Contract analysis

I. Executive Summary The purpose of this memorandum is to evaluate whether any Stark Law (42 U.S.C. § 1395nn) violations identified during the comprehensive self-assessment engagement undertaken by Arbor Health Technologies Inc. ("AHT") warrant voluntary self-disclosure to the Centers for Medicare & Medicaid Services ("CMS") under the Self-Referral Disclosure Protocol ("SRDP"). This memorandum sets forth the factual

II. Background on the CMS Self-Referral Disclosure Protocol A. Statutory and Regulatory Framework The physician self-referral law, commonly known as the Stark Law, is codified at 42 U.S.C. § 1395nn. The Stark Law prohibits a physician from making referrals for designated health services payable by Medicare or Medicaid to an entity with which the physician (or an immediate family member of the physician) has a financi

III. Identification and Analysis of Potential Stark Law Violations This section sets forth C&H's detailed analysis of the specific arrangements identified as presenting the highest risk of Stark Law violations. For each arrangement, we describe the factual background, identify the applicable DHS category and financial relationship, analyze the relevant Stark Law exceptions, estimate the potential overpayment exposure

1. Arrangement Summary AHT and Meridian Diagnostics LLC ("Meridian") are parties to a Services Agreement dated March 1, 2021 (the "Meridian Agreement"). Meridian's principal address is 88 Trumbull Street, Hartford, Connecticut 06103, and its EIN is 82-4019673. Under the Meridian Agreement, Meridian provides mobile MRI and advanced diagnostic imaging services at four AHT clinic locations in Connecticut. Meridian suppl

2. Stark Law Analysis DHS Category Implicated. The DHS category implicated by this arrangement is "radiology and certain other imaging services," as defined in 42 U.S.C. § 1395nn(h)(6) and the corresponding regulations at 42 C.F.R. § 411.351. MRI services fall squarely within this DHS category. Referral Relationship. AHT-employed physicians refer patients to Meridian for MRI services. Meridian is an entity that furni

3. Estimated Overpayment Exposure The relevant period for overpayment exposure analysis extends from March 1, 2021 (the effective date of the Meridian Agreement) through the date on which the arrangement is restructured to achieve compliance. For purposes of this preliminary estimate, we assume restructuring will be completed within approximately 60 days of the date of this memorandum (i.e., by approximately August 1

4. Risk Assessment Risk Level: HIGH The Meridian per-scan facility access fee is facially inconsistent with the requirements of all applicable Stark Law exceptions regarding volume and value of referrals. The arrangement has been in place since March 2021, creating over two years of potentially tainted DHS referrals and a substantial aggregate exposure. The volume of DHS referrals ($2.8 million per year) and the dire

1. Arrangement Summary AHT and Pinnacle Laboratory Services Inc. ("Pinnacle") are parties to a Preferred Laboratory Agreement dated June 15, 2020 (the "Pinnacle Agreement"). Pinnacle's principal address is 1200 Warwick Avenue, Suite 110, Warwick, Rhode Island 02886, and its EIN is 05-6138290. Under the Pinnacle Agreement, AHT clinics in Rhode Island and southeastern Massachusetts designate Pinnacle as the preferred l

2. Stark Law Analysis — Non-Monetary Remuneration DHS Category Implicated. The DHS category implicated by the Pinnacle arrangement is "clinical laboratory services," as defined in 42 U.S.C. § 1395nn(h)(6) and the corresponding regulations at 42 C.F.R. § 411.351. Referral and Financial Relationship. AHT-employed physicians refer patients to Pinnacle for outpatient laboratory services. Pinnacle furnishes DHS to patient

3. Stark Law Analysis — Dr. Karen Ellsworth's Ownership Interest Dr. Karen Ellsworth is the spouse of Dr. Nathan Ellsworth, AHT's Chief Executive Officer. As a spouse, Dr. Karen Ellsworth is an "immediate family member" of Dr. Nathan Ellsworth as that term is defined in the Stark Law (42 U.S.C. § 1395nn(a)(2) and 42 C.F.R. § 411.351). Dr. Nathan Ellsworth is a physician who, in his capacity as CEO of AHT, may make or

4. Estimated Overpayment Exposure The relevant period for overpayment exposure analysis extends from June 15, 2020 (the effective date of the Pinnacle Agreement) through the date on which the non-compliant elements of the arrangement are remediated. The estimated DHS referral volumes from AHT physicians to Pinnacle during the relevant period are as follows: Applying AHT's 61% Medicare/Medicaid payer mix yields an est

5. Risk Assessment Risk Level: HIGH The Pinnacle arrangement presents two independent and compounding Stark Law concerns, either of which standing alone would warrant a high-risk classification. Mitigating factors. Dr. Karen Ellsworth's ownership interest is passive (4.2%) and relatively modest. Dr. Nathan Ellsworth serves in an administrative/executive capacity (CEO) and may not personally make referral decisions fo

1. Arrangement Summary AHT maintains 38 independent contractor/medical director arrangements with physicians who provide medical directorship and clinical oversight services across AHT's 23 outpatient clinic locations and ancillary service lines. These physicians provide a range of services, including clinical oversight, quality assurance, peer review, policy development, staff supervision, credentialing support, and

2. Stark Law Analysis All 38 medical directors are physicians who are in a position to make or influence referrals to AHT for DHS, including clinical laboratory services, radiology and imaging services, and physical therapy services — all of which are provided at AHT's 23 outpatient clinic locations. The compensation paid by AHT to these physicians constitutes a direct compensation arrangement under the Stark Law (42

3. Estimated Overpayment Exposure The total DHS volume attributable to referrals by the 38 medical directors is substantial but requires detailed analysis of referral patterns for each individual physician. AHT's 23 clinics provide clinical laboratory services, radiology and imaging services, and physical therapy services — all of which are DHS categories — and the medical directors are generally in a position to ref

4. Risk Assessment Risk Level: HIGH (aggregate) / MODERATE to HIGH (individual arrangements) The effective average hourly rate of $501.28 above the 90th percentile is a significant red flag that, in the aggregate, suggests a systemic compensation issue across AHT's medical director arrangements. The number of potentially non-compliant arrangements (38) and the aggregate annual compensation ($1.92 million) compound th

1. Overview. As part of its asset acquisition of Lakeview Medical Associates, P.C., which closed on August 15, 2022, AHT assumed a portfolio of physician agreements and real estate leases previously maintained by Lakeview. This portfolio includes: 14 physician agreements (12 employment agreements and 2 independent contractor agreements); 3 medical director agreements with annual stipends of $45,000, $60,000, and $72,

2. Stark Law Analysis The physician employment agreements assumed from Lakeview are analyzed primarily under the employment exception to the Stark Law (42 C.F.R. § 411.357(c)). The employment exception requires that: (a) the employment is for identifiable services; (b) the amount of remuneration is consistent with fair market value for the services; (c) the remuneration is not determined in a manner that takes into a

3. Estimated Overpayment Exposure The relevant period for overpayment exposure with respect to the Lakeview legacy arrangements begins on August 15, 2022 (the closing date of the acquisition) and extends through the date of remediation. DHS generated by the 14 Lakeview physicians at AHT facilities constitutes a subset of AHT's total DHS volume and requires isolation of referrals attributable to these specific physici

1. Overview. AHT provides management services to nine independently owned physician practices in Strathmore Mutual Insurance, Connecticut metropolitan area through ConnectiCare Physicians Network, LLC ("CPN"), a management services organization based at 55 Asylum Street, 7th Floor, Hartford, Connecticut 06103. Under the management services agreements ("MSAs") between AHT and each managed practice, AHT provides admini

2. Stark Law Analysis The MSA arrangements require analysis under the Stark Law's indirect compensation arrangement framework (42 C.F.R. § 411.354(c)). An indirect compensation arrangement exists when: (a) there is an unbroken chain of persons or entities between the