PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
MANAGEMENT SERVICES AGREEMENT
Template — Prepared by Calderwood & Harkness LLP for Arbor Health Technologies Inc.
Matter Number: 1010-00003
Date of Template: ______ (To be completed upon adoption)
DRAFTING NOTE: This template is designed for use in management services arrangements between Arbor Health Technologies Inc. (or its subsidiaries) and independently owned physician practices, including arrangements administered through ConnectiCare Physicians Network, LLC. It incorporates Anti-Kickback Statute management contracts safe harbor provisions (42 C.F.R. § 1001.952(d)) and Stark Law indirect compensation arrangement safeguards (42 C.F.R. § 411.354(c)). This template supersedes all prior MSA forms.
DRAFTING INSTRUCTIONS AND USAGE GUIDANCE
This Section Is for Internal Use Only and Shall Not Be Included in Executed Agreements
I. Purpose of This Template
This template is to be used for all new and renewed management services arrangements between Arbor Health Technologies Inc. ("AHT") — or any AHT subsidiary, controlled affiliate, or related entity — and independently owned physician practices. It replaces and supersedes all prior management services agreement forms, including the legacy form designated "AHT-MSA-2019-Rev3" and the ConnectiCare form designated "CPN-MSA-2020."
This template has been specifically designed for arrangements of the type currently administered through ConnectiCare Physicians Network, LLC ("CPN") in Strathmore Mutual Insurance, Connecticut area, which currently encompasses nine (9) managed practices. However, the template is intended for broader use across all AHT-managed practice arrangements, regardless of geography, specialty, or the specific AHT subsidiary or affiliate serving as the contracting Manager entity.
Transition from Percentage-of-Collections Fee Structure. The prior MSA form utilized a percentage-of-collected-net-revenue fee structure, historically set at fifteen percent (15%) of collected net revenue. Following a comprehensive compliance review, Calderwood & Harkness LLP has identified this fee structure as presenting material compliance risk under the Anti-Kickback Statute ("AKS") and the Physician Self-Referral Law ("Stark Law"), particularly in circumstances where managed practices refer patients for Designated Health Services provided by Manager-affiliated entities (e.g., AHT-owned laboratory services, diagnostic imaging centers, or physical therapy facilities). The percentage-of-collections structure creates an inherent risk that the management fee may be deemed to "take into account the volume or value of referrals" in violation of the AKS management contracts safe harbor at 42 C.F.R. § 1001.952(d)(5) and the Stark Law indirect compensation arrangement exception at 42 C.F.R. § 411.354(c)(2)(ii).
Accordingly, this template offers two alternative fee structures that are designed to mitigate this compliance risk:
(a) Alternative A — Fixed Monthly Management Fee. A fixed dollar amount payable monthly, determined in advance and substantiated by a fair market value opinion, that does not vary based on the volume or value of referrals or collections.
(b) Alternative B — Blended Fee Model (Fixed Base Plus Limited Variable Component). A fixed monthly base fee supplemented by a limited variable component tied to administrative metrics (e.g., number of patient encounters processed, number of claims submitted, number of credentialing applications completed) that are not proxies for referral volume or value.
The percentage-of-collections model should be transitioned away from in all existing and future arrangements, in favor of Alternative A or Alternative B, per the recommendations of Calderwood & Harkness LLP. All legacy arrangements utilizing the percentage-of-collections model should be amended or replaced no later than the next renewal date.
II. Approval Workflow
All management services agreements using this template must be reviewed and approved by the following individuals prior to execution:
(a) The General Counsel of Arbor Health Technologies Inc. (currently Patricia Yamamoto, Esq.), who shall review the agreement for legal sufficiency, regulatory compliance, and consistency with this template; and
(b) The Chief Compliance Officer of Arbor Health Technologies Inc. (currently Derek Huang), who shall review the agreement for compliance with AHT's compliance program, including the Fair Market Value Determination Procedures, referral tracking requirements, and exclusion screening protocols.
Any deviations from the template terms — including, without limitation, modifications to the fee structure, term length, scope of services, termination provisions, or regulatory safeguard provisions — require prior written approval from the General Counsel. Such approval shall be documented in writing and maintained in the compliance files for the applicable arrangement.
All executed MSAs must be accompanied by a current fair market value opinion from an independent valuation firm (e.g., Northbridge Valuation Advisors LLC) or a documented internal FMV benchmarking analysis prepared in accordance with AHT's Fair Market Value Determination Procedures (most recently revised March 2023). The FMV substantiation must be dated within three (3) years of the execution date (or the most recent renewal date) of the agreement.
III. Regulatory Cross-References
The following federal and state statutes, regulations, and guidance documents are relevant to the drafting and administration of management services agreements under this template:
Federal Statutes and Regulations:
• Anti-Kickback Statute: 42 U.S.C. § 1320a-7b(b)
• AKS Management Contracts Safe Harbor: 42 C.F.R. § 1001.952(d)
• Stark Law (Physician Self-Referral Law): 42 U.S.C. § 1395nn
• Stark Law — Indirect Compensation Arrangement: 42 C.F.R. § 411.354(c)
• Stark Law Exceptions — Personal Services: 42 C.F.R. § 411.357(d)
• Stark Law Exceptions — Fair Market Value: 42 C.F.R. § 411.357(l)
• CMS Final Rule on Stark Law Modernization: 85 Fed. Reg. 77492 (effective January 19, 2021)
• AKS Final Rule on Safe Harbor Modernization: 85 Fed. Reg. 77684 (effective January 19, 2021)
State Statutes (Selected — Applicable to Current Managed Practice Locations):
• Connecticut Referral Fee Prohibition: Conn. Gen. Stat. § 20-7a(d) (relevant for Connecticut-based managed practices, including all practices currently administered through CPN)
• Massachusetts Anti-Kickback Law: M.G.L. c. 175H, § 3 (relevant for any Massachusetts-based managed practices that may be established or acquired in the future)
Additional state-specific statutes and regulations should be identified and cross-referenced as the managed practice network expands into new jurisdictions.
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (this "Agreement") is entered into as of _____ (the "Effective Date"), by and between:
Manager: ___________ ("Manager"), a _____ organized under the laws of the State of _____, with its principal office located at ____________; and
Practice: ___________ ("Practice"), a _____ organized under the laws of the State of _____, with its principal office located at ____________.
Manager and Practice are each referred to herein as a "Party" and collectively as the "Parties."
[DRAFTING NOTE: For AHT-administered arrangements, the Manager will typically be Arbor Health Technologies Inc. or ConnectiCare Physicians Network, LLC, depending on the contracting structure. Insert the correct entity. The Practice must be the entity that employs or contracts with the physicians providing clinical services. Under applicable state law, the Practice must maintain independent clinical judgment and control over the practice of medicine.]
RECITALS. WHEREAS, Practice is an independently owned physician practice duly organized and authorized to provide professional medical services, including ___________ (the "Medical Services"), and Practice employs or contracts with licensed physicians who provide such Medical Services to patients (collectively, the "Practice Physicians"); and
WHEREAS, Manager is engaged in the business of providing management, administrative, and operational support services to physician practices, and Manager possesses the expertise, resources, infrastructure, and personnel necessary to deliver such services; and
WHEREAS, Practice desires to engage Manager to provide certain non-clinical management services to Practice in order to enhance the administrative efficiency, operational effectiveness, and overall performance of Practice's operations, and Manager desires to provide such services to Practice, all on the terms and conditions set forth herein; and
WHEREAS, the Parties intend this Agreement to comply with all applicable federal and state laws and regulations, including the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) and its management contracts safe harbor (42 C.F.R. § 1001.952(d)), the federal Physician Self-Referral Law (42 U.S.C. § 1395nn) (the "Stark Law"), and all applicable state anti-kickback and referral fee prohibitions, and the Parties intend that this Agreement shall be interpreted in a manner consistent with such compliance objectives; and
WHEREAS, the Management Fee (as defined herein) is intended to reflect the fair market value for the Management Services (as defined herein) actually provided by Manager hereunder and is not intended, in whole or in part, to induce or reward the referral of patients, items, or services payable by any Federal Healthcare Program (as defined herein), any commercial health plan, or any other third-party payer.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:
(a) "Affiliate" means, with respect to any person or entity, any other person or entity that directly or indirectly controls, is controlled by, or is under common control with such person or entity. For purposes of this definition, "control" means the power to direct or cause the direction of the management and policies of an entity, whether through ownership of voting securities, by contract, or otherwise.
(b) "AKS" means the federal Anti-Kickback Statute, codified at 42 U.S.C. § 1320a-7b(b), as amended from time to time, and all regulations promulgated thereunder.
(c) "Ancillary Services" means laboratory services, diagnostic imaging services, physical therapy services, and other designated health services (as defined under 42 U.S.C. § 1395nn(h)(6)) that are provided by Manager, Manager's Affiliates, or any entity in which Manager or Manager's Affiliates have a direct or indirect financial interest.
(d) "Applicable Law" means all federal, state, and local laws, statutes, regulations, rules, ordinances, orders, directives, and guidance applicable to the Parties' performance under this Agreement, including, without limitation, the AKS, the Stark Law, the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), the Health Information Technology for Economic and Clinical Health Act ("HITECH"), applicable state anti-kickback and referral fee prohibitions, state laws governing the corporate practice of medicine, and all regulations, rules, and guidance promulgated thereunder.
(e) "Base Management Fee" has the meaning set forth in Section 4.1.
(f) "Collected Net Revenue" means the gross amounts actually collected by Practice from all sources (including, without limitation, patient payments, insurance reimbursements, Federal Healthcare Program payments, and managed care payments) for professional medical services rendered by Practice Physicians during the applicable measurement period, less (i) refunds and overpayments returned to payers or patients, (ii) contractual adjustments resulting from participation in managed care or other payer agreements, (iii) bad debt write-offs in accordance with Practice's customary accounting policies, and (iv) amounts required to be withheld pursuant to applicable legal or regulatory requirements.
(g) "Commercially Reasonable" means, consistent with the definition set forth in 42 C.F.R. § 411.351, an arrangement that furthers a legitimate business purpose of the reasonable participants to the arrangement and is on similar terms and conditions as comparable arm's-length transactions, sensibly considering the parties, the circumstances, and the subject matter of the transaction. An arrangement will be considered commercially reasonable even if it does not result in profit for one or more of the parties.
(h) "Compliance Officer" means the individual designated by Manager as its chief compliance officer, currently Derek Huang, or such other individual as Manager may designate from time to time by written notice to Practice.
(i) "Designated Health Services" or "DHS" means designated health services as defined in Section 1877(h)(6) of the Social Security Act (42 U.S.C. § 1395nn(h)(6)), including clinical laboratory services, physical therapy services, occupational therapy services, outpatient speech-language pathology services, radiology and certain other imaging services, radiation therapy services and supplies, durable medical equipment and supplies, parenteral and enteral nutrients, equipment, and supplies, prosthetics, orthotics, and prosthetic devices and supplies, home health services, outpatient prescription drugs, and inpatient and outpatient hospital services.
(j) "Effective Date" means the date first written above.
(k) "Fair Market Value" or "FMV" means, consistent with the definition set forth in 42 C.F.R. § 411.351, the value in arm's-length transactions, consistent with the general market value. "General market value" means the price that an asset would bring, or the compensation that would be included in a service agreement, as the result of bona fide bargaining between well-informed parties to the agreement who are not otherwise in a position to generate business for the other party, at the time of the service agreement and in the market in which the asset is located or the service is performed. Fair market value shall be determined without regard to the volume or value of any referrals or other business generated between the Parties.
(l) "Federal Healthcare Program" means a "federal health care program" as defined in 42 U.S.C. § 1320a-7b(f), including Medicare, Medicaid, TRICARE, the Veterans Health Administration, and all other federal programs providing health care benefits, whether directly, through insurance, or otherwise.
(m) "Fixed Base Fee" has the meaning set forth in Section 4.1, Alternative B, if applicable.
(n) "Initial Term" has the meaning set forth in Section 3.1.
(o) "Management Fee" means, collectively, the Base Management Fee (under Alternative A) or the Fixed Base Fee and Variable Component (under Alternative B), as set forth in Section 4.1 and Schedule B.
(p) "Management Services" means the non-clinical management, administrative, and operational support services described in Schedule A attached hereto and incorporated herein by reference.
(q) "Manager Personnel" means all employees, independent contractors, subcontractors, agents, and representatives of Manager who are involved in providing Management Services under this Agreement.
(r) "Medicaid" means the federal-state healthcare program established under Title XIX of the Social Security Act (42 U.S.C. § 1396 et seq.).
(s) "Medicare" means the federal healthcare program established under Title XVIII of the Social Security Act (42 U.S.C. § 1395 et seq.).
(t) "Practice Physicians" means all physicians who are employed by, or under contract with, Practice to provide professional medical services to patients of Practice, together with all other licensed healthcare professionals providing clinical services on behalf of Practice.
(u) "Referral" means a referral as defined in Section 1877(h)(5) of the Social Security Act (42 U.S.C. § 1395nn(h)(5)), and includes a request by a physician for, or ordering of, or the certifying or recertifying of the need for, any Designated Health Service.
(v) "Renewal Term" has the meaning set forth in Section 3.2.
(w) "Stark Law" means the Physician Self-Referral Law, codified at Section 1877 of the Social Security Act (42 U.S.C. § 1395nn), as amended from time to time, and all regulations promulgated thereunder, including 42 C.F.R. Part 411, Subpart J.
(x) "Term" means the Initial Term and all Renewal Terms, as set forth in Article III.
(y) "Variable Component" has the meaning set forth in Section 4.1, Alternative B, if applicable.
ARTICLE II — ENGAGEMENT OF MANAGER; SCOPE OF SERVICES
Section 2.1 — Engagement. Practice hereby engages Manager, and Manager hereby accepts such engagement, to provide the Management Services described in Schedule A to Practice during the Term of this Agreement. Manager shall provide the Management Services as an independent contractor and not as an employee, agent, partner, or joint venturer of Practice. Except as expressly set forth in this Agreement, Manager shall have no authority to bind Practice or to act on behalf of Practice in any capacity.
Section 2.2 — Scope of Management Services. The Management Services to be provided by Manager are described in detail in Schedule A, which is attached hereto and incorporated herein by reference. Schedule A sets forth the specific services, deliverables, service levels, and performance standards applicable to each category of Management Services. The categories of Management Services include, but are not limited to, the following:
(a) Billing, Coding, and Revenue Cycle Management. Manager shall provide billing, coding, claims submission, payment posting, accounts receivable management, denial management, and other revenue cycle management services as described in Schedule A.
(b) Practice Management and Administration. Manager shall provide general practice management and administrative support, including scheduling, patient intake coordination, workflow optimization, and office administration services as described in Schedule A.
(c) Information Technology Infrastructure and Support. Manager shall provide information technology infrastructure, systems, and support services, including access to and maintenance of Manager's proprietary ArborConnect electronic health records and practice management software platform, as well as hardware support, network management, data backup, cybersecurity services, and technical help desk support, as described in Schedule A.
(d) Human Resources Administration (Non-Clinical Staff). Manager shall provide human resources administration services with respect to non-clinical staff employed by or providing services to Practice, including recruitment, onboarding, payroll processing, benefits administration, and employment law compliance support, as described in Schedule A. For the avoidance of doubt, Manager shall not exercise any supervisory authority over Practice Physicians or other clinical personnel.
(e) Financial Management and Reporting. Manager shall provide financial management services, including bookkeeping, financial reporting, accounts payable management, budgeting, and financial analysis, as described in Schedule A.
(f) Compliance Program Support. Manager shall provide compliance program support services, including development and maintenance of compliance policies and procedures, compliance training materials, internal audit support, and regulatory monitoring, as described in Schedule A.
(g) Marketing and Patient Outreach (Non-Clinical). Manager shall provide non-clinical marketing, patient outreach, and community engagement services, including website management, digital marketing, patient communications, and reputation management, as described in Schedule A. All marketing activities shall comply with Applicable Law, and Manager shall not engage in marketing activities that could be construed as patient solicitation in violation of any applicable statute or regulation.
(h) Facilities Management and Maintenance. Manager shall provide facilities management and maintenance services, including lease administration support, maintenance coordination, vendor management for facility-related services, and regulatory compliance with respect to facility standards (e.g., OSHA, ADA), as described in Schedule A.
(i) Supply Chain and Procurement (Non-Pharmaceutical, Non-Clinical). Manager shall provide supply chain management and procurement services for non-pharmaceutical, non-clinical supplies and equipment, including office supplies, administrative equipment, and non-medical consumables, as described in Schedule A.
(j) Credentialing Support. Manager shall provide credentialing and re-credentialing support services for Practice Physicians, including payer enrollment, hospital privilege applications, and credentialing documentation management, as described in Schedule A.
(k) Additional Services. Manager shall provide such additional non-clinical management and administrative services as may be mutually agreed upon by the Parties in writing and added to Schedule A by amendment, subject to compliance with the approval workflow requirements set forth in the Drafting Instructions.
[DRAFTING NOTE: The specificity of Schedule A is critical. Each service category must be described with sufficient detail to satisfy the AKS safe harbor requirement that the agreement "covers all of the services the agent provides to the principal" (42 C.F.R. § 1001.952(d)(1)). Vague or overbroad descriptions of services should be avoided. If the scope of services changes materially during the Term, Schedule A should be amended and a new or updated FMV analysis should be obtained.]
Section 2.3 — Exclusions from Services. Notwithstanding any other provision of this Agreement, Manager shall not provide, and shall have no responsibility for, the following:
(a) Clinical services of any kind, including the diagnosis, treatment, or management of patients;
(b) Medical decision-making, clinical judgment, or any activity constituting the practice of medicine under the laws of any applicable jurisdiction;
(c) The hiring, firing, supervision, or direction of Practice Physicians with respect to their clinical duties;
(d) Any activity that requires a professional medical license, including prescribing medications, ordering tests or procedures, or signing medical records; or
(e) Any determination regarding the medical necessity, appropriateness, or quality of clinical services provided by Practice or Practice Physicians.
Practice retains sole and exclusive authority over, and responsibility for, all clinical decisions, patient care, treatment protocols, and the professional activities of Practice Physicians. Nothing in this Agreement shall be construed to modify, limit, or otherwise affect Practice's independent clinical judgment or its obligations under applicable medical practice acts and regulations.
Section 2.4 — Service Standards. Manager shall perform the Management Services in a professional and workmanlike manner, exercising the degree of skill, care, and diligence customarily exercised by qualified management services firms providing comparable services to similarly situated physician practices. Manager shall perform all Management Services in compliance with Applicable Law and in a manner consistent with industry standards for healthcare practice management services. Manager shall dedicate sufficient personnel, resources, and attention to ensure the timely and effective delivery of all Management Services.
Section 2.5 — Practice Independence. Nothing in this Agreement shall be construed to grant Manager any control over, or authority to direct, the clinical judgment of Practice, Practice Physicians, or any other clinical personnel of Practice. Practice shall at all times maintain independent medical judgment and exclusive control over the practice of medicine, including all decisions regarding patient care, treatment, diagnosis, and referral. Manager acknowledges and agrees that it does not employ, supervise, or direct Practice Physicians in the performance of their clinical duties. Manager further acknowledges and agrees that Practice's clinical decisions, including referral decisions, are made independently and without regard to this Agreement or the Management Fee payable hereunder.
ARTICLE III — TERM AND TERMINATION
Section 3.1 — Initial Term. This Agreement shall commence on the Effective Date and shall continue for an initial term of _____ (__) (the "Initial Term"), unless earlier terminated in accordance with the provisions of this Article III.
[DRAFTING NOTE: To satisfy the AKS management contracts safe harbor at 42 C.F.R. § 1001.952(d)(3), the agreement must have a term of at least one (1) year. A term of one (1) to three (3) years is recommended. The term selected should be consistent with the period covered by the FMV opinion.]
Section 3.2 — Renewal. Following the expiration of the Initial Term, this Agreement shall automatically renew for successive _____ (__) periods (each a "Renewal Term"), unless either Party provides written notice of non-renewal to the other Party at least ninety (90) days prior to the expiration of the then-current Initial Term or Renewal Term, as applicable. Each Renewal Term shall be on the same terms and conditions as set forth herein, subject to any amendments agreed upon by the Parties in writing and any adjustments to the Management Fee as provided in Section 4.1 and Schedule B.
[DRAFTING NOTE: Automatic renewal provisions are permissible under the Stark Law modernized regulations (effective January 19, 2021, pursuant to 85 Fed. Reg. 77492) and under the AKS management contracts safe harbor, provided the holdover or renewal period does not extend beyond what is commercially reasonable. The FMV substantiation should be refreshed no less frequently than every three (3) years to ensure that the Management Fee continues to reflect FMV during any Renewal Term.]
Section 3.3 — Holdover. If this Agreement expires or is terminated pursuant to this Article III and Manager continues to provide Management Services to Practice (in whole or in part) with Practice's express or implied acquiescence, such continuation shall constitute a month-to-month holdover period on the same terms and conditions as those in effect immediately prior to such expiration or termination (including the Management Fee then in effect). Either Party may terminate the holdover arrangement upon thirty (30) days' prior written notice to the other Party. The Parties acknowledge that holdover periods should not persist indefinitely, and the Parties shall use commercially reasonable efforts to execute a new agreement or formal renewal within a commercially reasonable timeframe following the commencement of any holdover period.
[DRAFTING NOTE: The Stark Law modernization rules (42 C.F.R. § 411.354(e)) expressly permit holdover arrangements under certain conditions, including that the arrangement is on the same terms and conditions as the immediately preceding arrangement, and the holdover arrangement is terminated within six (6) months from the expiration of the prior agreement or within six (6) months of either party providing notice to the other of an intent to terminate the holdover. The compensation during a holdover must continue to reflect FMV. Indefinite holdover periods should be avoided.]
Section 3.4 — Termination for Cause. Either Party may terminate this Agreement immediately upon written notice to the other Party if:
(a) The other Party materially breaches any provision of this Agreement and fails to cure such breach within thirty (30) days after receipt of written notice from the non-breaching Party specifying the nature of the breach in reasonable detail;
(b) The other Party (i) becomes the subject of a voluntary or involuntary petition under any bankruptcy or insolvency law, (ii) makes an assignment for the benefit of creditors, (iii) has a receiver, trustee, or liquidator appointed for all or a substantial part of its assets, or (iv) is otherwise unable to pay its debts as they become due;
(c) The other Party, or any of its owners, officers, directors, employees, or agents, is excluded, debarred, or suspended from participation in any Federal Healthcare Program, or any state healthcare program;
(d) The other Party, or any of its owners, officers, directors, employees, or agents, is convicted of a criminal offense related to healthcare fraud, patient abuse or neglect, or a controlled substance offense, or is charged with or indicted for any such offense;
(e) A governmental authority issues a final, non-appealable determination that this Agreement, or any material provision thereof, violates the AKS, the Stark Law, or any other Applicable Law; or
(f) The other Party fails to maintain the insurance coverages required by Section 11.1 and does not cure such failure within fifteen (15) days after written notice from the terminating Party.
Section 3.5 — Termination Without Cause. Either Party may terminate this Agreement without cause upon one hundred twenty (120) days' prior written notice to the other Party. Upon termination without cause, all rights and obligations of the Parties shall terminate as of the effective date of such termination, except as otherwise provided in Section 3.7.
Section 3.6 — Termination for Regulatory Non-Compliance. Either Party may terminate this Agreement upon thirty (30) days' prior written notice to the other Party if such Party determines, in good faith and after consultation with qualified legal counsel, that continued performance of this Agreement would reasonably be expected to result in a violation of Applicable Law, including the AKS, the Stark Law, or any applicable state anti-kickback or referral fee prohibition. A Party exercising its right to terminate under this Section 3.6 shall not be liable to the other Party for damages, lost profits, or any other remedy arising out of such termination.
Section 3.7 — Effect of Termination. Upon the expiration or termination of this Agreement for any reason:
(a) Wind-Down of Services. Manager shall cooperate with Practice to effect an orderly transition and wind-down of the Management Services. Manager shall continue to provide transition assistance for a period of up to sixty (60) days following the effective date of termination (the "Transition Period"), at Practice's reasonable request, and Practice shall compensate Manager for such transition services at the Management Fee rate then in effect (prorated for the applicable period).
(b) Return of Records and Data. Manager shall promptly return to Practice, or at Practice's election destroy, all records, documents, data, and materials belonging to Practice that are in Manager's possession or control, including patient records, financial records, billing records, and electronic data. Manager shall provide Practice with all data exports and system access reasonably necessary to enable Practice to transition to a successor management services provider or to self-manage its operations.
(c) Accounts Receivable. Unless otherwise agreed by the Parties in writing, Manager shall complete the collection of any accounts receivable that are outstanding as of the effective date of termination for services rendered prior to such date, and shall remit all collected amounts to Practice in accordance with the payment terms of this Agreement.
(d) Survival. The following provisions shall survive the expiration or termination of this Agreement: Article I (Definitions), Article IX (Audit and Access Rights), Article X (Confidentiality), Section 11.2 (Indemnification by Manager), Section 11.3 (Indemnification by Practice), Section 9.4 (Record Retention), Section 3.7 (Effect of Termination), and Article V (Referral Independence and Stark Law Safeguards), and any other provisions that by their nature are intended to survive termination.
ARTICLE IV — COMPENSATION
Section 4.1 — Management Fee. As full compensation for the Management Services provided by Manager during the Term, Practice shall pay Manager the Management Fee as set forth below. The Parties shall select one of the following two alternative fee structures by marking the applicable alternative below. The selected alternative shall be further detailed in Schedule B.
ALTERNATIVE A — FIXED MONTHLY MANAGEMENT FEE
Practice shall pay Manager a fixed monthly management fee of $___________________ per month (the "Base Management Fee"). The Base Management Fee shall be payable in accordance with the payment terms set forth in Section 4.5 and Schedule B.
The Base Management Fee has been determined in advance and reflects the Fair Market Value of the Management Services described in Schedule A, as substantiated by the FMV documentation identified in Section 4.2 and attached as Schedule C. The Base Management Fee does not take into account the volume or value of any referrals or other business generated between the Parties or their respective Affiliates.
Annual Adjustment. The Base Management Fee may be adjusted annually, effective on each anniversary of the Effective Date, based on one or more of the following methodologies as specified in Schedule B: (i) an adjustment equal to the percentage change in the Consumer Price Index for All Urban Consumers (CPI-U), as published by the U.S. Bureau of Labor Statistics, for the twelve-month period ending on the most recently reported month preceding the anniversary date; (ii) mutual written agreement of the Parties based on an updated FMV analysis; or (iii) such other adjustment methodology as may be specified in Schedule B. Notwithstanding the foregoing, any adjusted Base Management Fee must (A) continue to reflect Fair Market Value for the Management Services, (B) be set in advance for the upcoming period, and (C) not take into account the volume or value of referrals or other business generated between the Parties.
[DRAFTING NOTE: The fixed monthly amount must be determined in advance and must reflect FMV as documented by an independent FMV opinion (e.g., from Northbridge Valuation Advisors LLC or a comparable firm) or a documented internal FMV benchmarking analysis prepared in accordance with AHT's Fair Market Value Determination Procedures. The fee must not take into account the volume or value of any referrals or other business generated between the parties. Alternative A is the preferred fee structure from a regulatory compliance perspective.]
ALTERNATIVE B — BLENDED FEE (FIXED BASE PLUS ADMINISTRATIVE VARIABLE COMPONENT)
Practice shall pay Manager:
(i) A fixed monthly base fee of $___________________ (the "Fixed Base Fee"); plus
(ii) A variable component calculated as _% of __________ (the "Variable Component"). The permissible administrative metric used to calculate the Variable Component is: ___________.
The aggregate of the Fixed Base Fee and the Variable Component shall constitute the Management Fee for each applicable month. The Variable Component is tied to an administrative metric that does not correlate with, and does not serve as a proxy for, the volume or value of referrals from Practice or Practice Physicians to Manager, Manager's Affiliates, or any other entity. Examples of permissible administrative metrics include the number of patient encounters processed through the billing system, the number of claims submitted to payers, or the number of credentialing applications processed.
The Variable Component shall be subject to a maximum monthly cap of $___________________ (or __% of the aggregate Management Fee for any given month), regardless of the level of the administrative metric. The calculation methodology, cap, and sample calculations are set forth in Schedule B.
[DRAFTING NOTE: THE VARIABLE COMPONENT MUST BE TIED TO AN ADMINISTRATIVE METRIC THAT DOES NOT CORRELATE WITH THE VOLUME OR VALUE OF REFERRALS to Manager, Manager's Affiliates, or any entity with which Manager has a financial relationship. Specifically, the Variable Component must NOT be calculated as a percentage of Collected Net Revenue attributable to Designated Health Services or Ancillary Services provided by Manager or Manager's Affiliates. The use of a percentage-of-collected-net-revenue model (such as the prior 15% of collected net revenue structure) is NOT recommended due to the risk that such a fee structure may be deemed to take into account the volume or value of referrals when the managed practice refers to Manager-affiliated ancillary services. Any variable component must be substantiated by an FMV opinion. The aggregate of the Fixed Base Fee and Variable Component must reflect FMV in all periods.]
Section 4.2 — FMV Certification. The Management Fee (whether under Alternative A or Alternative B) has been determined to reflect Fair Market Value for the Management Services described in Schedule A, as substantiated by the following FMV documentation:
Independent FMV opinion from ___________ dated _____;
Internal FMV benchmarking analysis dated _____, prepared in accordance with AHT's Fair Market Value Determination Procedures.
A copy of the FMV substantiation is attached as Schedule C and shall be maintained in the compliance files for this arrangement. The Parties shall refresh the FMV substantiation at least every three (3) years, or upon any material change in the scope, volume, or nature of the Management Services, whichever occurs first.
[DRAFTING NOTE: FMV opinions should be refreshed at least every three (3) years or upon any material change in the scope or volume of Management Services. If the scope of services changes materially, an interim FMV analysis should be obtained prior to implementing the revised fee.]
Section 4.3 — Commercial Reasonableness. The Parties acknowledge and agree that this Agreement, and each of the arrangements contemplated hereby, is commercially reasonable, that it furthers a legitimate business purpose, and that it would be entered into by reasonable parties of similar type and under similar circumstances, even if no referrals were made between the Parties or their respective Affiliates. The Management Services are legitimate, bona fide administrative and operational services necessary for the efficient operation of Practice, and the Management Fee reflects value commensurate with such services, regardless of any referral relationship that may exist between the Parties.
Section 4.4 — No Referral-Based Adjustment. The Management Fee shall not be adjusted or modified based on, and shall not take into account, the volume or value of referrals or other business generated between Practice, Practice Physicians, Manager, Manager's Affiliates, or any other person or entity. No bonus, incentive payment, discount, rebate, forgiveness of amounts owed, or other remuneration of any kind shall be paid by or to either Party, or any Affiliate of either Party, that is based on, correlated with, or determined by reference to the volume or value of referrals or other business generated between the Parties. Any compensation paid by either Party to the other under this Agreement or any related agreement shall be for specifically identified services or items and shall be consistent with Fair Market Value.
Section 4.5 — Payment Terms. Manager shall submit invoices to Practice on a monthly basis, on or before the fifteenth (15th) day of each calendar month for Management Services rendered during the immediately preceding calendar month. Each invoice shall include reasonable detail regarding the services provided and the calculation of the Management Fee for the applicable period, including, if Alternative B is selected, a calculation of the Variable Component showing the applicable administrative metric data. Payment shall be due within thirty (30) days of Practice's receipt of each invoice. Late payments shall bear interest at the rate of one and one-half percent (1.5%) per annum (or the maximum rate permitted by Applicable Law, whichever is less), calculated from the date payment was due until the date of actual payment.
Section 4.6 — Taxes. Each Party shall be solely responsible for its own tax obligations arising from or related to this Agreement, including all federal, state, and local income taxes, self-employment taxes, sales and use taxes, and any other applicable taxes. Practice shall not withhold any amounts from Management Fee payments with respect to income taxes, employment taxes, or any other taxes on behalf of Manager. Manager acknowledges that it is not an employee of Practice and that Practice will not issue IRS Form W-2 to Manager, but will issue IRS Form 1099-NEC (or applicable successor form) to Manager in accordance with Applicable Law.
Section 4.7 — Records of Fee Determination. Manager shall maintain complete and accurate documentation of the methodology used to determine the Management Fee, including all FMV opinions, benchmark data, comparable transaction analyses, internal FMV analyses, market surveys, and any other supporting documentation, for a period of not less than ten (10) years following the termination or expiration of this Agreement. This documentation shall be made available for inspection and audit in accordance with Article IX. This record retention obligation is intended to ensure compliance with applicable regulatory record retention requirements, including those applicable to arrangements involving Federal Healthcare Programs.
ARTICLE V — REFERRAL INDEPENDENCE AND STARK LAW SAFEGUARDS
Section 5.1 — No Referral Requirement. Nothing in this Agreement requires, induces, encourages, or obligates Practice or any Practice Physician to refer patients to Manager, Manager's Affiliates, or any other person or entity. Practice and Practice Physicians retain complete freedom and unfettered discretion regarding the referral of patients for any services, including Designated Health Services and Ancillary Services. Manager acknowledges that Practice Physicians' referral decisions are and shall remain independent clinical decisions made solely on the basis of the patient's medical needs, and Manager shall not seek to influence such decisions in any manner.
Section 5.2 — Disclosure of Available Ancillary Services. The Parties acknowledge that Manager or Manager's Affiliates may provide or arrange for the provision of certain Ancillary Services, including laboratory services, diagnostic imaging services, and physical therapy services. If Practice Physicians elect, in the exercise of their independent clinical judgment, to refer patients for services that are available from Manager or Manager's Affiliates, Practice Physicians shall comply with all applicable disclosure requirements, including informing patients of the availability of alternative providers. Practice Physicians shall not be influenced in any referral decision by this Agreement, the Management Fee payable hereunder, or any other financial relationship between the Parties or their respective Affiliates. Manager shall not market, promote, or incentivize the use of Manager-affiliated Ancillary Services by Practice Physicians, except to the extent that Manager may provide factual information about the availability, scope, and quality of such services upon Practice's request.
Section 5.3 — Indirect Compensation Arrangement Safeguards.
(a) The Parties acknowledge that the financial relationship between Manager and Practice, when combined with a financial relationship between Practice and Practice Physicians (e.g., employment or independent contractor agreements), may constitute an "indirect compensation arrangement" as defined in 42 C.F.R. § 411.354(c) if there is an unbroken chain of financial relationships between a Practice Physician (or the physician's immediate family member) and an entity furnishing DHS (i.e., Manager or Manager's Affiliates). The Parties further acknowledge that, under the Stark Law, a physician may not make a referral for DHS to an entity with which the physician has a direct or indirect compensation arrangement, unless the arrangement satisfies an applicable exception.
(b) To ensure compliance with the Stark Law exception for indirect compensation arrangements set forth at 42 C.F.R. § 411.354(c)(2) (as modified by the Stark Law modernization rules effective January 19, 2021), the Parties represent, warrant, and agree that:
(i) The compensation received by Manager under this Agreement is Fair Market Value for the Management Services actually provided by Manager and does not take into account the volume or value of referrals by Practice Physicians to Manager, Manager's Affiliates, or any other entity;
(ii) The compensation payable under this Agreement is set in advance, is fixed or follows a formula that is fixed in advance (as set forth in Section 4.1 and Schedule B), and is consistent with Fair Market Value throughout the Term;
(iii) This Agreement is commercially reasonable, furthers a legitimate business purpose, and is sensible even if no referrals are made between the Parties or their respective Affiliates; and
(iv) This Agreement does not violate the AKS or any applicable federal or state law or regulation governing billing or claims submission.
Section 5.4 — Referral Tracking and Monitoring. Manager shall implement and maintain a system for tracking referral patterns from Practice Physicians to Manager-affiliated Ancillary Services. The procedures for such referral tracking and monitoring are set forth in Exhibit A attached hereto and incorporated herein by reference. Manager's Compliance Officer (or designee) shall review referral data at least quarterly to identify any correlation or anomalous relationship between Management Fee payments and referral volumes. The Compliance Officer shall report the findings of each quarterly review to Manager's compliance committee. Any anomalous or concerning referral patterns shall be promptly investigated and addressed through the escalation procedures set forth in Exhibit A. Manager shall maintain records of all referral tracking data and quarterly review reports for the record retention period specified in Section 9.4.
Section 5.5 — Prohibition on Conditioning Services on Referrals. Manager shall not condition the provision, scope, quality, timeliness, or pricing of Management Services on the volume or value of referrals from Practice or Practice Physicians to Manager, Manager's Affiliates, or any other person or entity. Manager shall not withhold, reduce, delay, or threaten to withhold, reduce, or delay Management Services, or impose any adverse consequence on Practice, based on referral levels. Similarly, Manager shall not provide enhanced, expedited, or preferential Management Services to Practice or any Practice Physician as an inducement for referrals. Any change in the scope or pricing of Management Services shall be documented in a written amendment to this Agreement and shall be supported by FMV substantiation as required by Section 4.2.
ARTICLE VI — ANTI-KICKBACK STATUTE SAFE HARBOR COMPLIANCE
Section 6.1 — Safe Harbor Intent. The Parties intend this Agreement to satisfy all elements of the AKS management contracts safe harbor set forth at 42 C.F.R. § 1001.952(d), as amended by the AKS Safe Harbor Modernization Final Rule (85 Fed. Reg. 77684, effective January 19, 2021). The Parties shall interpret and perform this Agreement consistently with such intent. In the event of any ambiguity in the terms of this Agreement, such ambiguity shall be resolved in a manner that furthers compliance with the management contracts safe harbor.
Section 6.2 — Safe Harbor Elements. The Parties represent, warrant, and agree that this Agreement satisfies each of the following elements of the management contracts safe harbor at 42 C.F.R. § 1001.952(d):
(a) Written Agreement. This Agreement is set out in writing and is signed by both Parties (42 C.F.R. § 1001.952(d)(1));
(b) Specification of Services. This Agreement specifies the Management Services to be provided by Manager, as set forth in Section 2.2 and Schedule A (42 C.F.R. § 1001.952(d)(1));
(c) Schedule for Periodic Services. To the extent that the Management Services include services to be performed on a periodic, sporadic, or part-time basis, this Agreement and Schedule A specify the exact schedule, length of service intervals, and charges for such intervals (42 C.F.R. § 1001.952(d)(2));
(d) Minimum Term. The Initial Term of this Agreement is for not less than one (1) year (42 C.F.R. § 1001.952(d)(3));
(e) Aggregate Compensation. The aggregate compensation paid to Manager over the Term of this Agreement is set in advance, is consistent with Fair Market Value in arm's-length transactions, and is not determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the Parties for which payment may be made in whole or in part under Medicare, Medicaid, or other Federal Healthcare Programs (42 C.F.R. § 1001.952(d)(5));
(f) No Improper Counseling or Promotion. The Management Services provided under this Agreement do not involve the counseling or promotion of a business arrangement or other activity that violates any state or federal law (42 C.F.R. § 1001.952(d)(6)); and
(g) Reasonable Necessity. The aggregate Management Services contracted for under this Agreement do not exceed those that are reasonably necessary to accomplish the commercially reasonable business purpose of the services (42 C.F.R. § 1001.952(d)(7)).
Section 6.3 — State Law Compliance. In addition to compliance with the federal AKS and its safe harbors, the Parties shall comply with all applicable state anti-kickback statutes and referral fee prohibitions, including, without limitation:
(a) Connecticut Referral Fee Prohibition. For Practice locations in the State of Connecticut, the Parties shall comply with Conn. Gen. Stat. § 20-7a(d), which prohibits the payment or receipt of compensation for the referral of patients. The Parties represent that the Management Fee is for bona fide Management Services and is not compensation for the referral of patients.
(b) Massachusetts Anti-Kickback Law. For Practice locations in the Commonwealth of Massachusetts, the Parties shall comply with M.G.L. c. 175H, § 3, which prohibits the knowing and willful offer, payment, solicitation, or receipt of any remuneration to induce or in return for referrals of patients. The Parties represent that the Management Fee is for bona fide Management Services and is not remuneration for the referral of patients.
(c) Other State Laws. For Practice locations in other states, the Parties shall identify and comply with all applicable state anti-kickback, anti-referral, and fee-splitting statutes and regulations as specified in an addendum to this Agreement.
ARTICLE VII — REPRESENTATIONS AND WARRANTIES
Section 7.1 — Manager Representations. Manager represents and warrants to Practice as of the Effective Date, and on a continuing basis during the Term, as follows:
(a) Manager is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, and has all requisite corporate or organizational power to conduct its business as presently conducted;
(b) Manager has full power and authority to enter into this Agreement and to perform its obligations hereunder, and the execution, delivery, and performance of this Agreement have been duly authorized by all necessary corporate or organizational action on the part of Manager;
(c) The Management Fee reflects Fair Market Value for the Management Services described in Schedule A and has been determined in accordance with the methodologies described in Schedule C;
(d) Neither Manager, nor any of its owners, officers, directors, or key employees, has been excluded, debarred, or suspended from participation in any Federal Healthcare Program, and Manager has not been convicted of a criminal offense related to healthcare fraud, patient abuse or neglect, or a controlled substance offense;
(e) Manager maintains a compliance program that is consistent with the compliance program guidance promulgated by the Office of Inspector General of the U.S. Department of Health and Human Services, including the OIG Compliance Program Guidance for Third-Party Medical Billing Companies (63 Fed. Reg. 70138) and the OIG Compliance Program Guidance for Individual and Small Group Physician Practices (65 Fed. Reg. 59434), as applicable;
(f) Manager has not entered into this Agreement for the purpose of inducing or rewarding the referral of patients, items, or services payable by any Federal Healthcare Program, any commercial health plan, or any other payer;
(g) No portion of the Management Fee is intended to compensate Practice or Practice Physicians for referrals of patients, items, or services to Manager, Manager's Affiliates, or any other person or entity; and
(h) Manager is not a party to any agreement, arrangement, or understanding that would prevent Manager from fulfilling its obligations under this Agreement or that would render Manager's performance hereunder a violation of Applicable Law.
Section 7.2 — Practice Representations. Practice represents and warrants to Manager as of the Effective Date, and on a continuing basis during the Term, as follows:
(a) Practice is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, and has all requisite corporate or organizational power to conduct its business as presently conducted;
(b) Practice has full power and authority to enter into this Agreement and to perform its obligations hereunder, and the execution, delivery, and performance of this Agreement have been duly authorized by all necessary corporate or organizational action on the part of Practice;
(c) Neither Practice, nor any Practice Physician, nor any of Practice's owners, officers, directors, or key employees, has been excluded, debarred, or suspended from participation in any Federal Healthcare Program, and Practice has not been convicted of a criminal offense related to healthcare fraud, patient abuse or neglect, or a controlled substance offense;
(d) Practice has not entered into this Agreement for the purpose of obtaining inducements or rewards for referrals of patients, items, or services;
(e) Practice shall promptly notify Manager, in writing and in no event later than five (5) business days, if any Practice Physician or any of Practice's owners, officers, directors, or key employees becomes excluded, debarred, or suspended from participation in any Federal Healthcare Program, or is convicted of or charged with a criminal offense described in Section 3.4(d); and
(f) Practice is not a party to any agreement, arrangement, or understanding that would prevent Practice from fulfilling its obligations under this Agreement or that would render Practice's performance hereunder a violation of Applicable Law.
ARTICLE VIII — COMPLIANCE OBLIGATIONS
Section 8.1 — Compliance with Applicable Law. Both Parties shall comply with all Applicable Law in performing their respective obligations under this Agreement, including, without limitation, the AKS, the Stark Law, HIPAA, HITECH, applicable state anti-kickback and referral fee prohibitions, applicable state laws governing the corporate practice of medicine, and all regulations, rules, and guidance promulgated thereunder. Each Party shall promptly notify the other Party of any material change in Applicable Law that may affect the terms or enforceability of this Agreement.
Section 8.2 — Compliance Training. Manager shall make available to Practice and Practice Physicians compliance training materials covering the AKS, the Stark Law, applicable state fraud and abuse laws, and the terms and conditions of this Agreement, including the referral independence provisions of Article V. Such training materials shall be updated as necessary to reflect changes in Applicable Law or regulatory guidance. Practice shall ensure that all Practice Physicians are informed of, and acknowledge their understanding of, the referral independence provisions of this Agreement. Practice shall maintain records of such acknowledgments and shall make them available to Manager upon request.
Section 8.3 — Compliance Reporting. Either Party shall promptly notify the other Party's designated compliance officer in writing if it becomes aware of any actual or suspected violation of Applicable Law arising from or related to this Agreement, including any conduct that may constitute a violation of the AKS, the Stark Law, HIPAA, or any applicable state anti-kickback or referral fee prohibition. Such notice shall be provided as promptly as practicable and in no event later than ten (10) business days after the reporting Party becomes aware of the potential violation. The designated compliance contacts for each Party are as follows:
Manager's Compliance Contact:
Name: ___________
Title: ___________
Telephone: ___________
Email: ___________
Practice's Compliance Contact:
Name: ___________
Title: ___________