Contract analysis

I. EXECUTIVE SUMMARY This memorandum analyzes the management services arrangements ("MSAs") between Arbor Health Technologies Inc. ("AHT") and nine independently owned physician practices in Strathmore Mutual Insurance, Connecticut metropolitan area, administered through ConnectiCare Physicians Network, LLC ("CPN"), under the federal Physician Self-Referral Law (the "Stark Law," 42 U.S.C. § 1395nn) and the Anti-Kickb

1. Stark Law — Indirect Compensation Arrangement. The CPN management services arrangements, as currently structured, likely constitute non-compliant indirect compensation arrangements under the Stark Law. An unbroken chain of financial relationships exists between the referring physicians in the managed practices and AHT, the entity furnishing DHS. The percentage-based management fee creates a structure in which aggr

2. Stark Law — Exception Unavailability. The percentage-based fee formula presents a significant obstacle to satisfying the indirect compensation arrangement exception at 42 C.F.R. § 411.357(p), the fair market value exception at 42 C.F.R. § 411.357(l), and other potentially applicable Stark Law exceptions. The absence of an independent fair market value ("FMV") appraisal for the 15% management fee compounds this def

3. Anti-Kickback Statute — Safe Harbor Non-Compliance. The management contracts safe harbor at 42 C.F.R. § 1001.952(d) is not fully satisfied. Most critically, the 15% of collected net revenue fee is not "set in advance" within the meaning of the safe harbor, and the fee methodology does not adequately insulate compensation from variation with the volume or value of referrals.

4. Restructuring Recommended. We recommend prompt restructuring of the management fee formula, independent FMV substantiation, implementation of referral tracking and monitoring safeguards, compliance training, and evaluation of voluntary self-disclosure under the CMS Self-Referral Disclosure Protocol ("SRDP") and the OIG Self-Disclosure Protocol ("SDP"). The analysis and recommendations set forth below should be con

II. SCOPE AND METHODOLOGY A. Scope of Review This memorandum addresses all nine MSAs between AHT (through CPN) and the independently owned Hartford-area physician practices. The analysis is limited to the federal Stark Law and AKS implications of these arrangements and provides a brief overview of relevant Connecticut state law considerations. A detailed state-law analysis is contained in the companion Connecticut Re

1. Individual Management Services Agreements between CPN and each of the nine managed practices (executed copies and any amendments), specifically: a. MSA with Hartford Primary Care Associates, P.C. (executed March 1, 2020) b. MSA with Farmington Valley Internal Medicine, LLC (executed April 15, 2020) c. MSA with Greater Hartford Cardiology Group, P.C. (executed June 1, 2020) d. MSA with Glastonbury Family Physicians

2. CPN Operating Agreement and organizational documents, including the Articles of Organization filed with the Connecticut Secretary of State and all amendments thereto.

3. AHT financial records reflecting management fee revenue received from CPN and through CPN from each managed practice for FY2021 and FY2022.

4. Referral data and reports documenting patient referrals from the managed practices to AHT-owned ancillary services (clinical laboratory, diagnostic imaging, and physical therapy), extracted from the ArborConnect platform and AHT's billing and claims systems.

5. ArborConnect licensing agreements, platform documentation, integration specifications, and deployment records for the managed practices.

6. The Grayson Whitaker & Associates LLP compliance gap assessment report (GW-AHT-2022-Final, dated December 12, 2022), including supporting workpapers and appendices provided by the engagement principal, Carolyn Fitch.

7. AHT organizational chart showing the CPN reporting structure, ownership hierarchy, and management chain.

8. AHT FY2022 Medicare cost report data, payer mix reports, and ancillary services revenue breakdowns.

9. Halsted Accounting Group LLP FY2022 management letter (engagement partner: Ronald Desmond), containing observations regarding FMV substantiation requirements for certain AHT arrangements.

10. AHT Compliance Program documentation, including the Code of Conduct, policies and procedures, and compliance training records. C. Interviews Conducted C&H conducted interviews with the following individuals during the course of this review: • Derek Huang, Chief Compliance Officer, AHT — interviewed on February 8, 2023 and March 14, 2023 regarding the compliance program structure, referral monitoring capabilities,

III. FACTUAL BACKGROUND A. AHT Corporate and Operational Overview Arbor Health Technologies Inc. ("AHT") is a Delaware corporation headquartered at 200 Concord Avenue, Suite 400, Cambridge, Massachusetts 02138 (EIN: 84-3291057; NPI: 1497253810). AHT operates a multi-state healthcare platform that combines clinical operations with health information technology. On the clinical side, AHT operates twenty-three (23) outp

1. Percentage-Based Fee Structure Linked to Referral-Influenced Revenue. The 15% of collected net revenue fee structure creates a direct relationship between AHT's management fee revenue and the managed practices' overall collections, which include collections influenced by referral activity to AHT-owned ancillary services.

2. Absence of Documented FMV Analysis. The report noted that AHT had no documentation in its files — no independent appraisal, no internal memorandum, no market benchmarking study — establishing that the 15% management fee rate represents fair market value for the scope of management services actually provided by CPN.

3. Absence of Referral Tracking Safeguards. The MSAs contain no provisions restricting, monitoring, or tracking referrals from managed practice physicians to AHT-owned ancillary services. No compliance certifications, anti-referral covenants, or independent medical judgment representations are included in the current MSA templates.

4. Potential Stark Law Indirect Compensation Arrangement Issues. The report specifically identified the risk that the chain of financial relationships — from AHT through CPN to the managed practices and then to the referring physicians — could constitute an "indirect compensation arrangement" under 42 C.F.R. § 411.354(c), with the percentage-based fee varying with the volume or value of referrals. The Grayson Whitake

IV. STARK LAW ANALYSIS A. Overview of Stark Law Prohibition and Referral Relationship The Stark Law, formally the Physician Self-Referral Law, prohibits a physician from making a "referral" for "designated health services" to an entity with which the physician (or an immediate family member of the physician) has a "financial relationship," unless an exception applies. 42 U.S.C. § 1395nn(a)(1). If a referral is made i

1. Management Fee Variation with Referral Volume The 15% of collected net revenue management fee is directly proportional to the managed practice's total collections. If referrals from managed practice physicians to AHT-owned ancillary services increase, and if those referrals generate downstream revenue that flows back to the managed practice in any form — or if the increased referral activity is correlated with inc

2. Physician Compensation Variation The more technically precise question under the second element is whether the referring physician's aggregate compensation from the managed practice entity varies with, or takes into account, the volume or value of referrals. This depends on how each managed practice compensates its physicians. If physicians are compensated based on a share of practice profits, a percentage of coll

4. Conclusion on Volume/Value Element We conclude that the second element of the indirect compensation arrangement test is likely satisfied in the CPN context. The percentage-based management fee creates a structural linkage between AHT's compensation and managed practice revenue that is influenced, directly or indirectly, by referral activity. To the extent that managed practice physicians are compensated in a manne

1. An unbroken chain of financial relationships exists between each referring physician and AHT (through the managed practice entity and CPN).

2. The referring physicians receive aggregate compensation from their managed practice entities that varies with, or takes into account, the volume or value of referrals to AHT, due to the percentage-based management fee structure and the managed practices' compensation methodologies.

3. AHT has actual knowledge of the referral relationship and the compensation dynamics. The existence of an indirect compensation arrangement means that AHT's furnishing of DHS pursuant to referrals from managed practice physicians is prohibited under the Stark Law, 42 U.S.C. § 1395nn(a)(1), unless an applicable exception is satisfied. Any claims submitted to Medicare for DHS referred by managed practice physicians d

1. Indirect Compensation Arrangement Exception — 42 C.F.R. § 411.357(p) The regulations provide a specific exception for indirect compensation arrangements at 42 C.F.R. § 411.357(p). To qualify, the arrangement must satisfy each of the following requirements: (a) The compensation received by the referring physician under the arrangement is fair market value for services and items actually provided, not taking into ac

2. Fair Market Value Exception — 42 C.F.R. § 411.357(l) The fair market value exception provides that compensation resulting from an arrangement between an entity and a physician (or a group of physicians) for the provision of items or services is not a "compensation arrangement" for Stark Law purposes if the arrangement meets certain requirements, including that the arrangement is set out in writing, the compensatio

3. Value-Based Enterprise Exceptions — 42 C.F.R. § 411.357(aa) The 2021 Stark Modernization Rule introduced new exceptions for "value-based arrangements" between participants in a "value-based enterprise." 42 C.F.R. § 411.357(aa). A "value-based enterprise" is defined as two or more participants collaborating to achieve at least one value-based purpose. A "value-based purpose" includes coordinating and managing the c

V. ANTI-KICKBACK STATUTE ANALYSIS A. Overview of AKS Prohibition The federal Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), prohibits any person from knowingly and willfully offering, paying, soliciting, or receiving any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward any person for referring an individual for the furnishin