)
Purchase of non-controlling interests	(1,095)
Intercompany	(5,251)	2,930	(13,555)
Proceeds from issuance of non-controlling interests		185
Distributions to non-controlling interests	(10,422)	(3,979)	(3,537)
Net cash provided by (used in) financing activities	(16,600)	(3,341)	(18,217)
Net increase (decrease) in cash and cash equivalents	(205)	(320)	(190)
Cash and cash equivalents at beginning of period	830	1,150	1,340
Cash and cash equivalents at end of period	625	830	1,150
Select | Eliminations
Operating activities
Net income	(141,637)	(135,414)	(144,532)
Changes in operating assets and liabilities, net of effects from acquisition of businesses:
Equity in earnings of subsidiaries	$ 141,637	$ 135,414	$ 144,532

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Selected Quarterly Financial Data (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Selected quarterly financial data (unaudited)
Net operating revenues	$ 1,039,205	$ 1,021,123	$ 887,065	$ 795,343	$ 771,608	$ 758,069	$ 772,762	$ 762,578	$ 3,742,736	$ 3,065,017	$ 2,975,648
Income from operations	62,300	48,214	85,011	79,265	57,822	66,017	82,193	78,444	274,790	284,476	301,436
Net income attributable to Select Medical Holdings Corporation	$ 29,327	$ 29,406	$ 36,940	$ 35,063	$ 25,712	$ 26,530	$ 35,341	$ 33,044	$ 130,736	$ 120,627	$ 114,390
Income per common share:
Basic (in dollars per share)	$ 0.22	$ 0.22	$ 0.28	$ 0.27	$ 0.20	$ 0.20	$ 0.27	$ 0.24	$ 1.00	$ 0.91	$ 0.82
Diluted (in dollars per share)	$ 0.22	$ 0.22	$ 0.28	$ 0.27	$ 0.20	$ 0.20	$ 0.27	$ 0.24	$ 0.99	$ 0.91	$ 0.82
Select
Selected quarterly financial data (unaudited)
Net operating revenues	$ 1,039,205	$ 1,021,123	$ 887,065	$ 795,343	$ 771,608	$ 758,069	$ 772,762	$ 762,578	$ 3,742,736	$ 3,065,017	$ 2,975,648
Income from operations	62,300	48,214	85,011	79,265	57,822	66,017	82,193	78,444	274,790	284,476	301,436
Net income attributable to Select Medical Holdings Corporation	$ 29,327	$ 29,406	$ 36,940	$ 35,063	$ 25,712	$ 26,530	$ 35,341	$ 33,044	$ 130,736	$ 120,627	$ 116,580

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Schedule II - Valuation and Qualifying Accounts (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Allowance for Doubtful Accounts
Changes in valuation and qualifying accounts
Balance at Beginning of Year	$ 46,425	$ 40,815	$ 41,854
Charged to Cost and Expenses	59,372	44,600	37,423
Deductions	(44,664)	(38,990)	(38,462)
Balance at End of Year	61,133	46,425	40,815
Income Tax Valuation Allowance
Changes in valuation and qualifying accounts
Balance at Beginning of Year	9,641	10,547	13,341
Charged to Cost and Expenses	(2,055)	(906)	(2,794)
Balance at End of Year	$ 7,586	$ 9,641	$ 10,547