Contract analysis

I. EXECUTIVE SUMMARY This memorandum analyzes the Connecticut referral fee prohibition statute, Conn. Gen. Stat. § 20-7a(d), and its applicability to two principal categories of Arbor Health Technologies Inc. ("AHT") operations in the State of Connecticut: (1) AHT's four Connecticut outpatient clinics, branded as "Arbor Health Clinics," which provide primary care, specialty care, and ancillary services to patients th

II. SCOPE AND ENGAGEMENT CONTEXT This memorandum is issued as part of the comprehensive AKS/Stark Law self-assessment and remediation engagement authorized by AHT Board Resolution No. 2023-01-004, adopted on January 24, 2023, by the Board of Directors of Arbor Health Technologies Inc. That resolution directed AHT's General Counsel to retain outside counsel to conduct a thorough review of all physician compensation, r

III. FACTUAL BACKGROUND A. AHT's Connecticut Clinic Operations Arbor Health Technologies Inc. is a Delaware corporation headquartered at 200 Concord Avenue, Suite 400, Cambridge, Massachusetts 02138 (EIN: 84-3291057; NPI: 1497253810). AHT was founded in 2009 and has grown through a combination of organic expansion and acquisitions to become a multi-state healthcare services platform operating twenty-three outpatient

IV. STATUTORY FRAMEWORK: CONN. GEN. STAT. § 20-7a(d) A. Text and Scope of the Prohibition Connecticut General Statutes § 20-7a(d) establishes a broad prohibition on the payment or receipt of referral-linked remuneration by healthcare providers and facilities operating within the state. The statute provides, in pertinent part, that no person licensed to practice medicine or surgery, or any other licensed health care p

V. APPLICATION TO AHT CONNECTICUT CLINIC OPERATIONS A. Employed Physician Arrangements AHT's W-2 employed physicians at its four Connecticut clinic locations represent the lowest-risk category of arrangements under the Connecticut referral fee prohibition. These physicians are bona fide employees of AHT, compensated under employment agreements that specify base salaries, benefits, and, in certain cases, performance-b

VI. APPLICATION TO CONNECTICARE PHYSICIANS NETWORK MSA ARRANGEMENTS A. Structure of the Referral Chain The CPN management services arrangements create a complex, multi-directional web of financial relationships and referral patterns that is at the center of the Connecticut state-law analysis. The structure may be summarized as follows:

1. AHT provides comprehensive practice management services to nine independently owned physician practices in Strathmore Mutual Insurance area through the CPN entity.

2. Each managed practice pays AHT a management fee calculated as 15% of the practice's collected net revenue, aggregating to approximately $4.73 million in FY2022.

3. Several of the nine managed practices refer patients to AHT-owned ancillary services—specifically, AHT's laboratory, diagnostic imaging, and physical therapy operations—for testing, imaging studies, and rehabilitation services.

4. AHT earns ancillary service revenue from these referred patients, in addition to the management fee revenue it earns from the referring practices. Under Conn. Gen. Stat. § 20-7a(d), the combination of these elements creates a two-directional flow of remuneration and referrals that may constitute prohibited consideration for referrals. Specifically, the management fee payments flow from the managed practices to AHT

VII. APPLICATION TO MERIDIAN DIAGNOSTICS ARRANGEMENT A. Per-Scan Facility Access Fee Under Connecticut Law The Meridian per-scan facility access fee arrangement presents a distinct category of Connecticut state-law risk. Under this arrangement, Meridian pays AHT $185 per scan for access to AHT clinic space at which Meridian positions its mobile MRI unit and provides diagnostic imaging services. In FY2022, approximate

VIII. INTERACTION WITH FEDERAL AKS AND STARK LAW ANALYSIS A. Layered Compliance Obligations AHT's Connecticut arrangements are subject to three overlapping and independently applicable regulatory frameworks:

1. Federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) and the accompanying regulatory safe harbors (42 C.F.R. § 1001.952), which prohibit the knowing and willful offer, payment, solicitation, or receipt of remuneration to induce or reward referrals of items or services reimbursable under federal healthcare programs;

2. Federal Physician Self-Referral Law (Stark Law) (42 U.S.C. § 1395nn) and the implementing regulations (42 C.F.R. § 411.350 et seq.), which prohibit physicians from referring Medicare patients for designated health services to entities with which the physician (or an immediate family member) has a financial relationship, unless an applicable exception is met; and

3. Connecticut State Referral Fee Prohibition (Conn. Gen. Stat. § 20-7a(d)), which prohibits the payment or receipt of any fee, commission, rebate, or other consideration in