UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2015

AMSURG CORP.

(Exact Name of Registrant as Specified in its Charter)

Tennessee	001-36531	62-1493316
(State or Other Jurisdiction of Incorporation)	(Commission  File Number)	(I.R.S. Employer  Identification No.)
1A Burton Hills Boulevard
Nashville, Tennessee		37215
(Address of Principal Executive Offices)		(Zip Code)

(615) 665-1283

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]                   No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X]                   No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.   (Check one):

Large accelerated filer  [X]                                      Accelerated filer                  [  ]

Non-accelerated filer    [   ]                                      Smaller reporting company [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ]                    No [X]

As of November 5, 2015 there were outstanding 48,455,300 shares of the registrant’s Common Stock, no par value.

Table of Contents to Form 10-Q for the Nine Months EndedSeptember 30, 2015

Part I	Financial Information
	Item 1.	Financial Statements	1
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
	Item 4.	Controls and Procedures	43
Part II	Other Information
	Item 1.	Legal Proceedings	44
	Item 1A.	Risk Factors	44
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
	Item 3.	Defaults Upon Senior Securities	44
	Item 4.	Mine Safety Disclosures	44
	Item 5.	Other Information	44
	Item 6.	Exhibits	45
	Signature		46

i

Part I

Item 1.  Financial Statements

AmSurg Corp. Consolidated Balance Sheets (unaudited) (In thousands)
	September 30,		December 31,
	2015		2014
Assets
Current assets:
Cash and cash equivalents	$	187,422	$	208,079
Restricted cash and marketable securities	11,789		10,219
Accounts receivable, net of allowance of $144,893 and $113,357, respectively	276,237		233,053
Supplies inventory	20,887		19,974
Prepaid and other current assets	91,651		115,362
Total current assets	587,986		586,687
Property and equipment, net	190,399		180,448
Investments in unconsolidated affiliates	112,877		75,475
Goodwill	3,589,317		3,381,149
Intangible assets, net	1,282,567		1,273,879
Other assets	24,074		25,886
Total assets	$	5,787,220	$	5,523,524
Liabilities and Equity
Current liabilities:
Current portion of long-term debt	$	19,982	$	18,826
Accounts payable	30,750		29,585
Accrued salaries and benefits	186,923		140,044
Accrued interest	17,846		29,644
Other accrued liabilities	130,563		67,986
Total current liabilities	386,064		286,085
Long-term debt	2,230,296		2,232,186
Deferred income taxes	645,711		633,480
Other long-term liabilities	90,671		89,443
Commitments and contingencies
Noncontrolling interests – redeemable	185,261		184,099
Equity:
Preferred stock, no par value, 5,000 shares authorized, 1,725 shares issued and outstanding	166,632		166,632
Common stock, no par value, 120,000 and 70,000 shares authorized, respectively, 48,455 and 48,113 shares issued and outstanding, respectively	897,007		885,393
Retained earnings	718,104		627,522
Total AmSurg Corp. equity	1,781,743		1,679,547
Noncontrolling interests – non-redeemable	467,474		418,684
Total equity	2,249,217		2,098,231
Total liabilities and equity	$	5,787,220	$	5,523,524

See accompanying notes to the unaudited consolidated financial statements.

1

Item 1. Financial Statements - (continued) Table of Contents

AmSurg Corp. Consolidated Statements of Operations (unaudited) (In thousands, except earnings per share)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Revenues	$	712,719		$	555,543		$	2,058,649		$	1,093,331
Provision for uncollectibles	(62,492		)	(53,193		)	(196,027		)	(53,193		)
Net revenue	650,227			502,350			1,862,622			1,040,138
Operating expenses:
Salaries and benefits	327,532			240,337			950,107			406,539
Supply cost	45,638			41,886			134,012			120,564
Other operating expenses	98,852			81,262			294,424			191,243
Transaction costs	2,107			25,102			5,560			28,681
Depreciation and amortization	24,106			20,838			70,536			37,533
Total operating expenses	498,235			409,425			1,454,639			784,560
Net gain on deconsolidations	9,112			—			5,854			3,411
Equity in earnings of unconsolidated affiliates	4,935			2,158			11,575			3,461
Operating income	166,039			95,083			425,412			262,450
Interest expense, net	30,242			39,054			90,671			52,906
Debt extinguishment costs	—			16,887			—			16,887
Earnings from continuing operations before income taxes	135,797			39,142			334,741			192,657
Income tax expense	37,518			22			76,960			25,802
Net earnings from continuing operations	98,279			39,120			257,781			166,855
Net loss from discontinued operations	—			(1,697		)	—			(1,146		)
Net earnings	98,279			37,423			257,781			165,709
Less net earnings attributable to noncontrolling interests	55,618			47,257			160,407			139,387
Net earnings (loss) attributable to AmSurg Corp. shareholders	42,661			(9,834		)	97,374			26,322
Preferred stock dividends	(2,264		)	(2,239		)	(6,792		)	(2,239		)
Net earnings (loss) attributable to AmSurg Corp. common shareholders	$	40,397		$	(12,073	)	$	90,582		$	24,083
Amounts attributable to AmSurg Corp. common shareholders:
Earnings (loss) from continuing operations, net of income tax	$	40,397		$	(10,697	)	$	90,582		$	25,466
Loss from discontinued operations, net of income tax	—			(1,376		)	—			(1,383		)
Net earnings (loss) attributable to AmSurg Corp. common shareholders	$	40,397		$	(12,073	)	$	90,582		$	24,083
Basic earnings (loss) per share attributable to AmSurg Corp. common shareholders:
Net earnings (loss) from continuing operations	$	0.85		$	(0.23	)	$	1.90		$	0.70
Net loss from discontinued operations	—			(0.03		)	—			(0.04		)
Net earnings (loss)	$	0.85		$	(0.26	)	$	1.90		$	0.66
Diluted earnings (loss) per share attributable to AmSurg Corp. common shareholders:
Net earnings (loss) from continuing operations	$	0.83		$	(0.23	)	$	1.89		$	0.69
Net loss from discontinued operations	—			(0.03		)	—			(0.04		)
Net earnings (loss)	$	0.83		$	(0.26	)	$	1.89		$	0.65
Weighted average number of shares and share equivalents outstanding:
Basic	47,707			46,320			47,652			36,620
Diluted	51,275			46,320			48,050			37,026

See accompanying notes to the unaudited consolidated financial statements.

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Item 1. Financial Statements - (continued) Table of Contents

AmSurg Corp. Consolidated Statements of Changes in Equity (unaudited) (In thousands)
	AmSurg Corp. Shareholders																	Noncontrolling
												Noncontrolling						Interests –
												Interests –			Total			Redeemable
	Common Stock					Preferred Stock			Retained			Non-			Equity			(Temporary
	Shares		Amount			Shares	Amount		Earnings			Redeemable			(Permanent)			Equity)
Balance at December 31, 2014	48,113		$	885,393		1,725	$	166,632	$	627,522		$	418,684		$	2,098,231		$	184,099
Net earnings	—		—			—	—		97,374			49,895			147,269			110,512
Issuance of restricted stock	314		—			—	—		—			—			—			—
Cancellation of restricted stock	(7	)	—			—	—		—			—			—			—
Stock options exercised	102		2,356			—	—		—			—			2,356			—
Stock repurchased	(67	)	(3,684		)	—	—		—			—			(3,684		)	—
Share-based compensation	—		11,319			—	—		—			—			11,319			—
Tax benefit related to exercise of share-based awards	—		3,779			—	—		—			—			3,779			—
Dividends paid on preferred stock	—		—			—	—		(6,792		)	—			(6,792		)	—
Acquisitions and other transactions impacting noncontrolling interests	—		328			—	—		—			71,814			72,142			(645		)
Distributions to noncontrolling interests, net of capital contributions	—		—			—	—		—			(49,345		)	(49,345		)	(108,574		)
Disposals and other transactions impacting noncontrolling interests	—		(2,484		)	—	—		—			(23,574		)	(26,058		)	(131		)
Balance at September 30, 2015	48,455		$	897,007		1,725	$	166,632	$	718,104		$	467,474		$	2,249,217		$	185,261
Balance at January 1, 2014	32,353		$	185,873		—	$	—	$	578,324		$	361,359		$	1,125,556		$	177,697
Net earnings	—		—			—	—		26,322			40,672			66,994			98,715
Issuance of stock	15,490		693,401			1,725	166,647		—			—			860,048			—
Issuance of restricted stock	272		—			—	—		—			—			—			—
Cancellation of restricted stock	(12	)	—			—	—		—			—			—			—
Stock options exercised	89		2,150			—	—		—			—			2,150			—
Stock repurchased	(69	)	(2,890		)	—	—		—			—			(2,890		)	—
Share-based compensation	—		7,388			—	—		—			—			7,388			—
Tax benefit related to exercise of share-based awards	—		2,288			—	—		—			—			2,288			—
Dividends paid on preferred stock	—		—			—	—		(2,239		)	—			(2,239		)	—
Acquisitions and other transactions impacting noncontrolling interests	—		762			—	—		—			42,119			42,881			—
Distributions to noncontrolling interests, net of capital contributions	—		—			—	—		—			(40,735		)	(40,735		)	(98,677		)
Disposals and other transactions impacting noncontrolling interests	—		(3,350		)	—	—		—			(520		)	(3,870		)	(1,219		)
Balance at September 30, 2014	48,123		$	885,622		1,725	$	166,647	$	602,407		$	402,895		$	2,057,571		$	176,516

See accompanying notes to the unaudited consolidated financial statements.

3

Item 1. Financial Statements - (continued) Table of Contents

AmSurg Corp. Consolidated Statements of Cash Flows (unaudited) (In thousands)
	Nine Months Ended September 30,
	2015			2014
Cash flows from operating activities:
Net earnings	$	257,781		$	165,709
Adjustments to reconcile net earnings to net cash flows provided by operating activities:
Depreciation and amortization	70,536			37,533
Amortization of deferred loan costs	6,238			15,645
Provision for uncollectibles	212,546			69,715
Net loss on sale of long-lived assets	—			2,468
Net gain on deconsolidations	(5,854		)	(3,411		)
Share-based compensation	11,319			7,388
Excess tax benefit from share-based compensation	(3,779		)	(2,288		)
Deferred income taxes	7,309			31,388
Equity in earnings of unconsolidated affiliates	(11,575		)	(3,461		)
Debt extinguishment costs	—			4,536
Net change in fair value of contingent consideration	8,338			—
Increases (decreases) in cash and cash equivalents, net of acquisitions and dispositions:
Accounts receivable	(232,465		)	(65,758		)
Supplies inventory	(533		)	68
Prepaid and other current assets	36,479			(24,414		)
Accounts payable	2,316			(10,007		)
Accrued expenses and other liabilities	64,760			48,368
Other, net	3,786			2,572
Net cash flows provided by operating activities	427,202			276,051
Cash flows from investing activities:
Acquisitions and related expenses	(233,490		)	(2,138,648		)
Acquisition of property and equipment	(47,006		)	(23,109		)
Proceeds from sale of interests in surgery centers	—			4,969
Purchases of marketable securities	(1,743		)	(3,486		)
Maturities of marketable securities	4,233			—
Other	(3,974		)	2,082
Net cash flows used in investing activities	(281,980		)	(2,158,192		)
Cash flows from financing activities:
Proceeds from long-term borrowings	10,197			2,046,399
Repayment on long-term borrowings	(15,737		)	(403,043		)
Distributions to noncontrolling interests	(158,144		)	(139,443		)
Proceeds from preferred stock offering	—			172,500
Cash dividends for preferred shares	(6,792		)	(2,239		)
Proceeds from common stock offering	—			439,875
Proceeds from issuance of common stock upon exercise of stock options	2,356			2,150
Repurchase of common stock	(3,684		)	(2,890		)
Excess tax benefit from share-based compensation	3,779			2,288
Payments of equity issuance costs	—			(24,366		)
Financing cost incurred	(294		)	(65,673		)
Other	2,440			(176		)
Net cash flows provided by (used in) financing activities	(165,879		)	2,025,382
Net increase (decrease) in cash and cash equivalents	(20,657		)	143,241
Cash and cash equivalents, beginning of period	208,079			50,840
Cash and cash equivalents, end of period	$	187,422		$	194,081
Supplemental cash flow information:
Interest payments	$	96,418		$	20,440
Income tax paid, net of refunds	$	28,429		$	6,970

See accompanying notes to the unaudited consolidated financial statements.

4

Item 1. Financial Statements - (continued) Table of Contents

AmSurg Corp.

Notes to the Unaudited Consolidated Financial Statements

(1) Basis of Presentation    

These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial reporting and in accordance with Rule 10-01 of Regulation S-X. In the opinion of management, the unaudited interim consolidated financial statements contained in this report reflect all normal recurring adjustments, which are necessary for a fair presentation of the financial position and the results of operations for the interim periods presented. The results of operations for any interim period are not necessarily indicative of results for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in AmSurg Corp.'s (Company) 2014 Annual Report on Form 10-K.

Ambulatory Services

The Company, through its wholly-owned subsidiaries, owns interests, primarily 51%, in limited partnerships (LPs) and limited liability companies (LLCs) which own and operate ambulatory surgery centers (ASCs, surgery centers or centers). The Company does not have an ownership interest in a LP or LLC greater than 51% which it does not consolidate. The Company has ownership interests of less than 51% in 15 LPs and LLCs, 2 of which it consolidates as the Company has substantive participation rights and 13 of which it does not consolidate as the Company’s rights are limited to protective rights only. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and the consolidated LPs and LLCs. Consolidation of such LPs and LLCs is necessary as the Company’s wholly-owned subsidiaries have primarily 51% or more of the financial interest of the LPs and LLCs, are the general partner or majority member with all the duties, rights and responsibilities thereof, are responsible for the day-to-day management of the LPs and LLCs, and have control of the entities. The responsibilities of the Company’s noncontrolling partners (LPs and noncontrolling members) are to supervise the delivery of medical services, with their rights being restricted to those that protect their financial interests, such as approval of the acquisition of significant assets or the incurrence of debt which they are generally required to guarantee on a pro rata basis based upon their respective ownership interests. Intercompany profits, transactions and balances have been eliminated. All LPs and LLCs and noncontrolling partners are referred to herein as “partnerships” and “partners”, respectively.

Ownership interests in consolidated subsidiaries held by parties other than the Company are identified and generally presented in the consolidated financial statements within the equity section but separate from the Company’s equity. However, for instances in which certain redemption features that are not solely within the control of the Company are present, classification of noncontrolling interests outside of permanent equity is required. Consolidated net earnings (loss) attributable to the Company and to the noncontrolling interests are identified and presented on the consolidated statements of operations; changes in ownership interests are accounted for as equity transactions; and when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary and the gain or loss on the deconsolidation of the subsidiary are measured at fair value. Certain transactions with noncontrolling interests are also classified within financing activities in the statements of cash flows. 

Center profits and losses of consolidated entities are allocated to the Company’s partners in proportion to their ownership percentages and reflected in the aggregate as net earnings (loss) attributable to noncontrolling interests. The partners of the Company’s center partnerships typically are organized as general partnerships, LPs or LLCs that are not subject to federal income tax. Each partner shares in the pre-tax earnings of the center in which it is a partner. Accordingly, the earnings attributable to noncontrolling interests in each of the Company’s consolidated partnerships are generally determined on a pre-tax basis, and total net earnings attributable to noncontrolling interests are presented after net earnings. However, the Company considers the impact of the net earnings attributable to noncontrolling interests on earnings before income taxes in order to determine the amount of pre-tax earnings on which the Company must determine its income tax expense. In addition, distributions from the partnerships are made to both the Company’s wholly-owned subsidiaries and the partners on a pre-tax basis.

Physician Services

On July 16, 2014, the Company completed its acquisition of Sheridan Healthcare (Sheridan). Sheridan is a national provider of multi-specialty physician and administrative services to hospitals, ambulatory surgery centers and other healthcare facilities. Sheridan focuses on delivering comprehensive physician services, primarily in the areas of anesthesiology, children's services, radiology and emergency medicine to healthcare facilities. Through its contracts with healthcare facilities, Sheridan is authorized to bill and collect charges for fee for service medical services rendered by its healthcare professionals and employees in exchange for the provision of services to the patients of these facilities. Contract revenue is earned directly from hospital customers through a variety of payment arrangements that are established when payments from third-party payors are inadequate to support the costs of providing the services

5

Item 1. Financial Statements - (continued) Table of Contents

required under the contract. Sheridan also provides physician services and manages office-based practices in the areas of gynecology, obstetrics and perinatology. The consolidated financial statements include the accounts of Sheridan and its wholly-owned subsidiaries along with the accounts of affiliated professional corporations (PCs) with which Sheridan currently has management arrangements. Sheridan's agreements with these PCs provide that the term of the arrangements is permanent, subject only to termination by the Company, except in the case of gross negligence, fraud or bankruptcy of the Company. These arrangements are captive in nature as a majority of the outstanding voting equity instruments of the PCs are owned by nominee shareholders appointed at the sole discretion of the Company. The Company has a contractual right to transfer the ownership of the PCs at any time to any person it designates as the nominee shareholder. The Company has the right to receive income, both as ongoing fees and as proceeds from the sale of its interest in the PCs, in an amount that fluctuates based on the performance of the PCs and the change in the fair value of the Company’s interest in the PCs. The Company has exclusive responsibility for the provision of all non-medical services required for the day-to-day operation and management of the PCs and establishes the guidelines for the employment and compensation of the physicians and other employees of the PCs. In addition, the agreements provide that the Company has the right, but not the obligation, to purchase, or to designate a person(s) to purchase, the stock of the PCs for a nominal amount. Separately, in its sole discretion, the Company has the right to assign its interest in the management and purchase agreements. Based upon the provisions of these agreements, the Company has determined that the PCs are variable interest entities and that the Company is the primary beneficiary as defined in the accounting guidance for consolidation.

Restricted Cash and Marketable Securities

As of September 30, 2015 and December 31, 2014, the Company had $30.1 million and $30.3 million, respectively, of restricted cash and marketable securities in the accompanying consolidated balance sheets which is restricted for the purpose of satisfying the obligations of the Company's wholly-owned captive insurance company. The Company has reflected $18.3 million and $20.1 million as of September 30, 2015 and December 31, 2014, respectively, of its restricted cash and marketable securities as a component of other assets in the accompanying consolidated balance sheets. Restricted cash and marketable securities reflected as a component of total current assets in the accompanying consolidated balance sheets represent amounts available to satisfy the claims payments estimated to occur in the next 12 months. As of September 30, 2015 and December 31, 2014, the Company had $0.5 million and $3.0 million, respectively, included in restricted cash and marketable securities, consisting of certificates of deposit with maturities less than 180 days, which approximates fair value.

Reclassifications

Certain prior year amounts in the accompanying consolidated financial statements and these notes have been reclassified to reflect the impact of additional discontinued operations as further discussed in note 6.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In April 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-08 “Presentation of Financial Statements and Property, Plant and Equipment,” which raised the threshold for a disposal to qualify as a discontinued operation and requires certain new disclosures for individually material disposals that do not meet the new definition of a discontinued operation. The ASU’s intent is to reduce the number of disposals reported as discontinued operations by focusing on strategic shifts that have or will have a major effect on the Company’s operations and financial results rather than routine disposals that are not a change in the Company’s strategy. The guidance is effective for interim and annual periods beginning after December 15, 2014, with earlier adoption permitted.  From time to time, the Company will dispose of certain of its entities primarily due to management’s assessment of the Company’s strategy in the market and due to limited growth opportunities at those entities. Historically, these dispositions were classified as discontinued operations and recorded separately from continuing operations. The Company adopted this ASU effective January 1, 2015 and did not have any disposals during the nine months ended September 30, 2015. The Company does not believe this ASU will have a material impact on the Company’s consolidated financial position or cash flows.

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers,” which will eliminate the transaction and industry-specific revenue recognition guidance under current GAAP and replace it with a principle-based approach using the following steps: identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the

6

Item 1. Financial Statements - (continued) Table of Contents

entity satisfies a performance obligation. In August 2015, the FASB issued ASU 2015-14 "Revenue from Contracts with Customers (Topic 606), Deferral of the Effective Date" which granted a one-year deferral of this ASU. The guidance in ASU 2014-09 will now be effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods therein. Early adoption will be permitted for annual reporting periods beginning after December 15, 2016, including interim periods therein. The Company has yet to assess the impact, if any, this ASU will have on the Company's consolidated financial position, results of operations or cash flows.

In February 2015, the FASB issued ASU No. 2015-02, "Consolidations (Topic 810) - Amendments to the Consolidation Analysis". The new guidance makes amendments to the current consolidation guidance, including introducing a separate consolidation analysis specific to limited partnerships and other similar entities. Under this analysis, limited partnerships and other similar entities will be considered a variable-interest entity unless the limited partners hold substantive kick-out rights or participating rights. The standard is effective for annual periods beginning after December 15, 2015. The Company has not yet determined the impact, if any, this ASU will have on the Company's consolidated financial position, results of operations or cash flows.

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs". ASU 2015-03 amends current presentation guidance by requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. In August 2015, the FASB issued ASU 2015-15 “Interest - Imputation of Interest (Subtopic 835-50), Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to securities and exchange commission (SEC) Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update)” which incorporates into the Accounting Standards Codification an SEC staff announcement that the SEC staff will not object to an entity presenting the cost of securing a revolving line of credit as an asset, regardless of whether a balance is outstanding. The standards are effective for annual periods beginning after December 15, 2015, and interim periods within those fiscal years. Upon adoption, the Company will reclassify debt issuance costs which are currently presented as a component of intangible assets in the accompanying consolidated balance sheets to long-term debt, except those debt issuance costs associated with the Company's revolving credit facility. The Company expects the adoption of this standard will not have a significant impact on the Company's consolidated financial position, results of operations or cash flows.

In September 2015, the FASB issued ASU 2015-16 “Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments” which eliminates the requirement that an acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, an acquirer will recognize a measurement-period adjustment during the period in which it determines the amount of the adjustment, including the effect on earnings of any amounts it would have recorded in previous periods if the accounting had been completed at the acquisition date. The guidance is effective for fiscal years, including interim periods within those fiscal years, beginning after December 31, 2015 with early adoption permitted. The Company adopted this standard as of September 2015. The adoption of this ASU did not have a material effect on the Company's consolidated financial position, results of operations or cash flows as of September 30, 2015.

(2)  Revenue Recognition

Ambulatory Services

Ambulatory services revenues consist of billing for the use of the centers’ facilities directly to the patient or third-party payor and, at certain of the Company’s centers (primarily centers that perform gastrointestinal endoscopy procedures), billing for anesthesia services provided by medical professionals employed or contracted by the Company’s centers. Such revenues are recognized when the related surgical procedures are performed. Revenues exclude any amounts billed for physicians’ surgical services, which are billed separately by the physicians to the patient or third-party payor.

Revenues from ambulatory services are recognized on the date of service, net of estimated contractual adjustments from third-party medical service payors including Medicare and Medicaid. During the nine months ended September 30, 2015 and 2014, the Company derived approximately 26% and 25%, respectively, of its ambulatory services revenues from governmental healthcare programs, primarily Medicare and managed Medicare programs. 

Physician Services

Physician services revenues primarily consist of fee for service revenue and contract revenue and are derived principally from the provision of physician services to patients of the healthcare facilities the Company serves. Contract revenue represents income earned from the Company's hospital customers to subsidize contract costs when payments from third-party payors are inadequate to support such costs.

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The Company records revenue at the time services are provided, net of a contractual allowance and a provision for uncollectibles. Revenue less the contractual allowance represents the net revenue expected to be collected from third-party payors (including managed care, commercial and governmental payors such as Medicare and Medicaid) and patients insured by these payors. The Company also recognizes revenue for services provided during the period that have not been billed. Expected collections are estimated based on fees and negotiated payment rates in the case of third-party payors, the specific benefits provided for under each patient’s healthcare plan, mandated payment rates under the Medicare and Medicaid programs, and historical cash collections.

The Company's provision for uncollectibles includes its estimate of uncollectible balances due from uninsured patients, uncollectible co-pay and deductible balances due from insured patients and special charges, if any, for uncollectible balances due from managed care, commercial and governmental payors. The Company records net revenue from uninsured patients at its estimated realizable value, which includes a provision for uncollectible balances, based on historical cash collections (net of recoveries).

Net revenue for the physician services segment consists of the following major payors (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,					Period from July 16 - September 30, 2014 (1)
	2015
Medicare	$	44,196		13.0	%	$	125,593		13.1	%	$	29,163		12.9	%
Medicaid	18,456			5.4		48,318			5.0		13,217			5.9
Commercial and managed care	254,171			74.5		716,361			74.7		166,340			73.6
Self-pay	53,851			15.7		168,744			17.6		45,233			20.0
Net fee for service revenue	370,674			108.6		1,059,016			110.4		253,953			112.4
Contract and other revenue	33,062			9.7		95,749			10.0		25,171			11.1
Provision for uncollectibles	(62,492		)	(18.3	)	(196,027		)	(20.4	)	(53,193		)	(23.5	)
Net revenue for physician services	$	341,244		100.0	%	$	958,738		100.0	%	$	225,931		100.0	%

(1) On July 16, 2014, we completed the acquisition of Sheridan. As such, historical amounts for periods prior to that date are not included.

(3) Accounts Receivable

The Company manages accounts receivable by regularly reviewing its accounts and contracts and by providing appropriate allowances for contractual adjustments and uncollectible amounts. Some of the factors considered by management in determining the amount of such allowances are the historical trends of cash collections, contractual and bad debt write-offs, accounts receivable agings, established fee schedules, contracts with payors, changes in payor mix and procedure statistics. Actual collections of accounts receivable in subsequent periods may require changes in the estimated contractual allowance and provision for uncollectibles. The Company tests its analysis by comparing cash collections to net patient revenues and monitoring self-pay utilization. In addition, when actual collection percentages differ from expected results, on a contract by contract basis, supplemental detailed reviews of the outstanding accounts receivable balances may be performed by the Company’s billing operations to determine whether there are facts and circumstances existing that may cause a different conclusion as to the estimate of the collectability of that contract’s accounts receivable from the estimate resulting from using the historical collection experience. The Company also supplements its allowance for doubtful accounts policy for its physician services quarterly using a hindsight calculation that utilizes write-off data for all payor classes during the previous 12-month period to estimate the allowance for doubtful accounts at a point in time. Changes in these estimates are charged or credited to the consolidated statements of operations in the period of change. Material changes in estimates may result from unforeseen write-offs of patient or third party accounts receivable, unsuccessful disputes with managed care payors, adverse macro-economic conditions which limit patients’ ability to meet their financial obligations for the care provided by physicians, or broad changes to government regulations that adversely impact reimbursement rates for services provided by the Company. Significant changes in payor mix, business office operations, general economic conditions and health care coverage provided by federal or state governments or private insurers may have a significant impact on the Company’s estimates and significantly affect its results of operations and cash flows.

Due to the nature of the Company's operations, it is required to separate the presentation of its bad debt expense on the consolidated statement of operations. The Company records the portion of its bad debts associated with its physician services segment as a component of net revenue in the accompanying consolidated statement of operations, and the remaining portion, which is associated with its ambulatory services segment, is recorded as a component of other operating expenses in the accompanying consolidated statement of operations. The bifurcation is a result of the Company's ability to assess the ultimate collection of the patient service revenue associated with its ambulatory services segment before services are provided. The Company's ambulatory services segment is generally able to verify a patient's insurance coverage and ability to pay before services are provided as those services are pre-

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scheduled and non-emergent. Bad debt expense for ambulatory services is included in other operating expenses and was approximately $5.5 million and $5.7 million for the three months ended September 30, 2015 and 2014, respectively, and $16.5 million for each of the nine months ended September 30, 2015 and 2014. Bad debt expense related to physician services was $62.5 million and $196.0 million for the three and nine months ended September 30, 2015, respectively. Bad debt expense related to physician services was $53.2 million for the period from July 16, 2014 through September 30, 2014.

At September 30, 2015 and December 31, 2014 allowances for doubtful accounts were $144.9 million and $113.4 million, respectively. The increase in the allowance for doubtful accounts is primarily a result of operations of acquisitions completed during the nine months ended September 30, 2015. At September 30, 2015, approximately 77% of the Company’s allowance for doubtful accounts was related to fee for service patient receivables associated with our physician services segment. The principal exposure for uncollectible fee for service visits is from self-pay patients and, to a lesser extent, for co-payments and deductibles from patients with insurance. Concentration of credit risk is limited by the diversity and number of facilities, patients, payors, and by the geographic dispersion of the Company's operations.

(4)  Acquisitions

The Company accounts for its business combinations under the fundamental requirements of the acquisition method of accounting and under the premise that an acquirer be identified for each business combination. The acquirer is the entity that obtains control of one or more businesses in the business combination and the acquisition date is the date the acquirer achieves control. The assets acquired, liabilities assumed and any noncontrolling interests in the acquired business at the acquisition date are recognized at their fair values as of that date, and the direct costs incurred in connection with the business combination are recorded and expensed separately from the business combination. Acquisitions in which the Company is able to exert significant influence but does not have control are accounted for using the equity method.

Sheridan Acquisition

On July 16, 2014, the Company completed the acquisition of Sheridan in a cash and stock transaction. At closing, the Company paid approximately $2.1 billion in cash and issued 5,713,909 shares of its common stock to the former owners of Sheridan in exchange for all of the outstanding equity interests of Sheridan. The shares issued to Sheridan were valued at approximately $272.0 million based on the closing price of the Company's common stock on July 16, 2014. The acquisition of Sheridan enhances the growth profile and diversity of the Company by focusing on complementary specialties across the healthcare continuum.

The accounting for the acquisition of Sheridan was complete as of September 30, 2015. During 2015, factors became known to the Company that resulted in changes to the purchase price allocation of assets and liabilities, existing at the date of acquisition, related to Sheridan and resulted in a net decrease to goodwill of $8.7 million, an increase to other accrued expenses and a decrease to deferred income taxes.

Ambulatory Services Acquisitions

During the nine months ended September 30, 2015, the Company, through a wholly-owned subsidiary, acquired a controlling interest in five surgery centers. The aggregate amount paid for the centers acquired and for settlement of purchase price payable obligations during the nine months ended September 30, 2015 was approximately $112.9 million and was paid in cash and funded by operating cash flow. During the nine months ended September 30, 2014, the Company, through a wholly-owned subsidiary, acquired a controlling interest in four surgery centers (including two centers acquired as a result of the Sheridan transaction). The aggregate amount paid for the centers acquired outside of the Sheridan transaction and for settlement of purchase price payable obligations during the nine months ended September 30, 2014 was approximately $24.4 million, and was paid with a combination of operating cash flow and borrowings under the Company’s revolving credit facility in 2014. 

The total fair value of an acquisition includes an amount allocated to goodwill, which results from the centers’ favorable reputations in their markets, their market positions and their ability to deliver quality care with high patient satisfaction consistent with the Company’s business model.

Physician Services Acquisitions

The Company completed the acquisition of six physician practices in the nine months ended September 30, 2015. The total consideration consisted of cash of $120.6 million, which was funded at closing through available cash and current year operating cash flow. As a result of certain acquisitions completed during the year ended December 31, 2014, the Company has agreed to pay as additional consideration, amounts which are contingent on the acquired entities achieving future performance metrics. As of September 30, 2015 and December 31, 2014, the Company had accrued $33.7 million and $20.7 million, respectively, as a component of accrued liabilities and other long-term liabilities in the accompanying consolidated balance sheets which represents management's

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estimate of the fair values of the contingent consideration. As of September 30, 2015, the Company estimates it may have to pay between $32.0 million and $35.0 million in future contingent payments for acquisitions made prior to December 31, 2014 based upon the current projected financial performance or anticipated achievement of other targets of the acquired operations. The current estimate of future contingent payments could increase or decrease depending upon the actual performance of the acquisitions over each respective measurement period. During the three and nine months ended September 30, 2015, the Company recorded a net increase to the expected contingent consideration of approximately $1.9 million and $8.3 million, respectively, which is included in other operating expenses in the accompanying consolidated statements of operations, based on results of operations of the associated acquisitions. The acquisitions completed during the nine months ended September 30, 2015 did not contain provisions for contingent consideration.

The Company utilizes Level 3 inputs, which include unobservable data, to measure the fair value of the contingent consideration. The fair value was determined utilizing future forecasts of both earnings and other performance metrics which are expected to be achieved during the performance period, in accordance with each respective purchase agreement. In estimating the fair value, management developed various scenarios and weighted the probable outcome of each scenario using a range of expected probability specific to each agreement. Management utilized a market rate to discount the results of such analysis in order to record the present value of the expected future payout. The timing of the payments of the additional consideration varies by agreement but is expected to occur within one to three years from the respective date of acquisition.

Purchase Price Allocations

The acquisition date fair value of the total consideration transferred and acquisition date fair value of each major class of consideration for the acquisitions completed in the nine months ended September 30, 2015, including post acquisition date adjustments recorded to purchase price allocations, are as follows (in thousands): 

	Nine Months Ended September 30, 2015 (1)
Accounts receivable	$	17,560
Other current assets	9,387
Property and equipment	10,679
Goodwill	255,251
Intangible assets	45,600
Other long-term assets	40
Accounts payable	(2,718		)
Other accrued liabilities	(11,600		)
Deferred income taxes	(3,726		)
Other long-term liabilities	(4,957		)
Long-term debt	(3,928		)
Total fair value	311,588
Less:  Fair value attributable to noncontrolling interests	72,598
Acquisition date fair value of total consideration transferred	$	238,990

(1) Represents the preliminary allocation of fair value of acquired assets and liabilities associated with these acquisitions at September 30, 2015.

During 2015, no significant changes were made to the purchase price allocation of assets and liabilities, existing at the date of acquisition, related to individual acquisitions completed in 2014.

Fair value attributable to noncontrolling interests is based on significant inputs that are not observable in the market. Key inputs used to determine the fair value include financial multiples used in the purchase of noncontrolling interests primarily from acquisitions of centers. Such multiples, based on earnings, are used as a benchmark for the discount to be applied for the lack of control or marketability. The fair value of noncontrolling interests for acquisitions where the purchase price allocation is not finalized may be subject to adjustment as the Company completes its initial accounting for acquired intangible assets. 

During the three months ended September 30, 2015 and 2014, the Company incurred approximately $2.1 million and $25.1 million of transaction costs, respectively. During the nine months ended September 30, 2015 and 2014, the Company incurred approximately

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Item 1. Financial Statements - (continued) Table of Contents

$5.6 million and $28.7 million of transaction costs, respectively. The decrease in transaction costs during 2015 is primarily due to the significant costs incurred during the three months ended September 30, 2014 to acquire Sheridan.

Net revenue and net earnings included in the nine months ended September 30, 2015 and 2014 associated with completed acquisitions are as follows (in thousands):

	Nine Months Ended September 30,
	2015		2014
	Individual Acquisitions		Sheridan		Individual Acquisitions
Net revenue	$	95,026	$	226,545	$	9,925
Net earnings	18,605		19,684		2,293
Less:  Net earnings attributable to noncontrolling interests	4,561		164		1,412
Net earnings attributable to AmSurg Corp. common shareholders	$	14,044	$	19,520	$	881

The unaudited consolidated pro forma results for the nine months ended September 30, 2015 and 2014, assuming all 2015 acquisitions had been consummated on January 1, 2014, and all 2014 acquisitions had been consummated on January 1, 2013 are as follows (in thousands, except earnings per share):

	Nine Months Ended September 30,
	2015		2014
Net revenue	$	1,908,259	$	1,770,570
Net earnings	269,405		234,794
Amounts attributable to AmSurg Corp. common shareholders:
Net earnings	105,731		80,423
Net earnings per common share:
Basic	$	2.08	$	1.56
Diluted	$	2.06	$	1.55

(5) Investments in Unconsolidated Affiliates

Investments in unconsolidated affiliates in which the Company exerts significant influence but does not control or otherwise consolidate are accounted for using the equity method. Equity method investments are initially recorded at cost, unless such investments are a result of the Company entering into a transaction whereby the Company loses control of a previously controlled entity but retains a noncontrolling interest. Such transactions, which result in the deconsolidation of a previously consolidated entity, are measured at fair value. These investments are included as investments in unconsolidated affiliates in the accompanying consolidated balance sheets. The Company’s share of the profits and losses from these investments is reported in equity in earnings of unconsolidated affiliates in the accompanying consolidated statements of operations. The Company monitors its investments for other-than-temporary impairment by considering factors such as current economic and market conditions and the operating performance of the companies and records reductions in carrying values when necessary.

As of September 30, 2015 and December 31, 2014, the Company has recorded in the accompanying consolidated balance sheets its investments in unconsolidated affiliates of $112.9 million and $75.5 million, respectively. The Company's net earnings from these investments during the three months ended September 30, 2015 and 2014 were approximately $4.9 million and $2.2 million, respectively, and during the nine months ended September 30, 2015 and 2014 were approximately $11.6 million, and $3.5 million, respectively.

During the nine months ended September 30, 2015, the Company's ambulatory services segment entered into two separate equity method investments. As a result of these investment transactions, the Company contributed its controlling interest in three centers in exchange for noncontrolling interests in the new investments. Each of these investments is jointly owned by a health system and the Company. The newly formed investments (including the contributed centers) are controlled by the health systems. Also, as part of these transactions, the Company obtained a non-controlling interest in one additional center and one surgical hospital which were contributed by the health systems.

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During the nine months ended September 30, 2014, the Company's ambulatory services segment entered into four separate equity method investments. As a result of these investment transactions, the Company contributed its controlling interest in four of its centers and received net cash of $1.2 million in exchange for noncontrolling interests in the new investments. Each of these investments is jointly owned by a health system and the Company. The newly formed investments (including the contributed centers) are controlled by the health systems. Also, as part of these transactions, the Company obtained a non-controlling interest in one additional center which was contributed by a health system.

During the nine months ended September 30, 2015, the Company's physician services segment contributed two contracts into an entity jointly owned by the Company and a health system.

As a result of these transactions, for the nine months ended September 30, 2015 and 2014, the Company recorded approximately $26.9 million and $7.0 million, respectively, in the accompanying consolidated balance sheets, as a component of investments in unconsolidated affiliates, the fair value of the Company's investment in these entities.

In each of these transactions, the gain or loss on deconsolidation, which are primarily non-cash in nature, are determined based on the difference between the fair value of the Company’s interest, which is based on estimates of the expected future earnings, in the new entity and the carrying value of both the tangible and intangible assets of the contributed centers or contracts immediately prior to each transaction. Accordingly, the Company recognized a net gain on deconsolidation in the accompanying consolidated statements of operations of approximately $9.1 million and $5.9 million during the three and nine months ended September 30, 2015 and for the nine months ended September 30, 2014, the Company recognized a net gain on deconsolidation of approximately $3.4 million. There was no deconsolidation activity during the three months ended September 30, 2014.

(6)  Dispositions

During the nine months ended September 30, 2014, the Company initiated the disposition of centers in its ambulatory services segment due to management’s assessment of the Company’s strategy in the market and due to the limited growth opportunities at these centers. The Company did not dispose of any centers during the nine months ended September 30, 2015. For disposals occurring in 2014 and prior, the results of operations of discontinued centers have been classified as discontinued operations in all periods presented. As of January 1, 2015, the Company adopted ASU 2014-08 which raised the threshold for a disposal to qualify as a discontinued operation. As a result, the Company expects that such future disposals of its centers will no longer meet the definition to be accounted for as discontinued operations, and any gain or loss from such disposals will be included in continuing operations.

Results of operations and associated loss on disposal of the centers discontinued for the three and nine months ended September 30, 2014 are as follows (in thousands):

	Three Months Ended September 30, 2014			Nine Months Ended September 30, 2014
Revenues	$	1,279		$	8,750
Earnings (loss) before income taxes	(341		)	798
Results of discontinued operations, net of tax:
Earnings (loss) from operations of discontinued interests in surgery centers	(272		)	634
Loss on disposal of discontinued interests in surgery centers	(1,425		)	(1,780		)
Net loss from discontinued operations	(1,697		)	(1,146		)
Less: Net earnings (loss) from discontinued operations attributable to noncontrolling interests	(321		)	237
Net loss from discontinued operations attributable to AmSurg Corp. common shareholders	$	(1,376	)	$	(1,383	)

Cash proceeds from disposal for the nine months ended September 30, 2014 were $5.0 million.

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(7) Prepaid and Other Current Assets

The following table presents a summary of items comprising prepaid and other current assets in the accompanying consolidated balance sheets as of September 30, 2015 and December 31, 2014 (in thousands):

	September 30,		December 31,
	2015		2014
Income taxes receivable	$	—	$	28,694
Prepaid expenses	18,376		18,682
Deferred compensation plan assets	17,991		17,320
Deferred income taxes	34,250		22,462
Other	21,034		28,204
Total prepaid and other current assets	$	91,651	$	115,362

(8)  Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended September 30, 2015 are as follows (in thousands):

Balance at December 31, 2014	$	3,381,149
Goodwill acquired, including post acquisition adjustments	246,787
Goodwill disposed, including impact of deconsolidation transactions	(38,619		)
Balance at September 30, 2015	$	3,589,317

As of September 30, 2015, the ambulatory services segment and the physician services segment had approximately $2.0 billion and $1.6 billion, respectively, of goodwill. During the nine months ended September 30, 2015, goodwill increased $139.7 million for the ambulatory services segment primarily due to the acquisition of five centers, net of three deconsolidations. During the nine months ended September 30, 2015, goodwill increased by $68.5 million for the physician services segment primarily due to the acquisition of six physician practices, net of two deconsolidations. For the nine months ended September 30, 2015 and 2014, respectively, approximately $126.2 million and $25.1 million of goodwill recorded was deductible for tax purposes.

Intangible assets at September 30, 2015 and December 31, 2014 consisted of the following (in thousands):

	September 30, 2015							December 31, 2014
	Gross							Gross
	Carrying		Accumulated					Carrying		Accumulated
	Amount		Amortization			Net		Amount		Amortization			Net
Amortizable intangible assets:
Customer relationships with hospitals	$	1,013,156	$	(59,622	)	$	953,534	$	971,645	$	(22,145	)	$	949,500
Deferred financing cost	59,859		(11,382		)	48,477		59,574		(5,151		)	54,423
Capitalized software	66,938		(25,920		)	41,018		50,387		(19,197		)	31,190
Agreements, contracts and other	4,618		(3,075		)	1,543		3,523		(2,752		)	771
Total amortizable intangible assets	1,144,571		(99,999		)	1,044,572		1,085,129		(49,245		)	1,035,884
Non-amortizable intangible assets:
Trade name	228,000		—			228,000		228,000		—			228,000
Restrictive covenant arrangements	9,995		—			9,995		9,995		—			9,995
Total non-amortizable intangible assets	237,995		—			237,995		237,995		—			237,995
Total intangible assets	$	1,382,566	$	(99,999	)	$	1,282,567	$	1,323,124	$	(49,245	)	$	1,273,879

Approximately $44.5 million of intangible assets related to customer relationships were recorded during the nine months ended September 30, 2015 which are expected to be amortized over a period of 20 years with no expected residual values.

Amortization of intangible assets for the three months ended September 30, 2015 and 2014 was $17.1 million and $13.7 million, respectively, and $50.5 million and $16.2 million for the nine months ended September 30, 2015 and 2014, respectively. Estimated amortization of intangible assets for the remainder of 2015 and each of the following five years and thereafter is $17.4 million, $69.4

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million, $68.0 million, $66.9 million, $64.1 million, $61.1 million and $697.7 million, respectively. The Company expects to recognize amortization of all intangible assets over a weighted average period of 17.5 years with no expected residual values.

(9) Other Accrued Liabilities

The following table presents a summary of items comprising other accrued liabilities in the accompanying consolidated balance sheets as of September 30, 2015 and December 31, 2014 (in thousands):

	September 30,		December 31,
	2015		2014
Accrued professional liabilities	$	12,606	$	11,983
Contingent purchase price payable	28,700		12,213
Current income taxes payable	12,634		—
Refunds payable	41,302		17,752
Other	35,321		26,038
Total other accrued liabilities	$	130,563	$	67,986

(10) Accrued Professional Liabilities

The Company maintains professional liability insurance policies with third-party insurers generally on a claims-made basis, subject to self-insured retention, exclusions and other restrictions. A substantial portion of the professional liability loss risks are being provided by a third-party insurer which is fully reinsured by the Company's wholly-owned captive insurance subsidiary. The Company records an estimate of liabilities for self-insured amounts and claims incurred but not reported based on an actuarial valuation using historical loss patterns, which are not discounted.

At September 30, 2015, the Company's accrued professional liabilities are presented in the accompanying consolidated balance sheets as a component of other accrued liabilities and other long-term liabilities as follows (in thousands):

	September 30, 2015		December 31, 2014
Estimated losses under self-insured programs	$	29,153	$	25,337
Incurred but not reported losses	32,931		28,448
Total accrued professional liabilities	62,084		53,785
Less estimated losses payable within one year	12,606		11,983
Total	$	49,478	$	41,802

The changes to the Company's estimated losses under self-insured programs as of September 30, 2015 were as follows (in thousands):

Balance at December 31, 2014	$	53,785
Assumed liabilities through acquisitions	4,957
Provision related to current period reserves	14,591
Payments for current period reserves	(2,567		)
Benefit related to changes in prior period reserves	(902		)
Payments for prior period reserves	(7,780		)
Balance at September 30, 2015	$	62,084

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(11)Long-term Debt

Long-term debt at September 30, 2015 and December 31, 2014 consisted of the following (in thousands):

	September 30,		December 31,
	2015		2014
Term loan	$	859,125	$	865,650
5.625% Senior Unsecured Notes due 2020	250,000		250,000
5.625% Senior Unsecured Notes due 2022	1,100,000		1,100,000
Other debt due through 2025	22,200		20,156
Capitalized lease arrangements due through 2026	18,953		15,206
	2,250,278		2,251,012
Less current portion	19,982		18,826
Long-term debt	$	2,230,296	$	2,232,186

The fair value of fixed rate long-term debt, with a carrying value of $1,389.7 million, was $1,396.9 million at September 30, 2015. The fair value of variable rate long-term debt approximates its carrying value of $860.6 million at September 30, 2015. With the exception of the Company’s 2020 and 2022 Senior Unsecured Notes (each defined below), the fair value of fixed rate debt (Level 2) is determined based on an estimation of discounted future cash flows of the debt at rates currently quoted or offered to the Company for similar debt instruments of comparable maturities by its lenders. The fair value of the Company’s 2020 and 2022 Senior Unsecured Notes (Level 1) is determined based on quoted prices in an active market.

a.     Term Loan and Credit Facility

On July 16, 2014, the Company entered into a credit facility that is comprised of an $870.0 million term loan and a $300.0 million revolving credit facility.

The term loan matures on July 16, 2021 and bears interest at a rate equal to, at the Company’s option, the alternative base rate as defined in the agreement (ABR) plus 1.75% to 2.00% or LIBOR plus 2.75% to 3.00%, with a LIBOR floor of 0.75%, or a combination thereof (3.75% on September 30, 2015). The term loan requires quarterly principal payments of 0.25% of the face amount totaling $8.7 million annually.

The revolving credit facility matures on July 16, 2019 and permits the Company to borrow up to $300.0 million at an interest rate equal to, at the Company’s option, the ABR plus 1.75% to 2.00% or LIBOR plus 2.75% to 3.00%, or a combination thereof, and provides for a fee of 0.375% of unused commitments. The Company has the option to increase borrowings under the senior secured credit facility by an aggregate amount not to exceed the greater of $300.0 million and an unlimited amount as long as certain financial covenants are met and lender approval is obtained. The senior credit facility contains certain covenants relating to the ratio of debt to operating performance measurements and interest coverage ratios and is secured by a pledge of the stock of the Company’s wholly-owned subsidiaries and certain of the Company’s partnership and membership interests in the LPs and LLCs. As of September 30, 2015, the Company was in compliance with the covenants contained in the term loan and credit facility and had not drawn upon the revolving credit facility. On October 21, 2015, the Company exercised the accordion feature of its revolving credit facility and increased the Company's borrowing capacity by $200.0 million to $500.0 million.

Prior to entering into the Company's credit facility, the Company maintained a revolving credit facility which had a maturity date of June 2018 and permitted the Company to borrow up to $475.0 million at an interest rate equal to either the base rate plus 0.25% to 1.00% or LIBOR plus 1.25% to 2.00%, or a combination thereof. On July 3, 2014, the Company utilized proceeds received from its common and preferred stock offerings to repay its outstanding obligation under the prior revolving credit facility.

b.     Senior Unsecured Notes

2020 Senior Unsecured Notes

On November 20, 2012, the Company completed a private offering of $250.0 million aggregate principal amount of 5.625% senior unsecured notes due 2020 (the 2020 Senior Unsecured Notes). On May 31, 2013, the Company completed an offer to exchange the outstanding 2020 Senior Unsecured Notes for an equal amount of such notes that are registered under the Securities Act of 1933, as amended (the Securities Act). The net proceeds from the issuance of the 2020 Senior Unsecured Notes were used to reduce the outstanding indebtedness under the Company’s revolving credit agreement. The 2020 Senior Unsecured Notes are unsecured obligations of the Company and are guaranteed by its existing and subsequently acquired or organized wholly-owned domestic

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Item 1. Financial Statements - (continued) Table of Contents

subsidiaries. The 2020 Senior Unsecured Notes are pari passu in right of payment with all the existing and future senior debt of the Company and senior to all existing and future subordinated debt of the Company. Interest on the 2020 Senior Unsecured Notes accrues at the rate of 5.625% per annum and is payable semi-annually in arrears on May 30 and November 30, through the maturity date of November 30, 2020.

Prior to November 30, 2015, the Company may redeem up to 35% of the aggregate principal amount of the 2020 Senior Unsecured Notes at a redemption price of 105.625% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages, if any, using proceeds of one or more equity offerings. On or after November 30, 2015, the Company may redeem the 2020 Senior Unsecured Notes in whole or in part. The redemption price for such a redemption (expressed as percentages of principal amount) is set forth below, plus accrued and unpaid interest and liquidated damages, if any, if redeemed during the twelve-month period beginning on November 30 of the years indicated below:  

Period	Redemption Price
2015	104.219	%
2016	102.813	%
2017	101.406	%
2018 and thereafter	100.000	%

The 2020 Senior Unsecured Notes contain certain covenants which, among other things, limit, but may not restrict the Company’s ability to enter into or guarantee additional borrowings, sell preferred stock, pay dividends and repurchase stock. Based on the terms of the 2020 Senior Unsecured Notes, the Company has adequate ability to meet its obligations to pay dividends as required under the terms of its mandatory convertible preferred stock. The Company was in compliance with the covenants contained in the indenture relating to the 2020 Senior Unsecured Notes at September 30, 2015.

2022 Senior Unsecured Notes

On July 16, 2014, the Company completed a private offering of $1.1 billion aggregate principal amount of 5.625% senior unsecured notes due 2022 (the 2022 Senior Unsecured Notes). On February 19, 2015, the Company completed an offer to exchange the outstanding 2022 Senior Unsecured Notes, for an equal amount of such notes that are registered under the Securities Act. The 2022 Senior Unsecured Notes are unsecured obligations of the Company and are guaranteed by the Company and existing and subsequently acquired or organized wholly-owned domestic subsidiaries. The 2022 Senior Unsecured Notes are pari passu in right of payment with all the existing and future senior debt of the Company and senior to all existing and future subordinated debt of the Company. Interest on the 2022 Senior Unsecured Notes accrues at the rate of 5.625% per annum and is payable semi-annually in arrears on January 15 and July 15 through the maturity date of July 15, 2022.

Prior to July 15, 2017, the Company may redeem up to 35% of the aggregate principal amount of the 2022 Senior Unsecured Notes at a redemption price of 105.625% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages, if any, using proceeds of one or more equity offerings. On or after July 15, 2017, the Company may redeem the 2022 Senior Unsecured Notes in whole or in part. The redemption price for such a redemption (expressed as percentages of principal amount) is set forth below, plus accrued and unpaid interest and liquidated damages, if any, if redeemed during the twelve-month period beginning on July 15 of the years indicated below:

Period	Redemption Price
2017	104.219	%
2018	102.813	%
2019	101.406	%
2020 and thereafter	100.000	%

The 2022 Senior Unsecured Notes contain certain covenants which, among other things, limit, but may not restrict the Company’s ability to enter into or guarantee additional borrowings, sell preferred stock, pay dividends and repurchase stock. Based on the terms of the 2022 Senior Unsecured Notes, the Company has adequate ability to meet its obligations to pay dividends as required under the terms of its mandatory preferred stock. The Company was in compliance with the covenants contained in the indenture relating to the 2022 Senior Unsecured Notes at September 30, 2015.

16

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c.     Senior Secured Notes

During 2010, the Company issued $75.0 million principal amount of senior secured notes (the Senior Secured Notes) pursuant to a note purchase agreement. The Senior Secured Notes had a maturity date of May 28, 2020. On July 16, 2014, the Company redeemed the Senior Secured Notes utilizing proceeds received from its common and preferred stock offerings.

(12)  Shareholders’ Equity

a.   Common Stock

On July 2, 2014, the Company issued 9,775,000 shares of its common stock in a public offering, at $45.00 per share, prior to underwriting discounts, commissions and other related offering expenses of approximately $18.5 million. Proceeds from the issuance were used to satisfy certain debt obligations with the remaining amount utilized to fund a portion of the Sheridan acquisition. In addition, on July 16, 2014, the Company issued 5,713,909 shares of its common stock in a private offering to the former owners of Sheridan as part of the total consideration for the Sheridan acquisition.

On August 9, 2013, the Board of Directors authorized a stock purchase program for up to $40.0 million of the Company’s shares of common stock, which expired on February 9, 2015. The Company did not purchase any shares under the stock repurchase program during 2015.

In addition, the Company repurchases shares by withholding a portion of employee restricted stock that vested to cover payroll withholding taxes in accordance with the restricted stock agreements. During the nine months ended September 30, 2015 and 2014, the Company repurchased 67,000 shares and 68,748 shares, respectively, of common stock for approximately $3.7 million and $2.9 million, respectively.

b. Preferred Stock

On July 2, 2014, the Company issued 1,725,000 shares of its mandatory convertible preferred stock in a public offering, at $100.00 per share, prior to underwriting discounts, commissions and other related offering expenses of approximately $5.9 million.

The mandatory convertible preferred stock pays dividends at an annual rate of 5.25% of the initial liquidation preference of $100 per share. Dividends accrue and cumulate from the date of issuance and, to the extent lawful and declared by the Company's Board of Directors, will be paid on each January 1, April 1, July 1 and October 1 in cash or, at the Company's election (subject to certain limitations), by delivery of any combination of cash and shares of common stock. Each share of the mandatory convertible preferred stock has a liquidation preference of $100, plus an amount equal to accrued and unpaid dividends. Each share of the mandatory convertible preferred stock will automatically convert on July 1, 2017 (subject to postponement in certain cases), into between 1.8141 and 2.2222 shares of common stock (the “minimum conversion rate” and “maximum conversion rate,” respectively), each subject to adjustment. The number of shares of common stock issuable on conversion will be determined based on the average volume weighted average price per share of the Company's common stock over the 20 consecutive trading day period commencing on and including the 22nd scheduled trading day prior to July 1, 2017. At any time prior to July 1, 2017, holders may elect to convert all or a portion of their shares of mandatory convertible preferred stock into shares of common stock at the minimum conversion rate. If any holder elects to convert shares of mandatory convertible preferred stock during a specified period beginning on the effective date of a fundamental change the conversion rate will be adjusted under certain circumstances and such holder will also be entitled to a fundamental change dividend make-whole amount.

During the nine months ended September 30, 2015, the Company's Board of Directors declared three dividends each totaling $1.3125 per share in cash, or $2.3 million, respectively, for the Company’s mandatory convertible preferred stock. All dividends declared during 2015 have been paid except those dividends declared on August 27, 2015, which were funded to the paying agent to be paid on October 1, 2015 to shareholders of record as of September 15, 2015. During the nine months ended September 30, 2014, the Company's Board of Directors declared dividends of $1.2979 per share in cash, or $2.2 million, for the Company’s mandatory convertible preferred stock.

c.   Stock Incentive Plans

In May 2014, the Company adopted the AmSurg Corp. 2014 Equity and Incentive Plan. The Company also has unvested restricted stock and fully vested options outstanding under the AmSurg Corp. 2006 Stock Incentive Plan, as amended, and the AmSurg Corp. 1997 Stock Incentive Plan, as amended, under which no additional awards may be granted. Under these plans, the Company has granted restricted stock and non-qualified options to purchase shares of common stock to employees and outside directors from its

17

Item 1. Financial Statements - (continued) Table of Contents

authorized but unissued common stock.  At September 30, 2015, 1,200,000 shares were authorized for grant under the 2014 Equity and Incentive Plan and 893,347 shares were available for future equity grants.  Restricted stock granted to outside directors vests on the first anniversary of the date of grant.  Restricted stock granted to employees vests over four years in three equal installments beginning on the second anniversary of the date of grant. The fair value of restricted stock is determined based on the closing bid price of the Company’s common stock on the grant date. Under Company policy, shares held by outside directors and senior management are subject to certain holding requirements and restrictions.

The Company has not issued options subsequent to 2008, and all outstanding options are fully vested. Options were granted at market value on the date of the grant and vested over four years.  Outstanding options have a term of ten years from the date of grant.

Other information pertaining to share-based activity during the three and nine months ended September 30, 2015 and 2014 was as follows (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Share-based compensation expense	$	3,727	$	2,424	$	11,319	$	7,388
Fair value of shares vested	—		123		13,220		10,481
Cash received from option exercises	276		504		2,356		2,150
Tax benefit from exercises of share based awards	246		198		3,779		2,288

As of September 30, 2015, the Company had total unrecognized compensation cost of approximately $20.6 million related to non-vested awards, which the Company expects to recognize through 2018 and over a weighted average period of 1.1 years. For the three and nine months ended September 30, 2015 and 2014, there were no options that were anti-dilutive.

A summary of the status of non-vested restricted shares at September 30, 2015 and changes during the nine months ended September 30, 2015 is as follows:

			Weighted
	Number		Average
	of Shares		Grant Price
Non-vested shares at December 31, 2014	668,109		$	33.51
Shares granted	313,498		56.19
Shares vested	(233,831	)	28.19
Shares forfeited	(6,983	)	39.88
Non-vested shares at September 30, 2015	740,793		$	44.73

In addition to the non-vested restricted shares, during the nine months ended September 30, 2015, the Company granted 68,533 performance-based restricted stock units (RSUs) to certain of its officers and physician employees. The fair value of our common stock on the grant date of these RSUs was $55.40. The RSUs will vest ratably over a three year period from the grant date. The conversion of the RSUs to restricted stock is contingent on the Company’s achievement of a specified one-year financial performance goal for the year ended December 31, 2015 and, if achieved, would occur during the first quarter of 2016. If the financial performance goal is not achieved, the RSUs will be forfeited. The number of RSUs that will ultimately be received by the holders range from 0% to 150% of the units granted, depending on the Company’s level of achievement with respect to the financial performance goal. At September 30, 2015, the Company believes the RSUs will vest at approximately 150%.

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A summary of stock option activity for the nine months ended September 30, 2015 is summarized as follows:

					Weighted
			Weighted		Average
			Average		Remaining
	Number		Exercise		Contractual
	of Shares		Price		Term (in years)
Outstanding at December 31, 2014	158,721		$	22.89	1.7
Options exercised with total intrinsic value of $4.2 million	(102,762	)	22.92
Options terminated	(11,750	)	23.42
Outstanding, Vested and Exercisable at September 30, 2015 with an aggregate intrinsic value of $2.4 million	44,209		$	22.70	1.0

The aggregate intrinsic value represents the total pre-tax intrinsic value received by the option holders on the exercise date or that would have been received by the option holders had all holders of in-the-money outstanding options at September 30, 2015 exercised their options at the Company’s closing stock price on September 30, 2015.

d. Earnings per Share

Basic net earnings (loss) attributable to AmSurg Corp. common stockholders, per common share, excludes dilution and is computed by dividing net earnings (loss) attributable to AmSurg Corp. common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings attributable to AmSurg common stockholders, per common share is computed by dividing net earnings attributable to AmSurg Corp. common stockholders by the weighted-average number of common shares outstanding during the period plus any potential dilutive common share equivalents, including shares issuable (1) upon the vesting of restricted stock awards as determined under the treasury stock method and (2) upon conversion of the Company's mandatory convertible preferred stock as determined under the if-converted method. For purposes of calculating diluted earnings per share, preferred stock dividends have been subtracted from both net earnings from continuing operations attributable to AmSurg Corp. and net earnings attributable to AmSurg Corp. common shareholders in periods in which utilizing the if-converted method would be anti-dilutive. For the nine months ended September 30, 2015, approximately 3.1 million common share equivalents related to the mandatory convertible preferred stock were anti-dilutive and therefore are excluded from the dilutive weighted average number of shares outstanding.

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The following is a reconciliation of the numerator and denominators of basic and diluted earnings (loss) per share (in thousands, except per share amounts):

	Three Months Ended September 30,							Nine Months Ended September 30,
	Earnings			Shares	Per Share			Earnings		Shares	Per Share
	(Numerator)			(Denominator)	Amount			(Numerator)		(Denominator)	Amount
2015:
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders (basic)	$	40,397		47,707	$	0.85		$	90,582	47,652	$	1.90
Preferred stock dividends	2,264			—				—		—
Effect of dilutive securities, options and non-vested shares	—			3,568				—		398
Net earnings from continuing operations attributable to AmSurg Corp. common shareholders (diluted)	$	42,661		51,275	$	0.83		$	90,582	48,050	$	1.89
2014:
Net earnings (loss) from continuing operations attributable to AmSurg Corp. common shareholders (basic)	$	(10,697	)	46,320	$	(0.23	)	$	25,466	36,620	$	0.70
Effect of dilutive securities, options and non-vested shares	—			—				—		406
Net earnings (loss) from continuing operations attributable to AmSurg Corp. common shareholders (diluted)	$	(10,697	)	46,320	$	(0.23	)	$	25,466	37,026	$	0.69

(13)  Income Taxes

The Company files a consolidated federal income tax return.  Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company applies recognition thresholds and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return as it relates to accounting for uncertainty in income taxes.  In addition, it is the Company’s policy to recognize interest accrued and penalties, if any, related to unrecognized benefits as income tax expense in its consolidated statement of operations.  The Company does not expect significant changes to its tax positions or liability for tax uncertainties during the next 12 months.

During the three and nine months ended September 30, 2015, the Company recorded an increase of approximately $4.7 million and $6.2 million, respectively, to its valuation allowances for net operating loss carryforwards resulting primarily from interest expense and transaction costs resulting from the acquisition of Sheridan, which were incurred in jurisdictions where it is not likely that sufficient taxable income will be generated to utilize those losses.

The Company and its subsidiaries file U.S. federal and various state tax returns.  With few exceptions, the Company is no longer subject to U.S. federal or state income tax examinations for years prior to 2012.

(14)  Commitments and Contingencies

Litigation

From time to time the Company is named as a party to legal claims and proceedings in the ordinary course of business. The Company's management is not aware of any claims or proceedings that are expected to have a material adverse impact on the Company's consolidated financial condition, results of operations or cash flows.

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Item 1. Financial Statements - (continued) Table of Contents

Insurance Programs

Given the nature of the services provided, the Company and its subsidiaries are subject to professional and general liability claims and related lawsuits in the ordinary course of business. The Company maintains professional insurance with third-party insurers generally on a claims-made basis, subject to self-insured retentions, exclusions and other restrictions. A substantial portion of the professional liability loss risks are being provided by a third-party insurer which is fully reinsured by the Company's wholly-owned captive insurance subsidiary. In addition, the captive provides stop loss coverage for the Company’s self-insured employee health program. The assets, liabilities and results of operations of the wholly-owned captive are consolidated in the accompanying consolidated financial statements. The liabilities for self-insurance in the accompanying consolidated balance sheets include estimates of the ultimate costs related to both reported claims on an individual and aggregate basis and unreported claims. The Company also obtains professional liability insurance on a claims-made basis from third party insurers for its surgery centers and certain of its owned practices and employed physicians.

The Company’s reserves for professional liability claims within the self-insured retention are based upon periodic actuarial calculations. These actuarial estimates consider historical claims frequency and severity, loss development patterns and other actuarial assumptions and are not discounted to present value.

The Company also maintains insurance for director and officer liability, workers’ compensation liability and property damage. Certain policies are subject to deductibles. In addition to the insurance coverage provided, the Company indemnifies its officers and directors for actions taken on behalf of the Company and its subsidiaries. 

Redeemable Noncontrolling Interests

Certain of the Company’s wholly-owned subsidiaries, as general partners in the LPs, are responsible for all debts incurred but unpaid by the LPs. As manager of the operations of the LPs, the Company has the ability to limit potential liabilities by curtailing operations or taking other operating actions.

In the event of a change in current law that would prohibit the physicians’ current form of ownership in the partnerships, the Company would be obligated to purchase the physicians’ interests in a substantial majority of the Company’s partnerships. The purchase price to be paid in such event would be determined by a pre-defined formula, as specified in the partnership agreements. The Company believes the likelihood of a change in current law that would trigger such purchases was remote as of September 30, 2015. As a result, the noncontrolling interests that are subject to this redemption feature are not included as part of the Company’s equity and are classified as noncontrolling interests – redeemable on the Company’s consolidated balance sheets.

Physician Services Headquarters Operating Lease

On January 16, 2015, the Company entered into an agreement to lease approximately 222,000 square feet of office space in Plantation, Florida which it intends to be the future headquarters of its physician services operations. The Company expects to take possession of the space in the fourth quarter of 2015 to begin tenant improvements on approximately 167,000 square feet of space which it intends to occupy during the second quarter of 2016. In addition, the Company plans to begin tenant improvements on an additional 55,000 square feet of space during the second quarter of 2016 which it will occupy at a later date. As the lease is expected to be operating in nature, the Company will begin to recognize rent expense on a straight line basis when possession is obtained. Annual rent expense is expected to be approximately $2.9 million. The initial term of this lease agreement is set to expire in February 2029.

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(15) Segment Reporting

Prior to the Sheridan acquisition, the Company operated its centers as individual components of one operating and reportable segment. Upon completion of the Sheridan acquisition, the Company operates in two major lines of business - the operation of ambulatory surgery centers and providing multi-specialty outsourced physician services, which have been identified as its operating and reportable segments. Through the ambulatory services segment, the Company acquires, develops and operates ambulatory surgery centers in partnership with physicians. Through the physician services segment, the Company provides outsourced physician services in multiple specialties to hospitals, ambulatory surgery centers and other healthcare facilities, primarily in the areas of anesthesiology, children’s services, emergency medicine and radiology. The Company’s financial information by operating segment is prepared on an internal management reporting basis and includes allocations of corporate overhead to each segment. This financial information is used by the chief operating decision maker to allocate resources and assess the performance of the operating segments. The Company’s operating segments have been defined based on the separate financial information that is regularly produced and reviewed by the Company’s chief operating decision maker which is its Chief Executive Officer. The following table presents financial information for each reportable segment (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Net Revenue:
Ambulatory Services	$	308,983		$	276,419		$	903,884		$	814,207
Physician Services (1)	341,244			225,931			958,738			225,931
Total	$	650,227		$	502,350		$	1,862,622		$	1,040,138
Adjusted EBITDA:
Ambulatory Services	$	55,353		$	47,853		$	162,965		$	145,475
Physician Services (1)	77,824			48,016			191,939			48,016
Total	$	133,177		$	95,869		$	354,904		$	193,491
Adjusted EBITDA:	$	133,177		$	95,869		$	354,904		$	193,491
Earnings from continuing operations attributable to noncontrolling interests	55,618			47,578			160,407			139,150
Interest expense, net	(30,242		)	(39,054		)	(90,671		)	(52,906		)
Depreciation and amortization	(24,106		)	(20,838		)	(70,536		)	(37,533		)
Share-based compensation	(3,727		)	(2,424		)	(11,319		)	(7,388		)
Net change in fair value of contingent consideration	(1,928		)	—			(8,338		)	—
Transaction costs	(2,107		)	(25,102		)	(5,560		)	(28,681		)
Debt extinguishment costs	—			(16,887		)	—			(16,887		)
Gain on deconsolidation	9,112			—			5,854			3,411
Earnings from continuing operations before income taxes	$	135,797		$	39,142		$	334,741		$	192,657
Acquisition and Capital Expenditures:
Ambulatory Services (2)	$	25,872		$	5,759		$	144,482		$	45,207
Physician Services (1)	25,927			2,339			136,014			2,339
Total	$	51,799		$	8,098		$	280,496		$	47,546

(1) Amounts reported for the 2014 periods represent the results of operations from July 16, 2014, the acquisition date of Sheridan, through September 30, 2014.

(2) Excludes the purchase price to acquire Sheridan.

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(16)  Financial Information for the Company and Its Subsidiaries

The 2020 Senior Unsecured Notes and 2022 Senior Unsecured Notes are senior unsecured obligations of the Company and are guaranteed by its existing and subsequently acquired or organized 100% owned domestic subsidiaries. The 2020 Senior Unsecured Notes and 2022 Senior Unsecured Notes are guaranteed on a full and unconditional and joint and several basis, with limited exceptions considered customary for such guarantees, including the release of the guarantee when a subsidiary's assets are sold. The following condensed consolidating financial statements present the Company (as parent issuer), the subsidiary guarantors, the subsidiary non-guarantors and consolidating adjustments. These condensed consolidating financial statements have been prepared and presented in accordance with Rule 3-10 of Regulation S-X “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.” The operating and investing activities of the separate legal entities are fully interdependent and integrated. Accordingly, the results of the separate legal entities are not representative of what the operating results would be on a stand-alone basis.

Condensed Consolidating Balance Sheet - September 30, 2015 (In thousands)
	Parent Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Total Consolidated
Assets
Current assets:
Cash and cash equivalents	$	68,730	$	56,647	$	62,045	$	—		$	187,422
Restricted cash and marketable securities	—		—		11,789		—			11,789
Accounts receivable, net	—		160,685		115,552		—			276,237
Supplies inventory	—		255		20,632		—			20,887
Prepaid and other current assets	33,969		50,302		19,516		(12,136		)	91,651
Total current assets	102,699		267,889		229,534		(12,136		)	587,986
Property and equipment, net	12,819		9,468		168,112		—			190,399
Investments in and receivables from unconsolidated affiliates	4,115,444		1,729,729		—		(5,732,296		)	112,877
Goodwill	—		1,559,463		—		2,029,854			3,589,317
Intangible assets, net	62,201		1,217,937		2,429		—			1,282,567
Other assets	3,408		1,040		21,624		(1,998		)	24,074
Total assets	$	4,296,571	$	4,785,526	$	421,699	$	(3,716,576	)	$	5,787,220
Liabilities and Equity
Current liabilities:
Current portion of long-term debt	$	8,700	$	—	$	11,282	$	—		$	19,982
Accounts payable	1,696		4,686		28,067		(3,699		)	30,750
Accrued salaries and benefits	28,070		141,388		17,465		—			186,923
Accrued interest	17,835		—		11		—			17,846
Other accrued liabilities	14,856		81,017		43,127		(8,437		)	130,563
Total current liabilities	71,157		227,091		99,952		(12,136		)	386,064
Long-term debt	2,200,425		—		57,759		(27,888		)	2,230,296
Deferred income taxes	238,773		408,936		—		(1,998		)	645,711
Other long-term liabilities	4,473		66,862		19,336		—			90,671
Intercompany payable	—		1,228,157		—		(1,228,157		)	—
Noncontrolling interests – redeemable	—		—		64,595		120,666			185,261
Equity:
Total AmSurg Corp. equity	1,781,743		2,854,480		133,171		(2,987,651		)	1,781,743
Noncontrolling interests – non-redeemable	—		—		46,886		420,588			467,474
Total equity	1,781,743		2,854,480		180,057		(2,567,063		)	2,249,217
Total liabilities and equity	$	4,296,571	$	4,785,526	$	421,699	$	(3,716,576	)	$	5,787,220

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Condensed Consolidating Balance Sheet - December 31, 2014 (In thousands)
	Parent Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Total Consolidated
Assets
Current assets:
Cash and cash equivalents	$	134,351	$	23,471	$	50,257	$	—		$	208,079
Restricted cash and marketable securities	—		—		10,219		—			10,219
Accounts receivable, net	—		123,772		109,281		—			233,053
Supplies inventory	—		301		19,673		—			19,974
Prepaid and other current assets	47,997		58,388		13,795		(4,818		)	115,362
Total current assets	182,348		205,932		203,225		(4,818		)	586,687
Property and equipment, net	10,391		9,972		160,085		—			180,448
Investments in and receivables from unconsolidated affiliates	3,912,804		1,587,881		—		(5,425,210		)	75,475
Goodwill	—		1,490,981		—		1,890,168			3,381,149
Intangible assets, net	67,678		1,203,218		2,983		—			1,273,879
Other assets	3,323		943		23,086		(1,466		)	25,886
Total assets	$	4,176,544	$	4,498,927	$	389,379	$	(3,541,326	)	$	5,523,524
Liabilities and Equity
Current liabilities:
Current portion of long-term debt	$	8,700	$	—	$	10,126	$	—		$	18,826
Accounts payable	1,849		35		31,781		(4,080		)	29,585
Accrued salaries and benefits	25,035		101,395		13,614		—			140,044
Accrued interest	29,621		—		23		—			29,644
Other accrued liabilities	8,051		44,305		16,368		(738		)	67,986
Total current liabilities	73,256		145,735		71,912		(4,818		)	286,085
Long-term debt	2,206,950		—		53,648		(28,412		)	2,232,186
Deferred income taxes	209,400		425,546		—		(1,466		)	633,480
Other long-term liabilities	7,391		63,616		18,436		—			89,443
Intercompany payable	—		1,219,979		8,010		(1,227,989		)	—
Noncontrolling interests – redeemable	—		—		63,544		120,555			184,099
Equity:
Total AmSurg Corp. equity	1,679,547		2,644,051		130,206		(2,774,257		)	1,679,547
Noncontrolling interests – non-redeemable	—		—		43,623		375,061			418,684
Total equity	1,679,547		2,644,051		173,829		(2,399,196		)	2,098,231
Total liabilities and equity	$	4,176,544	$	4,498,927	$	389,379	$	(3,541,326	)	$	5,523,524

24

Item 1. Financial Statements - (continued) Table of Contents

Condensed Consolidating Statement of Operations - For the Three Months Ended September 30, 2015 (In thousands)
	Parent Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Consolidating Adjustments			Total Consolidated
Net revenue	$	5,975		$	339,484	$	314,382	$	(9,614	)	$	650,227
Operating expenses:
Salaries and benefits	17,642			231,769		78,249		(128		)	327,532
Supply cost	—			476		45,182		(20		)	45,638
Other operating expenses	7,054			34,742		66,522		(9,466		)	98,852
Transaction costs	270			1,837		—		—			2,107
Depreciation and amortization	1,017			14,906		8,183		—			24,106
Total operating expenses	25,983			283,730		198,136		(9,614		)	498,235
Net gain on deconsolidations	—			9,112		—		—			9,112
Equity in earnings of unconsolidated affiliates	96,232			64,423		—		(155,720		)	4,935
Operating income	76,224			129,289		116,246		(155,720		)	166,039
Interest expense, net	11,766			17,845		631		—			30,242
Earnings from operations before income taxes	64,458			111,444		115,615		(155,720		)	135,797
Income tax expense	21,797			15,210		511		—			37,518
Net earnings	42,661			96,234		115,104		(155,720		)	98,279
Less net earnings attributable to noncontrolling interests	—			—		55,618		—			55,618
Net earnings attributable to AmSurg Corp. shareholders	42,661			96,234		59,486		(155,720		)	42,661
Preferred stock dividends	(2,264		)	—		—		—			(2,264		)
Net earnings attributable to AmSurg Corp. common shareholders	$	40,397		$	96,234	$	59,486	$	(155,720	)	$	40,397

Condensed Consolidating Statement of Operations - For the Nine Months Ended September 30, 2015 (In thousands)
	Parent Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Total Consolidated
Net revenue	$	20,145		$	954,642	$	915,791		$	(27,956	)	$	1,862,622
Operating expenses:
Salaries and benefits	50,796			671,988		227,703			(380		)	950,107
Supply cost	—			1,361		132,705			(54		)	134,012
Other operating expenses	19,471			106,452		196,023			(27,522		)	294,424
Transaction costs	862			4,698		—			—			5,560
Depreciation and amortization	2,907			43,830		23,799			—			70,536
Total operating expenses	74,036			828,329		580,230			(27,956		)	1,454,639
Net gain on deconsolidations	—			5,889		(35		)	—			5,854
Equity in earnings of unconsolidated affiliates	233,362			183,519		—			(405,306		)	11,575
Operating income	179,471			315,721		335,526			(405,306		)	425,412
Interest expense, net	35,630			53,223		1,818			—			90,671
Earnings from operations before income taxes	143,841			262,498		333,708			(405,306		)	334,741
Income tax expense	46,467			29,134		1,359			—			76,960
Net earnings	97,374			233,364		332,349			(405,306		)	257,781
Less net earnings attributable to noncontrolling interests	—			—		160,407			—			160,407
Net earnings attributable to AmSurg Corp. shareholders	97,374			233,364		171,942			(405,306		)	97,374
Preferred stock dividends	(6,792		)	—		—			—			(6,792		)
Net earnings attributable to AmSurg Corp. common shareholders	$	90,582		$	233,364	$	171,942		$	(405,306	)	$	90,582

25

Item 1. Financial Statements - (continued) Table of Contents

Condensed Consolidating Statement of Operations - For the Three Months Ended September 30, 2014 (In thousands)
	Parent Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Total Consolidated
Net revenue	$	5,551		$	221,013	$	280,589		$	(4,803	)	$	502,350
Operating expenses:
Salaries and benefits	14,961			153,653		71,846			(123		)	240,337
Supply cost	—			816		41,070			—			41,886
Other operating expenses	6,425			19,127		60,390			(4,680		)	81,262
Transaction costs	23,111			1,991		—			—			25,102
Depreciation and amortization	789			12,320		7,729			—			20,838
Total operating expenses	45,286			187,907		181,035			(4,803		)	409,425
Equity in earnings of unconsolidated affiliates	58,649			48,225		—			(104,716		)	2,158
Operating income	18,914			81,331		99,554			(104,716		)	95,083
Interest expense	23,865			14,630		559			—			39,054
Debt extinguishment costs	16,887			—		—			—			16,887
Earnings (loss) from continuing operations before income taxes	(21,838		)	66,701		98,995			(104,716		)	39,142
Income tax expense (benefit)	(8,566		)	8,051		537			—			22
Net earnings (loss) from continuing operations	(13,272		)	58,650		98,458			(104,716		)	39,120
Net earnings (loss) from discontinued operations	3,438			—		(5,135		)	—			(1,697		)
Net earnings (loss)	(9,834		)	58,650		93,323			(104,716		)	37,423
Less net earnings attributable to noncontrolling interests	—			—		47,257			—			47,257
Net earnings (loss) attributable to AmSurg Corp. shareholders	(9,834		)	58,650		46,066			(104,716		)	(9,834		)
Preferred stock dividends	(2,239		)	—		—			—			(2,239		)
Net earnings (loss) attributable to AmSurg Corp. common shareholders	$	(12,073	)	$	58,650	$	46,066		$	(104,716	)	$	(12,073	)
Amounts attributable to AmSurg Corp. common shareholders:
Earnings (loss) from continuing operations, net of income tax	$	(15,511	)	$	58,650	$	50,880		$	(104,716	)	$	(10,697	)
Discontinued operations, net of income tax	3,438			—		(4,814		)	—			(1,376		)
Net earnings (loss) attributable to AmSurg Corp. common shareholders	$	(12,073	)	$	58,650	$	46,066		$	(104,716	)	$	(12,073	)

26

Item 1. Financial Statements - (continued) Table of Contents

Condensed Consolidating Statement of Operations - For the Nine Months Ended September 30, 2014 (In thousands)
	Parent Issuer			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Total Consolidated
Net revenue	$	18,042		$	221,013	$	815,272		$	(14,189	)	$	1,040,138
Operating expenses:
Salaries and benefits	44,728			153,653		208,527			(369		)	406,539
Supply cost	—			816		119,748			—			120,564
Other operating expenses	15,440			19,127		170,496			(13,820		)	191,243
Transaction costs	26,690			1,991		—			—			28,681
Depreciation and amortization	2,429			12,320		22,784			—			37,533
Total operating expenses	89,287			187,907		521,555			(14,189		)	784,560
Gain on deconsolidation	3,411			3,411		—			(3,411		)	3,411
Equity in earnings of unconsolidated affiliates	161,340			150,916		—			(308,795		)	3,461
Operating income	93,506			187,433		293,717			(312,206		)	262,450
Interest expense	36,658			14,630		1,618			—			52,906
Debt extinguishment costs	16,887			—		—			—			16,887
Earnings from continuing operations before income taxes	39,961			172,803		292,099			(312,206		)	192,657
Income tax expense	16,687			8,051		1,064			—			25,802
Net earnings from continuing operations	23,274			164,752		291,035			(312,206		)	166,855
Net earnings (loss) from discontinued operations	3,048			—		(4,194		)	—			(1,146		)
Net earnings	26,322			164,752		286,841			(312,206		)	165,709
Less net earnings attributable to noncontrolling interests	—			—		139,387			—			139,387
Net earnings attributable to AmSurg Corp. shareholders	26,322			164,752		147,454			(312,206		)	26,322
Preferred stock dividends	(2,239		)	—		—			—			(2,239		)
Net earnings attributable to AmSurg Corp. common shareholders	$	24,083		$	164,752	$	147,454		$	(312,206	)	$	24,083
Amounts attributable to AmSurg Corp. common shareholders:
Earnings from continuing operations, net of income tax	$	21,035		$	164,752	$	151,885		$	(312,206	)	$	25,466
Discontinued operations, net of income tax	3,048			—		(4,431		)	—			(1,383		)
Net earnings attributable to AmSurg Corp. common shareholders	$	24,083		$	164,752	$	147,454		$	(312,206	)	$	24,083

27

Item 1. Financial Statements - (continued) Table of Contents

Condensed Consolidating Statement of Cash Flows - For the Nine Months Ended September 30, 2015 (In thousands)
	Parent Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total Consolidated
Cash flows from operating activities:
Net cash flows provided by (used in) operating activities	$	(20,702	)	$	313,286		$	368,391		$	(233,773	)	$	427,202
Cash flows from investing activities:
Acquisitions and related expenses	(29,157		)	(236,107		)	—			31,774			(233,490		)
Acquisition of property and equipment	(5,659		)	(15,418		)	(25,929		)	—			(47,006		)
Purchases of marketable securities	—			—			(1,743		)	—			(1,743		)
Maturities of marketable securities	—			—			4,233			—			4,233
Other	—			(779		)	(3,195		)	—			(3,974		)
Net cash flows used in investing activities	(34,816		)	(252,304		)	(26,634		)	31,774			(281,980		)
Cash flows from financing activities:
Proceeds from long-term borrowings	—			—			10,197			—			10,197
Repayment on long-term borrowings	(6,525		)	—			(9,212		)	—			(15,737		)
Distributions to owners, including noncontrolling interests	—			(59,616		)	(332,301		)	233,773			(158,144		)
Capital contributions	—			29,157			—			(29,157		)	—
Cash dividends for preferred shares	(6,792		)	—			—			—			(6,792		)
Financing cost incurred	(294		)	—			—			—			(294		)
Changes in intercompany balances with affiliates, net	524			—			(524		)	—			—
Other, net	2,984			2,653			1,871			(2,617		)	4,891
Net cash flows used in financing activities	(10,103		)	(27,806		)	(329,969		)	201,999			(165,879		)
Net increase (decrease) in cash and cash equivalents	(65,621		)	33,176			11,788			—			(20,657		)
Cash and cash equivalents, beginning of period	134,351			23,471			50,257			—			208,079
Cash and cash equivalents, end of period	$	68,730		$	56,647		$	62,045		$	—		$	187,422

28

Item 1. Financial Statements - (continued) Table of Contents

Condensed Consolidating Statement of Cash Flows - For the Nine Months Ended September 30, 2014 (In thousands)
	Parent Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Total Consolidated
Cash flows from operating activities:
Net cash flows provided by operating activities	$	103,091		$	225,098		$	309,033		$	(361,171	)	$	276,051
Cash flows from investing activities:
Acquisitions and related expenses	(2,147,585		)	(2,142,611		)	1,574			2,149,974			(2,138,648		)
Acquisition of property and equipment	(3,653		)	(2,337		)	(17,119		)	—			(23,109		)
Proceeds from sale of interests in surgery centers	—			4,969			—			—			4,969
Purchases of marketable securities	—			—			(3,486		)	—			(3,486		)
Other	(2,555		)	(648		)	5,285			—			2,082
Net cash flows used in investing activities	(2,153,793		)	(2,140,627		)	(13,746		)	2,149,974			(2,158,192		)
Cash flows from financing activities:
Proceeds from long-term borrowings	2,040,000			—			6,399			—			2,046,399
Repayment on long-term borrowings	(394,318		)	—			(8,725		)	—			(403,043		)
Distributions to owners, including noncontrolling interests	—			(206,580		)	(294,034		)	361,171			(139,443		)
Capital contributions	—			2,147,585			—			(2,147,585		)	—
Proceeds from preferred stock offering	172,500			—			—			—			172,500
Cash dividends for preferred shares	(2,239		)	—			—			—			(2,239		)
Proceeds from common stock offering	439,875			—			—			—			439,875
Payments of equity issuance costs	(24,366		)	—			—			—			(24,366		)
Financing costs incurred	(65,673		)	—			—			—			(65,673		)
Changes in intercompany balances with affiliates, net	731			—			(731		)	—			—
Other, net	1,311			(206		)	2,656			(2,389		)	1,372
Net cash flows provided by (used in) financing activities	2,167,821			1,940,799			(294,435		)	(1,788,803		)	2,025,382
Net increase in cash and cash equivalents	117,119			25,270			852			—			143,241
Cash and cash equivalents, beginning of period	6,710			—			44,130			—			50,840
Cash and cash equivalents, end of period	$	123,829		$	25,270		$	44,982		$	—		$	194,081

(17)  Subsequent Events

The Company assessed events occurring subsequent to September 30, 2015 for potential recognition and disclosure in the consolidated financial statements. The Company acquired one physician practice and two surgery centers for an aggregate purchase price of approximately $388.0 million. Other than the items described above, no events have occurred that would require adjustment to or disclosure in the consolidated financial statements. 

29

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains certain forward-looking statements (all statements other than with respect to historical fact) within the meaning of the federal securities laws, which are intended to be covered by the safe harbors created thereby.  Investors are cautioned that all forward-looking statements involve known and unknown risks and uncertainties including, without limitation, those described in this report and in our Annual Report on Form 10-K for the year ended December 31, 2014.  Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate.  Therefore there can be no assurance that the forward-looking statements included in this report will prove to be accurate.  Actual results could differ materially and adversely from those contemplated by any forward-looking statement.  In light of the significant risks and uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved.  We undertake no obligation to publicly release any revisions to any forward-looking statements in this discussion to reflect events and circumstances occurring after the date hereof or to reflect unanticipated events.

Forward-looking statements and our liquidity, financial condition and results of operations, may be affected by the following risks and uncertainties and the other risks and uncertainties discussed in this report, in our Annual Report on Form 10-K for the year ended December 31, 2014 under “Item 1A. – Risk Factors” as well as other unknown risks and uncertainties:

• the risk that we may face challenges managing our physician services segment as a new business and may not realize anticipated benefits;

• the risk of becoming subject to investigations by federal and state entities and unpredictable impacts of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the Health Reform Law);

• our ability to successfully maintain effective internal controls over financial reporting;

• our ability to implement our business strategy, manage the growth in our business, and integrate acquired businesses;

• the risk that our substantial indebtedness and restrictions in our debt instruments could adversely affect our business or our ability to implement our growth strategy or limit our ability to react to changes in the economy or our industry;

• our ability to generate sufficient cash to service all of our indebtedness, including any future indebtedness;

• the risk of regulatory changes that may obligate us to buy out interests of physicians who are minority owners of our surgery centers;

• our failure to successfully maintain numerous complex information systems and processes, implement new systems and processes, and maintain the security of those systems and processes;

• our failure to effectively and timely implement the ICD-10 coding system;

• the risk of litigation and investigations, and liability claims for damages and other expenses not covered by insurance;

• potential write-offs of the impaired portion of intangible assets;

• the risk that payments from third-party payors, including government healthcare programs, may decrease or not increase as costs increase;

• adverse developments affecting the medical practices of our physician partners;

• our ability to maintain favorable relations with our physician partners;

• our ability to grow revenues by increasing procedure volume while maintaining operating margins and profitability at our existing surgery centers;

• our ability to compete for physician partners, managed care contracts, patients and strategic relationships;

• adverse weather and other factors beyond our control that may affect our surgery centers;

• our legal responsibility to minority owners of our surgery centers, which may conflict with our interests and prevent us from acting solely in our best interests;

• the risk of changes in patient volume and patient mix;

• the risk related to revenue concentration resulting from several significant client relationships;

• the risk that contracts are cancelled or not renewed or that we are not able to enter into additional contracts under terms that are acceptable to us;

• the risk of potential decreases in our reimbursement rates, revenue and profit margin under our fee for service payor contracts;

• failure to timely or accurately bill for services;

• the risk that laws and regulations that regulate payments for medical services made by government healthcare programs could cause our revenues to decrease;

• our ability to enroll our providers in the Medicare and Medicaid programs on a timely basis;

• the risk that our strategic partnerships with certain healthcare providers are not successful;

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued) Table of Contents

• the high level of competition in our segments of the market for medical services;

• our ability to successfully recruit and retain physicians, nurses and other clinical providers with the qualifications and attributes desired by us and our clients;

• our ability to accurately assess the costs we will incur under new contracts;

• the risk that margins may be negatively impacted by cross-selling to existing clients or selling bundled services to new clients;

• our ability in some jurisdictions to enforce non-compete agreements with our physicians and other clinical employees;

• the risk of unfavorable changes in regulatory, economic and other conditions in the states where we operate;

• the risk that legislative or regulatory action may make our captive insurance company arrangement less feasible or otherwise reduce our profitability; and

• the inherent uncertainties relating to the reserves we establish with respect to our losses covered under our insurance programs.

Executive Overview

Prior to July 16, 2014, our business was solely the acquisition, operation and development of surgery centers in partnership with physicians. On July 16, 2014, we completed the acquisition of Sheridan, a physician services company, in a cash and stock transaction. At closing, we paid approximately $2.1 billion in cash and issued approximately 5.7 million shares of our common stock to the former owners of Sheridan in exchange for all of the outstanding equity interests of Sheridan. The 5.7 million shares of our common stock were valued at approximately $272.0 million in the aggregate based on the closing price of our common stock on July 16, 2014. See “— Liquidity and Capital Resources” for further discussion regarding the impact of the Sheridan transaction and associated financing transactions on our cash flows and debt financings.

Our operations consist primarily of two major segments, ambulatory services and physician services.

Ambulatory Services Overview

We are one of the largest owners and operators of outpatient ambulatory surgery centers (ASCs, surgery centers or centers) in the United States based upon total number of surgery centers. We acquire, develop and operate surgery centers in partnership primarily with physicians.  Our surgery centers are typically located adjacent to or in close proximity to the medical practices of our partner physicians. At September 30, 2015, we operated 253 ASCs in 34 states and the District of Columbia in partnership with approximately 2,000 physicians. We generally own a majority interest, primarily 51%, in the surgery centers we operate. We also own a minority interest in certain surgery centers in partnerships with leading health systems and physicians and intend to continue to pursue such partnerships.

Physician Services Overview

We are a leading national provider of multi-specialty outsourced physician services to hospitals, ASCs and other healthcare facilities. At September 30, 2015, we delivered physician services, primarily in the areas of anesthesiology, children’s services, radiology and emergency medical services, to more than 360 healthcare facilities in 27 states, with a significant presence in Florida, New Jersey, Texas and California. At September 30, 2015, we employed more than 3,000 physicians and other healthcare professionals in our physician services business. We receive reimbursement from third-party payors for fee for service medical services rendered by our affiliated healthcare professionals and employees to the patients who receive medical treatment at these facilities. In addition to this primary form of reimbursement, in certain cases, we also receive contract revenue directly from the facilities where we perform our services through a variety of payment arrangements that are established when reimbursement from third-party payors is inadequate to support the costs of providing our services. We also provide physician services and manage office-based practices in the areas of gynecology, obstetrics and perinatology.

Operating Environment

Our ASCs and physician practices depend upon third-party reimbursement programs, including governmental and private insurance programs, to pay for substantially all of the services rendered to patients. For the nine months ended September 30, 2015, we derived approximately 26% and 18%, respectively, of our ambulatory services and physician services net revenue from governmental healthcare programs, primarily Medicare and managed Medicare programs, and the remainder from a wide mix of commercial payors and patient co-pays and deductibles.  The Medicare program currently reimburses physician services and ASCs in accordance with predetermined fee schedules.  We are not required to file cost reports for our centers or physician services and, accordingly, we have no unsettled amounts from governmental third-party payors.

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued) Table of Contents

ASCs are paid under the Medicare program based upon a percentage of the payments to hospital outpatient departments pursuant to the hospital outpatient prospective patient system and reimbursement rates for ASCs are increased annually based on increases in the consumer price index (CPI). The Health Reform Law provides for the annual CPI increases applicable to ASCs to be reduced by a productivity adjustment, which is based on historical nationwide productivity gains. In 2014, ASC reimbursement rates increased by 1.2%, which positively impacted our 2014 ambulatory services revenues by approximately $6.5 million, net of the continued effects of sequestration, as discussed below. In 2015, ASC reimbursement rates increased by 1.9%, which we estimate will positively impact our 2015 ambulatory services revenues by approximately $9.0 million. Centers for Medicare and Medicaid Services (CMS) has announced that ASCs reimbursement rates will increase by 0.3% for 2016, which we estimate will not have a significant impact our 2016 ambulatory services revenues. There can be no assurance that CMS will not revise the ASC payment system or that any annual CPI increases will be material. 

Physician services are paid under the Medicare program based upon the Medicare Physician Fee Schedule (MPFS), under which CMS has assigned a national relative value unit (RVU) to most medical procedures and services that reflects the various resources required by a physician to provide the services relative to all other services. Each RVU is calculated based on a combination of work required in terms of time and intensity of effort for the service, practice expense (overhead) attributable to the service and malpractice insurance expense attributable to the service. These three elements are each modified by a geographic adjustment factor to account for local practice costs and then aggregated. Historically, the aggregated amount was multiplied by a conversion factor calculated by the sustainable growth rate (SGR) to arrive at the payment amount for each service. In April 2015, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) repealed the SGR physician payment methodology. Instead of tying payments to the SGR, MACRA provided for a 0.5% payment update for July 1, 2015 through December 31, 2015 and for each calendar year thereafter through 2019. In addition, MACRA requires the establishment of the Merit-Based Incentive Payment System (MIPS) beginning in 2019, under which physicians will receive performance-based payment incentives or payment reductions based on their performance with respect to clinical quality, resource use, clinical improvement activities, and meaningful use of electronic health records. MIPS will consolidate certain existing physician incentive programs, including payments to physicians for the meaningful use of electronic health records. MACRA also requires CMS beginning in 2019 to provide incentive payments for physicians and other eligible professionals that participate in alternative payment models, such as accountable care organizations.

In November 2012, CMS adopted a rule under the Health Reform Law that generally allows physicians in certain specialties who provide eligible primary care services to be paid at the Medicare reimbursement rates in effect in calendar years 2013 and 2014 instead of state-established Medicaid reimbursement rates (Medicaid-Medicare Parity). Generally, state Medicaid reimbursement rates are lower than federally established Medicare rates. Legislation was passed in certain states to extend Medicaid-Medicare Parity for calendar year 2015. Accordingly, we estimate our 2015 Medicaid program revenues will be reduced by approximately $3.4 million compared to a full fiscal 2014.

The Budget Control Act of 2011 (BCA) requires automatic spending reductions of $1.2 trillion for federal fiscal years (FFY) 2013 through 2021, minus any deficit reductions enacted by Congress and debt service costs. The percentage reduction for Medicare may not be more than 2% for a FFY, with a uniform percentage reduction across all Medicare programs. These BCA-mandated spending cuts are commonly referred to as “sequestration.” Sequestration began on March 1, 2013, and CMS imposed a 2% reduction on Medicare claims as of April 1, 2013. These reductions have been extended through FFY 2024. We cannot predict with certainty what other deficit reduction initiatives may be proposed by Congress, whether Congress will attempt to restructure or suspend sequestration or the impact sequestration may have on our centers. 

The Health Reform Law represents significant change across the healthcare industry and contains a number of provisions designed to reduce Medicare program spending. However, the Health Reform Law also expands coverage of uninsured individuals through a combination of public program expansion and private sector health insurance reforms.  For example, the Health Reform Law has expanded eligibility under existing Medicaid programs in states that have not opted out of the expansion, created financial penalties on individuals who fail to carry insurance coverage, established affordability credits for those not enrolled in an employer-sponsored health plan, resulted in the establishment of, or participation in, a health insurance exchange for each state and allowed states to create federally funded, non-Medicaid plans for low-income residents not eligible for Medicaid.  The Health Reform Law also required a number of private health insurance market reforms, including a ban on lifetime limits and pre-existing condition exclusions, new benefit mandates and increased dependent coverage.

Many health plans are required to cover, without cost-sharing, certain preventive services designated by the U.S. Preventive Services Task Force, including screening colonoscopies.  Medicare now covers these preventive services without cost-sharing, and states that provide Medicaid coverage of these preventive services without cost-sharing receive a one percentage point increase in their federal medical assistance percentage for these services.

Health insurance market reforms that expand insurance coverage may result in an increased volume of certain procedures at our

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centers. Most of the provisions of the Health Reform Law that are reducing the number of uninsured individuals are in effect, but, the employer mandate, which requires firms with 50 or more full-time employees to offer health insurance or pay fines, will not be fully implemented until January 1, 2016. Because of the many variables involved, including the law’s complexity, lack of implementing definitive regulations or interpretive guidance, gradual or partially delayed implementation, court challenges, amendments, repeal, or further implementation delays, we are unable to predict the net effect of the reductions in Medicare spending, the expected increases in revenues from increased procedure volumes, and numerous other provisions in the law that may affect us. We are further unable to foresee how individuals and employers will respond to the choices afforded them by the Health Reform Law. Thus, we cannot predict the full impact of the Health Reform Law on us at this time.

Critical Accounting Policies

A summary of significant accounting policies is disclosed in our 2014 Annual Report on Form 10-K under the caption “Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. There have been no changes in the nature of our critical accounting policies or the application of those policies since December 31, 2014.

Recent Accounting Pronouncements

See Note 1 in the Notes to the Unaudited Consolidated Financial Statements.

Results of Operations

Our consolidated statements of operations include the results of both our ambulatory services segment and our physician services segment. Our consolidated revenues consist of both facility fees charged for surgical procedures performed in our ASCs and fee for service revenue, contract revenue and other revenue derived principally from the provision of physician services to patients of the healthcare facilities we serve through our physician services segment. Additionally, at certain of our centers (primarily centers that perform gastrointestinal endoscopy procedures), we charge for anesthesia services provided by medical professionals employed or contracted by our centers. As it relates to our ambulatory services segment, we generally own a controlling interest, primarily 51%, in our centers, and our consolidated statements of operations include 100% of the results of operations of each of our consolidated entities, reduced by the noncontrolling partners’ share of the net earnings or loss of the surgery centers. The noncontrolling ownership interest in each limited partnership (LP) or limited liability company (LLC) is generally held directly or indirectly by physicians who perform procedures at the center. With few exceptions, we generally own 100% of the entities included in our physician services segment. On a consolidated basis, our share of the profits and losses of non-consolidated entities is reported in equity in earnings of unconsolidated affiliates in our consolidated statements of operations.

Our revenues are influenced by national surgery trends, hospital specific factors, and other factors affecting patient needs for medical services. National surgery trends can change based on changes in patient utilization, population growth and demographics, weather related disruptions, as well as general economic factors. Hospital-specific elements include changes in local availability of alternative sites of care to the patient, changes in surgeon utilization of the facility, construction and regulations that affect patient flow through the hospital. We believe patient utilization can be affected by changes in the portion of medical costs for which the patients themselves bear financial responsibility, by general economic conditions, and by other factors.

Our ambulatory services revenues are directly related to the number of procedures performed at our centers. Our overall growth in ASC procedure volume is impacted directly by the number of centers in operation and the procedure volume at existing centers. We increase our number of centers through acquisitions, joint venture partnerships and developments. Procedure growth at an existing center may result from additional contracts entered into with third-party payors, increased numbers of procedures performed by our physician partners, additional physicians utilizing the center and/or scheduling and operating efficiencies gained at the surgery center.

Our physician services revenues consist of fee for service revenue, contract revenue and other revenue. Fee for service revenue is primarily generated through the provision of anesthesiology, children's services, radiology and emergency medical services at the facilities we serve. Contract revenue reflects payments received or receivable directly from certain of the facilities where we provide medical services, and typically arise in cases where our reimbursement from third-party payors is not sufficient to cover the costs of our medical services. We also earn other revenue for certain ancillary services performed.

Expenses associated with our ambulatory services segment relate directly and indirectly to procedures performed and include: clinical and administrative salaries and benefits, supply cost and other operating expenses such as linen cost, repair and maintenance of equipment, billing fees and bad debt expense. The majority of our salary and benefits cost is associated directly with the number of centers we own and manage and tends to grow in proportion to the growth in our number of centers in operation. We also incur

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operating expenses resulting from our corporate oversight which includes salaries and benefits of our operators and administrative support infrastructure. Our centers also incur costs that are more fixed in nature, such as lease expense, legal fees, property taxes, utilities and depreciation and amortization.

Salaries and benefits expense is a significant component of the total expenses associated with our physician services segment and includes compensation and benefits for our employed physicians and other professional providers as well as the salaries and benefits of our administrative support staff. Other operating expenses of our physician services segment includes professional liability costs, costs of business development and marketing, information technology, dues and licenses, occupancy costs and other administrative functions that are indirectly related to the operations of our physician group practices. Our professional liability costs include provisions for paid and estimated losses for actual claims and estimates of claims likely to be incurred in the period, based on our past loss experience and actuarial analysis provided by a third party, as well as actual direct costs, including investigation and defense costs, and other costs related to provider professional liability. We plan to continue to expand our investment in administrative support initiatives as a result of our planned future growth from new contracts and acquisitions.

Our depreciation expense primarily relates to charges for equipment and leasehold improvements. Amortization expense primarily relates to intangible assets recorded for customer relationships, computer software, and other technologies arising from acquisitions that we have made.

Our interest expense results primarily from our borrowings used to fund acquisition and development activity, as well as interest incurred on capital leases and the amortization of deferred financing costs.

The effective tax rate on pre-tax earnings as presented is approximately 23% for the nine months ended September 30, 2015. However, after excluding the earnings attributable to non-controlling interest, and certain discrete tax items that may occur from time to time, our adjusted effective tax rate generally increases to approximately 40%. We file a consolidated federal income tax return and numerous state income tax returns with varying tax rates which reflects the blending of these rates.

Profits and losses are allocated to our noncontrolling partners, all of which relate to our ambulatory services segment, in proportion to their individual ownership percentages and reflected in the aggregate as total net earnings attributable to noncontrolling interests. The noncontrolling partners are typically organized as general partnerships, LPs or LLCs that are not subject to federal income tax. Each noncontrolling partner shares in the pre-tax earnings or loss of the entity of which it is a partner. Accordingly, net earnings attributable to the noncontrolling interests in each of our LPs and LLCs are generally determined on a pre-tax basis, and pre-tax earnings are presented before net earnings attributable to noncontrolling interests have been subtracted.

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Consolidated Operations

The following table shows certain statement of operations items expressed as a percentage of net revenues for the three and nine months ended September 30, 2015 and 2014. The operating results of Sheridan are included in our operating results effective July 16, 2014.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Net revenue	100.0	%	100.0	%	100.0	%	100.0	%
Operating expenses:
Salaries and benefits	50.4		47.8		51.0		39.1
Supply cost	7.0		8.3		7.2		11.6
Other operating expenses	15.2		16.2		15.8		18.4
Transaction costs	0.3		5.0		0.3		2.8
Depreciation and amortization	3.7		4.1		3.8		3.6
Total operating expenses	76.6		81.5		78.1		75.4
Gain on deconsolidation	1.4		—		0.3		0.3
Equity in earnings of unconsolidated affiliates	0.8		0.4		0.6		0.3
Operating income	25.5		18.9		22.8		25.2
Interest expense, net	4.7		7.8		4.9		5.1
Debt extinguishment costs	—		3.4		—		1.6
Earnings from continuing operations before income taxes	20.9		7.8		18.0		18.5
Income tax expense	5.8		—		4.1		2.5
Net earnings from continuing operations	15.1		7.8		13.8		16.0
Net loss from discontinued operations	—		(0.3	)	—		(0.1	)
Net earnings	15.1		7.4		13.8		15.9
Net earnings attributable to noncontrolling interests	8.6		9.4		8.6		13.4
Net earnings (loss) attributable to AmSurg Corp. shareholders	6.6	%	(2.0	)%	5.2	%	2.5	%

Three and Nine Months Ended September 30, 2015 compared to Three and Nine Months Ended September 30, 2014

We experienced significant changes in our consolidated operations during the three and nine months ended September 30, 2015 as compared to the three and nine months ended September 30, 2014, primarily as a result of the following:

• our operating results for the three and nine months ended September 30, 2015 include the operating results of Sheridan, which are only included from July 16 through September 30, 2014 in prior periods results;

• we incurred additional interest expense associated with the debt financing required to complete the acquisition of Sheridan;

• we completed acquisitions in both our ambulatory services and physician services segments; and

• we experienced positive same center and contract organic growth during the current year periods.

Net revenue increased $147.9 million, or 29.4%, to $650.2 million in the three months ended September 30, 2015 from $502.4 million in the three months ended September 30, 2014. Net revenue increased $822.5 million, or 79.1%, to $1,862.6 million in the nine months ended September 30, 2015 from $1,040.1 million in the nine months ended September 30, 2014. Our net revenue was impacted primarily due to the following:

• an increase of $115.3 million and $732.8 million during the three and nine months ended September 30, 2015, respectively, associated with the business acquired from Sheridan and subsequent acquisitions in our physician services segment; and

• an increase of $32.6 million and $89.7 million during the three and nine months ended September 30, 2015, respectively, associated with our ambulatory services segment.

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Operating income increased $71.0 million, or 74.6%, to $166.0 million during the three months ended September 30, 2015, from $95.1 million in the three months ended September 30, 2014. Operating income increased $163.0 million, or 62.1%, to $425.4 million during the nine months ended September 30, 2015, from $262.5 million in the nine months ended September 30, 2014. Our operating income was impacted during the three and nine months ended September 30, 2015 primarily due to the following:

• an increase of $21.1 million and $91.3 million during the three and nine months ended September 30, 2015, respectively, associated with the business acquired from Sheridan; and

• an increase of $49.8 million and $71.6 million during the three and nine months ended September 30, 2015, respectively, associated with results from our ambulatory services segment.

Net interest expense decreased to $30.2 million in the three months ended September 30, 2015, from $39.1 million in the three months ended September 30, 2014 and increased to $90.7 million in the nine months ended September 30, 2015, from $52.9 million in the nine months ended September 30, 2014, primarily due to increased indebtedness as a result of the financings associated with the acquisition of Sheridan during the year ended December 31, 2014. In addition, during the three months ended September 30, 2014, we recorded $12.8 million in interest expense on the accompanying statements of operations related to fees paid to obtain a commitment for bridge financing in order to effect the Sheridan transaction. During the three months ended September 30, 2014, we were able to obtain permanent financing and therefore expensed the commitment fee. See “- Liquidity and Capital Resources” for additional information.

We recognized income tax expense of $37.5 million and $77.0 million for the three and nine months ended September 30, 2015, respectively, compared to almost no tax expense in the three months ended September 30, 2014 and $25.8 million in the nine months ended September 30, 2014, respectively. Our reduction in tax expense for the three months ended September 30, 2014 is due to the fact we recognized a loss during the period primarily due to the substantial amount of transaction costs associated with the acquisition of Sheridan. Our effective tax rate during the three and nine months ended September 30, 2015 was approximately 27.6% and 23.0%, respectively, of earnings from continuing operations. This differs from the federal statutory income tax rate of 35.0% primarily due to the exclusion of the noncontrolling interests’ share of pre-tax earnings and the impact of state income taxes. The increase in our effective tax rate during the quarter was primarily the result of our continued evaluation of the impact of the acquisition of Sheridan on our consolidated tax structure. During the three and nine months ended September 30, 2015, we recorded an increase of approximately $4.7 million and $6.2 million, respectively, to our valuation allowances for net operating loss carryforwards resulting primarily from interest expense and transaction costs resulting from the acquisition of Sheridan, which were incurred in jurisdictions where it is not likely that sufficient taxable income will be generated to utilize those losses.

Noncontrolling interests in net earnings for the three and nine months ended September 30, 2015 increased $8.4 million and $21.0 million, respectively, from the three and nine months ended September 30, 2014 primarily as a result of noncontrolling interests in earnings at surgery centers recently added to operations. Due to the inclusion of Sheridan's revenue in the three and nine months ended September 30, 2015, noncontrolling interests in earnings as a percentage of revenues decreased to 8.6% in the three and nine months ended September 30, 2015, respectively, from 9.4% and 13.4%, respectively, in the three and nine months ended September 30, 2014.

Ambulatory Services Operations

The following table presents certain operating data at our ASCs for the three and nine months ended September 30, 2015 and 2014. An ASC is deemed to be under development when a LP or LLC has been formed with the physician partners to develop the ASC.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Procedures performed during the period at consolidated centers	434,720			410,048			1,280,541			1,211,065
Centers in operation at end of period (consolidated)	240			233			240			233
Centers in operation at end of period (unconsolidated)	13			9			13			9
Average number of continuing centers in operation (consolidated)	239			233			237			233
New centers added during the period	3			4			6			6
Centers discontinued during the period	—			4			—			5
Centers under development end of period	1			1			1			1
Centers under letter of intent, end of period	5			8			5			8
Average revenue per consolidated center (in 000s)	$	1,295		$	1,188		$	3,810		$	3,497
Same center revenues increase	6.6		%	1.7		%	5.5		%	0.6		%
Surgical hospitals in operation at end of period (unconsolidated)	1			—			1			—

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Of the continuing centers in operation at September 30, 2015, 151 centers performed gastrointestinal endoscopy procedures, 54 centers performed procedures in multiple specialties, 39 centers performed ophthalmology procedures and 9 centers performed orthopaedic procedures. In addition, during the three months ended September 30, 2015, we acquired a non-controlling interest in a surgical hospital. The results of operations of the surgical hospital are included in our consolidated statement of operations as a component of equity in earnings of unconsolidated affiliates.

A significant measurement of how much our ambulatory services revenues grow from year to year for existing centers is the change in our same-center revenue. We define our same-center group each year as those centers that contain full year-to-date operations in both comparable reporting periods, including the expansion of the number of operating centers associated with a LP or LLC. Ambulatory services revenues at our 2015 same-center group, comprising 227 centers and constituting approximately 95% of our total number of consolidated centers, increased by 6.6% and 5.5% during the three and nine months ended September 30, 2015, respectively, primarily due to the increase in the number of procedures compared to the prior year periods.

The following table presents selected statement of operations data expressed in dollars (in thousands) and as a percentage of net revenue for our ambulatory services segment.

	Three Months Ended September 30,								Nine Months Ended September 30,
	2015				2014				2015				2014
Net revenue	$	308,983	100.0	%	$	276,419	100.0	%	$	903,884	100.0	%	$	814,207	100.0	%
Operating expenses:
Salaries and benefits	94,368		30.5		85,384		30.9		274,826		30.4		251,586		30.9
Supply cost	45,162		14.6		41,070		14.9		132,651		14.7		119,748		14.7
Other operating expenses	62,795		20.3		57,919		21.0		183,867		20.3		167,900		20.6
Transaction costs	270		0.1		23,111		8.4		862		0.1		26,690		3.3
Depreciation and amortization	9,200		3.0		8,451		3.1		26,706		3.0		25,146		3.1
Total operating expenses	211,795		68.5		215,935		78.1		618,912		68.5		591,070		72.6
Gain on deconsolidation	11,829		3.8		—		—		11,606		1.3		3,411		0.4
Equity in earnings of unconsolidated affiliates	2,081		0.7		795		0.3		3,712		0.4		2,098		0.3
Operating income	$	111,098	36.0	%	$	61,279	22.2	%	$	300,290	33.2	%	$	228,646	28.1	%

Three and Nine Months Ended September 30, 2015 compared to Three and Nine Months Ended September 30, 2014

The number of procedures performed in our ASCs increased by 24,672, or 6.0%, to 434,720 and 69,476, or 5.7%, to 1,280,541 in the three and nine months ended September 30, 2015, respectively, from 410,048 and 1,211,065 in the three and nine months ended September 30, 2014, respectively. Ambulatory services revenues increased $32.6 million, or 11.8%, to $309.0 million and $89.7 million, or 11.0%, to $903.9 million, in the three and nine months ended September 30, 2015, respectively, from $276.4 million and $814.2 million in the three and nine months ended September 30, 2014, respectively. Our ambulatory services revenues were impacted during the three and nine months ended September 30, 2015 primarily due to the following:

• revenue growth of $17.4 million and $42.5 million for the three and nine months ended September 30, 2015, respectively, recognized by our 2015 same-center group, reflecting a 6.6% and 5.5% increase in our 2015 same-center group;

• centers acquired in 2014, which contributed $8.1 million and $34.3 million of additional revenues in the three and nine months ended September 30, 2015, respectively, due to having a full period of operations in 2015;

• centers acquired in 2015, which generated $14.4 million and $26.6 million in revenues during the three and nine months ended September 30, 2015, respectively; and

• reduced revenue recognized during the three and nine months ended September 30, 2015 of $6.7 million and $13.3 million, respectively, resulting from the deconsolidation of centers that were consolidated in the prior period. Our share of the results of operations from the deconsolidated centers are reflected in equity in earnings of unconsolidated affiliates in our consolidated statements of operations.

Salaries and benefits increased by $9.0 million, or 10.5%, to $94.4 million and $23.2 million, or 9.2%, to $274.8 million in the three and nine months ended September 30, 2015, respectively, from $85.4 million and $251.6 million in the three and nine months ended September 30, 2014, respectively. The increases were a result of staffing at newly acquired centers, as well as the additional staffing required at existing centers. Salaries and benefits declined as a percentage of revenue primarily due to the increase in our same center revenue during the three and nine months ended September 30, 2015.

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Supply cost increased $4.1 million, or 10.0%, to $45.2 million and $12.9 million, or 10.8%, to $132.7 million in the three and nine months ended September 30, 2015, respectively, from $41.1 million and $119.7 million in the three and nine months ended September 30, 2014, respectively. Increased supply costs for the three and nine months ended September 30, 2015 are primarily due to newly acquired or opened centers.

Other operating expenses increased $4.9 million, or 8.4%, to $62.8 million and $16.0 million, or 9.5%, to $183.9 million in the three and nine months ended September 30, 2015, respectively, from $57.9 million and $167.9 million in the three and nine months ended September 30, 2014, respectively. The additional expense in the three and nine months ended September 30, 2015 resulted primarily from:

• an increase of $2.3 million and $6.0 million, respectively, in other operating expenses at our 2015 same-center group in the three and nine months ended September 30, 2015;

• centers acquired or opened during 2014, which resulted in an increase of $1.8 million and $6.7 million, respectively, in other operating expenses in the three and nine months ended September 30, 2015; and

• centers acquired during 2015, which resulted in an increase of $2.1 million and $4.0 million, respectively, in other operating expenses in the three and nine months ended September 30, 2015.

During the three and nine months ended September 30, 2015, we incurred $0.3 million and $0.9 million, respectively, of transaction costs primarily as a result of ASC acquisition activity. During the three and nine months ended September 30, 2014, we incurred $23.1 million and $26.7 million, respectively, of transaction costs which were primarily associated with the Sheridan acquisition.

Depreciation and amortization expense increased $0.7 million, or 8.9%, to $9.2 million and $1.6 million, or 6.2%, to $26.7 million in the three and nine months ended September 30, 2015, respectively, from $8.5 million and $25.1 million in the three and nine months ended September 30, 2014, respectively, primarily as a result of centers acquired during 2014 and 2015.

Equity in earnings of unconsolidated affiliates was $2.1 million and $3.7 million during the three and nine months ended September 30, 2015, respectively, and $0.8 million and $2.1 million during the three and nine months ended September 30, 2014, respectively. The increase in our earnings from equity method investments during the three and nine months ended September 30, 2015 is due to the consummation of two separate equity method investments. As a result of these investment transactions, we contributed our controlling interest in three centers in exchange for noncontrolling interests in the new investments. Each of these investments is jointly owned by a health system and us. The newly formed investments (including the contributed centers) are controlled by the health systems. Also, as part of these transactions, we obtained a non-controlling interest in an additional center and a surgical hospital which were contributed by the health systems.

Physician Services Operations

We utilize certain measures for our physician services operations to monitor our net revenue growth, which includes same contract revenue, new contract revenue and acquired contract revenue. Our same contract revenue reflects revenue received from services provided through contracts in existence in both comparable reporting periods. Our new contract revenue reflects revenue from contracts that have not been in effect for both the entire current and comparable periods less the amount of revenue relating to contracts terminated during such periods. Acquired contract revenue reflects the revenue from acquisitions that were completed during the periods. The following table presents the percentage change related to Sheridan's net revenue growth and same contract revenue growth during the three and nine months ended September 30, 2015.

	Three Months Ended September 30,		Nine Months Ended September 30,
	2015		2015
Contribution to Net Revenue Growth:
Same contract	7.6	%	7.9	%
New contract	2.9		2.3
Acquired contract and other	15.4		11.4
Total net revenue growth	25.9	%	21.6	%
Same contract revenue growth	10.1	%	10.4	%

During the three and nine months ended September 30, 2015, compared to the prior year periods, Sheridan's total growth in net revenue resulted primarily from physician practices acquired in 2014 and 2015, which contributed approximately $41.4 million and $104.9 million, respectively. In addition, Sheridan experienced an increase in net revenue as a result of same contract growth, which

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is reflective of an increase in patient encounters and increased revenue per patient encounter, which in part is due to the continuing positive payer mix shift from serving a higher percentage of insured patients, increased acuity, and positive contracting efforts.

We evaluate our physician services revenue net of contractual adjustments and provisions for uncollectible charges. Payors generally receive discounts from standard charges, which we refer to as contractual adjustments. In addition, patients our physicians serve may be personally responsible for the payment of the medical services they receive. Our contracts with hospitals and other facilities typically require us to provide care to all patients who present at our locations. While we seek to bill for all medical services we provide, a portion of our medical services are delivered to patients that have no insurance and from whom we cannot collect full compensation. As a result, we establish a provision for uncollectible charges. Our net revenue from our physician services operations represents gross billings after provisions for contractual allowances and uncollectibles.

The following table shows selected statement of operations data expressed in dollars (in thousands) and as a percentage of net revenue for our physician services segment.

	Three Months Ended September 30,					Nine Months Ended September 30,					Period from July 16 - September 30, 2014 (1)
	2015
Net revenue	$	341,244		100.0	%	$	958,738		100.0	%	$	225,931	100.0	%
Operating expenses:
Salaries and benefits	233,164			68.3		675,281			70.4		154,953		68.6
Supply cost	476			0.1		1,361			0.1		816		0.4
Other operating expenses	36,057			10.6		110,557			11.5		23,343		10.3
Transaction costs	1,837			0.5		4,698			0.5		1,991		0.9
Depreciation and amortization	14,906			4.4		43,830			4.6		12,387		5.5
Total operating expenses	286,440			83.9		835,727			87.2		193,490		85.6
Loss on deconsolidation	(2,717		)	(0.8	)	(5,752		)	(0.6	)	—		—
Equity in earnings of unconsolidated affiliates	2,854			0.8		7,863			0.8		1,363		0.6
Operating income	$	54,941		16.1	%	$	125,122		13.1	%	$	33,804	15.0	%

(1) On July 16, 2014, we completed the acquisition of Sheridan. As such, historical amounts for periods prior to that date are not included.

Included in total operating expenses above for the three and nine months ended September 30, 2015 is approximately $243.4 million and $700.5 million, respectively, incurred for direct practice expenses, which primarily includes salaries and benefits costs of our physicians and other professional medical personnel. During the period July 16, 2014 through September 30, 2014, direct practice expenses was $164.3 million. As a percentage of physician services revenue, direct practice expense was 71.3% and 73.1%, respectively, for the three and nine months ended September 30, 2015. Direct practice expense is generally higher in the first quarter due to the concentration of additional payroll taxes and other employee benefits during the period. During the nine months ended September 30, 2015, we recognized approximately $8.3 million in other operating expenses associated with the net change in fair value of contingent consideration.

Depreciation and amortization for our physician services segment includes approximately $12.7 million and $37.6 million of amortization for the three and nine months ended September 30, 2015, respectively, resulting primarily from amortizable intangible assets related to our customer relationships with hospitals. During the period July 16, 2014 through September 30, 2014 depreciation and amortization was $10.0 million. The increase in amortization associated with customer relationships with hospitals during the three months ended September 30, 2015 compared to the prior year period is a result of acquisitions completed subsequent to the Sheridan transaction.

Liquidity and Capital Resources

Cash and cash equivalents at September 30, 2015 and December 31, 2014 were $187.4 million and $208.1 million, respectively. The decrease in cash is primarily due to the following:

• completed ambulatory services and physician services acquisitions totaling $233.5 million (net of cash acquired), which were funded with operating cash; and

• interest payments of $96.4 million, primarily including $61.7 million for our 2022 Senior Unsecured Notes, $24.3 million for our term loan, and $7.0 million for our 2020 Senior Unsecured Notes.

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued) Table of Contents

At September 30, 2015, we had working capital of $201.9 million, compared to $300.6 million at December 31, 2014. The decrease is primarily due to the cash paid for acquisitions completed during the nine months ended September 30, 2015, an increase in accrued salaries and benefits primarily resulting from increased profit sharing incentives and an increase in the estimated contingent purchase price payable that is expected to be paid in the fourth quarter of 2015. Cash flow from operations for the nine months ended September 30, 2015 generated $427.2 million compared to $276.1 million for the nine months ended September 30, 2014. Additionally, net cash flow provided by operating activities, net of distributions to noncontrolling interests, for the nine months ended September 30, 2015 was $269.1 million, compared to $136.6 million for the nine months ended September 30, 2014. The increase in operating cash flow resulted primarily from the additional earnings from our physician services segment, which is included from July 16, 2014 (the date of acquisition) through September 30, 2014 and an increase in net earnings from our ambulatory services segment. For our ambulatory services segment, positive operating cash flows of individual centers are the sole source of cash used to make distributions to our wholly-owned subsidiaries, as well as to our physician partners, which we are obligated to make on a monthly basis in accordance with each partnership’s partnership or operating agreement. Distributions to noncontrolling interests, which is considered a financing activity, were $158.1 million and $139.4 million during the nine months ended September 30, 2015 and 2014, respectively.

The principal source of our operating cash flow is the collection of accounts receivable from governmental payors, commercial payors and individuals. We bill for services as delivered, usually within a few days following the date the service is rendered for our ambulatory services segment and within five to ten days following the date the service is rendered for our physician services segment. Generally, unpaid amounts that are 30 to 45 days past due are rebilled based on a standard set of procedures. If amounts remain uncollected after 60 days, we proceed with a series of late-notice notifications until amounts are either collected, contractually written off in accordance with contracted rates or determined to be uncollectible, typically after 90 to 120 days. Receivables determined to be uncollectible are written off and such amounts are applied to our estimate of allowance for bad debts as previously established in accordance with our policy for bad debt expense. The amount of actual write-offs of account balances for each of our subsidiaries is continuously compared to established allowances for bad debt to ensure that such allowances are adequate. At September 30, 2015 and December 31, 2014, our ambulatory services segment net accounts receivable represented 38 and 37 days of revenue outstanding, respectively. At September 30, 2015 and December 31, 2014, our physician services segment net accounts receivable represented 44 and 41 days of revenue outstanding, respectively.

During the nine months ended September 30, 2015, we had total acquisition and capital expenditures of $280.5 million, which included:

• $120.6 million for the acquisition of physician practices;

• $112.9 million for the acquisition of interests in surgery centers; and

• $48.5 million for new or replacement property, including $1.5 million in new capital leases.

At September 30, 2015, we had unfunded construction and equipment purchase commitments for our new Physician Services headquarters and for surgery centers under development or under renovation of approximately $7.1 million, which we intend to fund through additional borrowings of long-term debt and operating cash flow.

As of September 30, 2015, we had $30.1 million of restricted cash and marketable securities which is restricted for the purpose of satisfying the obligations of our wholly-owned captive insurance company. Approximately $11.8 million is reflected as a component of total current assets in the accompanying consolidated balance sheets as such amount is available to satisfy the claims payments estimated to occur in the next 12 months.

During the nine months ended September 30, 2015, we received approximately $2.4 million from the exercise of stock options under our employee stock incentive plans. The excess tax benefit received from the exercise of those options and restricted stock vested was approximately $3.8 million.

On July 16, 2014, we completed the acquisition of Sheridan in a cash and stock transaction valued at approximately $2.35 billion. To fund the transaction, we completed offerings of common stock and mandatory convertible preferred stock on July 2, 2014, which resulted in the issuance of 9,775,000 shares of common stock and 1,725,000 shares of mandatory convertible preferred stock. Proceeds from the common stock offering and mandatory convertible preferred stock offering, net of transaction fees, were approximately $421.3 million and $166.6 million, respectively. In addition, on July 16, 2014, we entered into a new senior secured credit facility comprised of an $870.0 million term loan and a $300.0 million revolving credit facility and completed a private offering of $1.1 billion aggregate principal amount of our 2022 Senior Unsecured Notes. As a result of these transactions, the obligations related to our previously existing revolving credit facility and senior secured notes were satisfied and terminated.

The mandatory convertible preferred stock pays dividends at an annual rate of 5.25% of the initial liquidation preference of $100 per

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued) Table of Contents

share. Dividends, to the extent lawful and declared by our board of directors, are paid on each January 1, April 1, July 1 and October 1 in cash or, at our election (subject to certain limitations), by delivery of any combination of cash and shares of common stock. At any time prior to July 1, 2017, holders may elect to convert all or a portion of their shares of mandatory convertible preferred stock into shares of common stock at the minimum conversion rate of 1.8141 shares of common stock. On July 1, 2017, all outstanding shares of our mandatory convertible preferred stock will convert into common stock. During the nine months ended September 30, 2015, the our Board of Directors has declared three dividends each totaling $1.3125 per share in cash, or $2.3 million, respectively, for our mandatory convertible preferred stock. All dividends declared during 2015 have been paid except those dividends declared on August 27, 2015, which were funded to the paying agent to be paid on October 1, 2015 to shareholders of record as of September 15, 2015. During the nine months ended September 30, 2014, our Board of Directors declared dividends of $1.2979 per share in cash, or $2.2 million, for our mandatory convertible preferred stock.

During the nine months ended September 30, 2015, we repurchased 67,000 shares of our common stock by withholding a portion of employee restricted stock that vested, with a value of approximately $3.7 million, to cover payroll withholding taxes in accordance with the restricted stock agreements.

During 2012, we completed a private offering of $250.0 million aggregate principal amount of 5.625% senior unsecured notes due 2020 (the 2020 Senior Unsecured Notes). Interest accrues at the rate of 5.625% per annum and is payable semi-annually in arrears on May 30 and November 30, through the maturity date on November 30, 2020. At September 30, 2015, we had approximately $4.7 million in accrued interest associated with the 2020 Senior Unsecured Notes reflected in other accrued liabilities which will be paid in November 2015. The 2020 Senior Unsecured Notes contain certain covenants which, among other things, limit our ability to enter into or guarantee additional borrowing, sell preferred stock, pay dividends and repurchase stock, in each case subject to certain exceptions.

Our $870.0 million term loan matures on July 16, 2021 and bears interest equal to, at our option, the alternative base rate as defined in the agreement (ABR) plus 1.75% to 2.00% or LIBOR plus 2.75% to 3.00%, with a LIBOR floor of 0.75%, or a combination thereof (3.75% on September 30, 2015). Our revolving credit facility, which matures on July 16, 2019, permits us to borrow up to $300.0 million, at an interest rate equal to, at our option, the ABR plus 1.75% to 2.00% or LIBOR plus 2.75% to 3.00%, or a combination thereof and provides for a fee of 0.375% of unused commitments. In accordance with the terms of the senior secured credit facility, principal payments are required quarterly in installments of an amount equal to 0.25% of the aggregate initial principal amount of the term loan. We have the option to increase borrowings under the senior secured credit facility beyond the initial term under both the term loan and revolver as long as certain financial covenants are met and lender approval is obtained. On October 21, 2015, we exercised the accordion feature of our revolving credit facility and increased our borrowing capacity by $200.0 million to $500.0 million.

During 2014, we completed a private offering of $1.1 billion aggregate principal amount of 5.625% senior unsecured notes due 2022 (the 2022 Senior Unsecured Notes). Interest on the 2022 Senior Unsecured Notes accrues at the rate of 5.625% per annum and is payable semi-annually in arrears on January 15 and July 15 through the maturity date on July 15, 2022. At September 30, 2015, we had approximately $13.1 million in accrued interest associated with the 2022 Senior Unsecured Notes reflected in other accrued liabilities, which will be paid in January 2016.

For the nine months ended September 30, 2015, we had net repayments on long-term debt of $5.5 million. At September 30, 2015, we had no balance outstanding under our revolving credit agreement, $250.0 million outstanding pursuant to our 2020 Senior Unsecured Notes, $1.1 billion outstanding pursuant to our 2022 Senior Unsecured Notes and $859.1 million outstanding pursuant to our term loan. As of November 6, 2015, primarily due to acquisitions completed subsequent to quarter end, we have available under our revolving credit agreement $235.0 million for acquisition borrowings.

During the nine months ended September 30, 2015, we were in compliance with all covenants contained in our credit agreement, the indenture governing our 2020 Senior Unsecured Notes, and the indenture governing our 2022 Senior Unsecured Notes.

We expect our interest expense to be approximately $120.0 million on an annual basis primarily as a result of the indebtedness incurred in connection with the acquisition of Sheridan. We plan to fund the additional interest expense primarily through our increased operating cash flow as a result of the acquisition of Sheridan.

As of September 30, 2015, we have accrued $33.7 million as a component of accrued liabilities and other long-term liabilities in the accompanying consolidated balance sheets which represents our estimate of the fair values of the contingent consideration payable on recent acquisitions. We expect to pay approximately $28.7 million of such amount during the fourth quarter of 2015.

On January 16, 2015, we entered into an agreement to lease approximately 222,000 square feet of office space in Plantation, Florida which we intend to be the future headquarters of our physician services operations. We expect to take possession of the space in the

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Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations - (continued) Table of Contents

fourth quarter of 2015 to begin tenant improvements. Annual rent expense is expected to be approximately $2.9 million. Our rent obligation does not require cash payments until September 2016.

Based upon our current operations and anticipated growth, we believe our operating cash flow, borrowing capacity and ability to access capital markets will provide adequate resources to meet our working capital and capital expenditure requirements for the next 12 to 18 months. In addition to acquiring and developing ASCs and physician practices, we may from time to time consider other acquisitions or strategic joint ventures involving other companies, multiple-center chains, networks of ASCs or physician practices. Such acquisitions, joint ventures or other opportunities may require an amendment to our current debt agreements or additional external financing, which may include sales of equity securities. We cannot assure you that any required financing will be available, or will be available on terms acceptable to us.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

We are subject to market risk primarily from exposure to changes in interest rates based on our financing, investing and cash management activities. We utilize a balanced mix of maturities along with both fixed rate and variable rate debt to manage our exposures to changes in interest rates. Our variable debt instruments are primarily indexed to the prime rate or LIBOR. Interest rate changes would result in gains or losses in the market value of our fixed rate debt portfolio due to differences in market interest rates and the rates at the inception of the debt agreements. Based upon our indebtedness at September 30, 2015, a 100 basis point interest rate change would impact our net earnings and cash flow by approximately $5.2 million annually. Although there can be no assurances that interest rates will not change significantly, we do not expect changes in interest rates to have a material effect on our net earnings or cash flows in 2015 based on our indebtedness at September 30, 2015.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management team, including our chief executive officer and chief financial officer, we conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of September 30, 2015. Based on that evaluation, our chief executive officer (principal executive officer) and chief financial officer (principal accounting officer) have concluded that our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

As a result of the completion of the Sheridan acquisition on July 16, 2014, we are substantially complete with our implementation of disclosure controls and procedures and internal controls over financial reporting of Sheridan. We will continue to integrate them within our broader framework of controls and expect to be finalized as of December 31, 2015. The SEC’s rules require us to include acquired entities in our assessment of the effectiveness of internal control over financial reporting no later than the annual management report following the first anniversary of the acquisition. We plan to complete the evaluation and the integration of Sheridan within the required time frames and report management’s assessment of our internal control over financial reporting in our first annual report in which such assessment is required for this acquisition. There has been no change in our internal control over financial reporting during the quarter ended September 30, 2015 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

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Part II

Item 1.  Legal Proceedings

There have been no material changes during the nine months ended September 30, 2015 to the legal proceedings we previously described in our 2014 Annual Report on Form 10-K.

Item 1A. Risk Factors

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.   Defaults Upon Senior Securities

None.

Item 4.   Mine Safety Disclosures

Not applicable.

Item 5.   Other Information

None.

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Item 6.   Exhibits

Exhibit	Description
10.1	Incremental Agreement No. 1, dated October 21, 2015, by and among the Company, Citibank, N.A., as administrative agent and the other lenders party thereto (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K, dated October 27, 2015).
31.1	Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets at September 30, 2015 and December 31, 2014, (ii) the Consolidated Statements of Earnings for the three and nine month periods ended September 30, 2015 and 2014, (iii) the Consolidated Statements of Changes in Equity for the nine month periods ended September 30, 2015 and 2014, (iv) the Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2015 and 2014 and (v) the notes to the Unaudited Consolidated Financial Statements for the nine month periods ended September 30, 2015 and 2014

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Signature

Pursuant to the requirements 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.

		AMSURG CORP.
Date:	November 6, 2015
		By:	/s/ Claire M. Gulmi
			Claire M. Gulmi
			Executive Vice President and
			Chief Financial Officer
			(Principal Financial and Duly Authorized Officer)

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