ARBOR HEALTH TECHNOLOGIES INC.
CORPORATE COMPLIANCE PROGRAM MANUAL
Revised and Restated — Effective July 2023
Prepared by:
Calderwood & Harkness LLP One Federal Street, 30th Floor Boston, MA 02110
Matter Number: 1010-00003
CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED
This document has been prepared by Calderwood & Harkness LLP at the direction of Arbor Health Technologies Inc. and is protected by the attorney-client privilege and the work product doctrine. This Manual and its contents may not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP and the General Counsel of Arbor Health Technologies Inc.
Approved by the AHT Board of Directors Compliance Committee June 27, 2023
This Manual supersedes all prior versions of the AHT Compliance Program Manual, including all prior compliance program documentation, compliance policy memoranda, and compliance guidance materials issued before the effective date of this Manual.
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SECTION I: INTRODUCTION AND PURPOSE
1.1 Purpose of the Compliance Program Manual
This Corporate Compliance Program Manual (this "Manual") sets forth the comprehensive compliance program for Arbor Health Technologies Inc. ("AHT" or the "Company"), a Delaware corporation headquartered at 200 Concord Avenue, Suite 400, Cambridge, MA 02138. The purpose of this Manual is to establish and maintain an effective compliance program that prevents, detects, and corrects violations of applicable federal and state healthcare laws, regulations, and AHT internal policies. This Manual is intended to serve as the foundational compliance governance document for the Company, articulating the policies, procedures, structures, and expectations that govern the conduct of all AHT personnel in the performance of their duties.
AHT operates in a heavily regulated environment as a healthcare services and software-as-a-service ("SaaS") company. The Company currently operates twenty-three (23) outpatient clinics branded as "Arbor Health Clinics" across four states in the northeastern United States, as follows:
• Massachusetts: Fourteen (14) clinics
• Connecticut: Four (4) clinics
• Rhode Island: Three (3) clinics
• New Hampshire: Two (2) clinics
AHT reported $214.3 million in net revenue for fiscal year 2022 ("FY2022"), of which approximately sixty-one percent (61%), or $130.7 million, derives from Medicare and Medicaid reimbursements. This substantial dependence on federal healthcare program reimbursement creates significant compliance obligations under federal healthcare program integrity requirements, including the Anti-Kickback Statute, the Physician Self-Referral Law (Stark Law), the False Claims Act, and related authorities. The remaining revenue is composed of commercial payer reimbursement, including $38.6 million (approximately 18% of net revenue) from Covenant Health Plans Inc., the Company's largest commercial payer, with the balance of approximately $45.0 million derived from other commercial payers and patient self-pay.
In addition to its clinical operations, AHT develops and licenses the ArborConnect electronic health record ("EHR") and practice management SaaS platform to forty-two (42) external physician practices, generating $8.9 million in annual subscription revenue. The ArborConnect platform is also used internally across all twenty-three AHT clinics and by the nine independently owned physician practices managed through the ConnectiCare Physicians Network, LLC.
This Manual is designed to satisfy the seven elements of an effective compliance program as articulated by the Office of Inspector General ("OIG") of the U.S. Department of Health and Human Services ("HHS"). The OIG has long recognized that the adoption and implementation of a comprehensive compliance program is a significant factor in mitigating the risk of fraud, waste, and abuse, and in demonstrating an organization's commitment to lawful and ethical conduct. This Manual addresses each of the seven elements in the specific context of AHT's operations, risk profile, and organizational structure.
1.2 Background and Context for Revision
This Manual represents a comprehensive revision and restatement of AHT's prior compliance program documentation. The Company's compliance program was originally established in connection with the Compliance Committee Charter adopted on April 15, 2021, and subsequently amended on October 30, 2022. Prior compliance documentation consisted of the original Compliance Committee Charter, a series of compliance policy memoranda, and informal guidance materials. The Board of Directors determined that a comprehensive, unified compliance manual was necessary to ensure organizational clarity, to address identified compliance gaps, and to formalize the Company's compliance infrastructure in a manner commensurate with AHT's growth and complexity.
The revision of this Manual was prompted by a board-level compliance committee review following AHT's acquisition of substantially all of the assets of Lakeview Medical Associates, P.C. ("Lakeview") on August 15, 2022, for a purchase price of $11.4 million. The Lakeview acquisition involved the integration of a fourteen-physician multi-specialty practice into AHT's existing clinical operations, including the assumption of numerous physician employment agreements, independent contractor arrangements, medical director agreements, and office leases. The integration process revealed the need for a more structured and systematic approach to compliance governance, particularly with respect to the review and remediation of assumed arrangements.
Following the Lakeview acquisition, AHT engaged Grayson Whitaker & Associates LLP ("Grayson Whitaker"), a nationally recognized healthcare compliance consulting firm, to conduct a comprehensive compliance gap assessment of AHT's existing arrangements and compliance infrastructure. The resulting report (Report Reference GW-AHT-2022-Final, dated December 12, 2022) identified seventeen (17) "high-risk" and twenty-three (23) "moderate-risk" arrangements requiring legal review, structural remediation, or both. The high-risk arrangements included, among others, several medical director agreements with compensation exceeding fair market value benchmarks, a per-scan facility access arrangement with Meridian Diagnostics LLC, and a no-cost technology interface and CME sponsorship arrangement with Pinnacle Laboratory Services Inc.
In response to the Grayson Whitaker findings, and at the direction of the Board Compliance Committee, AHT's Board of Directors authorized the engagement of Calderwood & Harkness LLP to conduct a comprehensive compliance self-assessment and to prepare this Manual and related revised policies, procedures, and contract templates. The Calderwood & Harkness LLP engagement was authorized pursuant to Board Resolution No. 2023-01-004, adopted January 24, 2023. The engagement included: (i) a detailed legal review and risk assessment of all physician compensation arrangements, referral relationships, vendor contracts, and management services arrangements; (ii) the preparation of this Manual and a suite of revised compliance policies, procedures, and contract templates; (iii) the development of AKS/Stark Law compliance training materials; and (iv) the preparation of evaluation memoranda regarding the advisability of voluntary self-disclosure under the CMS Self-Referral Disclosure Protocol and the OIG Self-Disclosure Protocol.
This Manual incorporates guidance from the following principal regulatory sources, among others:
• OIG Compliance Program Guidance for Individual and Small Group Physician Practices, 65 Fed. Reg. 59434 (October 5, 2000);
• CMS Final Rule on Stark Law Modernization, 85 Fed. Reg. 77492 (December 2, 2020) (effective January 19, 2021);
• AKS Final Rule on Safe Harbor Modernization, 85 Fed. Reg. 77684 (December 2, 2020) (effective January 19, 2021);
• OIG General Compliance Program Guidance (November 2023 update, to the extent available as of the effective date of this Manual); and
• Applicable enforcement actions, advisory opinions, and settlement agreements issued by the OIG, CMS, and the U.S. Department of Justice that bear on AHT's compliance risk profile.
1.3 Scope and Applicability
This Manual applies to all AHT directors, officers, employees (approximately 1,340 total employees, including 147 W-2 employed physicians), independent contractors (38 independent contractor and medical director arrangements), agents, and business partners. Every individual who performs services on behalf of, or in connection with, AHT's operations is expected to understand and comply with the standards, policies, and procedures set forth in this Manual, as well as in the related policies and procedures referenced herein.
This Manual covers all AHT operations across the four states in which the Company maintains clinical operations: Massachusetts, Connecticut, Rhode Island, and New Hampshire. The geographic scope of this Manual encompasses all twenty-three Arbor Health Clinics, all corporate offices, and all technology and SaaS operations conducted by or on behalf of the Company.
This Manual applies to all AHT subsidiaries and affiliated entities, including:
• ConnectiCare Physicians Network, LLC ("CPN"), a Connecticut limited liability company through which AHT provides management services to nine (9) independently owned physician practices in Strathmore Mutual Insurance, Connecticut area. CPN is a wholly-owned subsidiary of AHT, and its operations are subject to this Manual to the extent of AHT's management functions and the compliance obligations arising from the management services arrangements with the independently owned practices.
This Manual applies to all categories of AHT operations, including:
• Clinical Operations: Primary care, specialty care (cardiology, orthopedics, and gastroenterology), and ancillary services including in-office laboratory, diagnostic imaging, and physical therapy services provided at AHT clinics;
• SaaS/Technology Operations: Development, licensing, and support of the ArborConnect EHR and practice management platform; and
• Management Services: Management services provided through CPN to independently owned physician practices.
The Company acknowledges that AHT is a portfolio company of Ridgeline Capital Partners Fund IV, L.P. ("Ridgeline" or the "Fund"), a private equity fund managed by Ridgeline Capital Advisors LLC. Ridgeline's designated board representatives — Claudia Sorrento, Managing Director, and Marcus Whitmore, Principal, of Ridgeline Capital Advisors LLC — participate in compliance oversight through their membership on the Board Compliance Committee. The compliance program is designed to address the specific risk factors associated with AHT's status as a private equity portfolio company, including rapid growth through acquisitions, integration of acquired practices, and compliance readiness for anticipated exit or sale transactions.
1.4 Definitions
The following defined terms are used throughout this Manual. Unless otherwise indicated, terms defined in this Section 1.4 shall have the meanings set forth below whenever they appear in this Manual:
"AKS" or "Anti-Kickback Statute" means 42 U.S.C. § 1320a-7b(b), as amended, which prohibits the knowing and willful offer, payment, solicitation, or receipt of any remuneration to induce or reward referrals of items or services reimbursable under federal healthcare programs.
"Board Compliance Committee" means the compliance committee established by the AHT Board of Directors under the Compliance Committee Charter adopted April 15, 2021, and amended October 30, 2022, as further described in Section III of this Manual.
"CCO" or "Chief Compliance Officer" means the individual designated by AHT to serve as the Compliance Officer responsible for the day-to-day management and oversight of the compliance program. As of the effective date of this Manual, the CCO is Derek Huang.
"Commercial Reasonableness" means that an arrangement is one that a reasonable, prudent businessperson would enter into under similar circumstances, considering the legitimate business purposes served by the arrangement, irrespective of whether the arrangement has the potential to generate referrals to the parties.
"Compliance Committee" or "Operational Compliance Committee" means the operational-level compliance committee described in Section 3.5 of this Manual, distinct from the Board Compliance Committee.
"Compliance Liaison" means the individual designated within each AHT clinic or department to serve as a local point-of-contact for compliance matters, as described in Section 3.6 of this Manual.
"Compliance Officer" means the CCO as defined above.
"DHS" or "Designated Health Services" means the categories of health services identified in 42 U.S.C. § 1395nn(h)(6) to which the Stark Law's referral prohibitions apply, including clinical laboratory services, physical therapy services, radiology and certain other imaging services, and other categories as specified by regulation.
"Fair Market Value" or "FMV" means the value in arm's-length transactions, consistent with the general market value, as determined by reference to independent third-party appraisals, recognized compensation survey data, and applicable regulatory definitions. For purposes of the Stark Law, FMV has the specific meaning set forth in 42 C.F.R. § 411.351.
"Federal Healthcare Program" means any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government, including Medicare, Medicaid, TRICARE, and other programs as defined in 42 U.S.C. § 1320a-7b(f).
"General Counsel" means the individual designated by AHT to serve as the Company's chief legal officer. As of the effective date of this Manual, the General Counsel is Patricia Yamamoto.
"Management Services Agreement" or "MSA" means an agreement pursuant to which AHT or a subsidiary (including CPN) provides management, administrative, or operational services to a physician practice or other healthcare entity.
"Non-Monetary Remuneration" means items or services of value (other than cash or cash equivalents) provided by or to AHT in connection with a referral relationship. The Stark Law establishes an annual limit on non-monetary remuneration to a referring physician, which is $459 per physician for calendar year 2023.
"Overpayment" means any funds that a person receives or retains under Medicare or Medicaid to which the person, after applicable reconciliation, is not entitled, as defined in 42 U.S.C. § 1320a-7k(d).
"PHI" or "Protected Health Information" means individually identifiable health information, as defined in 45 C.F.R. § 160.103, that is transmitted or maintained by AHT in any form or medium.
"Referral Source" means any individual or entity that refers, or is in a position to refer, patients, items, or services to or from AHT, including physicians, physician groups, hospitals, laboratories, imaging centers, and other healthcare providers.
"Remuneration" means any payment or other benefit, whether in cash or in kind, direct or indirect, overt or covert, made by or to any person in connection with the referral of items or services reimbursable by a federal healthcare program. Remuneration includes, but is not limited to, compensation, gifts, meals, entertainment, free or below-market goods or services, loans, and discounts.
"Safe Harbor" means a regulatory provision under 42 C.F.R. § 1001.952 that, if satisfied, protects an arrangement from prosecution under the AKS.
"Stark Exception" means a regulatory provision under 42 C.F.R. §§ 411.355–411.357 that, if satisfied, permits a physician to make referrals for DHS to an entity with which the physician has a financial relationship that would otherwise be prohibited under the Stark Law.
"Stark Law" or "Physician Self-Referral Law" means 42 U.S.C. § 1395nn, as amended, which prohibits a physician from making referrals for DHS to an entity with which the physician (or an immediate family member) has a financial relationship, unless an applicable exception is met.
"Value-Based Enterprise" or "VBE" means two or more VBE participants collaborating to achieve at least one value-based purpose, as defined in 42 C.F.R. § 411.351 (Stark Law) and the corresponding AKS safe harbor regulations.
SECTION II: LEGAL AND REGULATORY FRAMEWORK
2.1 Federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b))
The federal Anti-Kickback Statute ("AKS") is a criminal statute that 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, in exchange for or to induce: (a) the referral of an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a federal healthcare program; or (b) the purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a federal healthcare program.
The AKS is broadly construed by federal courts and enforcement agencies. Under the so-called "one purpose" test, a financial arrangement may violate the AKS if even one purpose of the remuneration is to induce or reward referrals, even if the arrangement also has other legitimate purposes. This standard makes the AKS particularly relevant to healthcare organizations with complex physician compensation and referral arrangements, as is the case with AHT.
The OIG has promulgated regulatory safe harbors under 42 C.F.R. § 1001.952 that define specific payment and business practices that are exempt from prosecution under the AKS. If an arrangement fully satisfies all elements of an applicable safe harbor, the arrangement is protected from criminal prosecution, civil monetary penalties, and exclusion under the AKS. If an arrangement does not fit squarely within a safe harbor, it is not necessarily illegal, but it must be evaluated on a facts-and-circumstances basis to determine whether it poses an unacceptable risk of AKS liability. The following safe harbors are of particular relevance to AHT's operations:
(a) Employment (42 C.F.R. § 1001.952(i)): Protects any amount paid by an employer to an employee (as defined for federal income tax purposes under 26 U.S.C. § 3121(d)(2)) for employment in the provision of covered items or services. This safe harbor is relevant to AHT's 147 W-2 employed physicians.
(b) Personal Services and Management Contracts (42 C.F.R. § 1001.952(d)): Protects payments made under a written agreement for specified services, where the agreement covers all services to be provided, the aggregate compensation is set in advance, is consistent with FMV, and does not take into account the volume or value of referrals. This safe harbor is critical for AHT's 38 independent contractor and medical director arrangements, as well as the CPN management services agreements.
(c) Space Rental (42 C.F.R. § 1001.952(b)): Protects payments for the use of office or other space under a written lease agreement, where the lease is at FMV, the term is at least one year, and the rental amount does not vary with or take into account the volume or value of referrals. This safe harbor is relevant to AHT's office leases and the Meridian Diagnostics facility access arrangement.
(d) Equipment Rental (42 C.F.R. § 1001.952(c)): Protects payments for the use of equipment under a written lease agreement, subject to requirements analogous to those of the space rental safe harbor.
(e) Referral Services (42 C.F.R. § 1001.952(f)): Protects certain payments for referral services meeting specified conditions.
(f) Value-Based Arrangements (42 C.F.R. § 1001.952(ee)–(gg)): Added by the AKS Safe Harbor Modernization Final Rule (85 Fed. Reg. 77684, effective January 19, 2021), these safe harbors protect certain value-based arrangements among VBE participants that meet defined criteria. These safe harbors are relevant to AHT's value-based payment arrangements with Covenant Health Plans Inc.
Penalties for AKS Violations. Violation of the AKS carries severe consequences, including: criminal penalties of up to $100,000 per violation and up to ten (10) years of imprisonment; civil monetary penalties of up to $100,000 per violation under the Civil Monetary Penalties Law; treble damages under the False Claims Act where claims submitted pursuant to a kickback arrangement are deemed false claims; and mandatory exclusion from participation in all federal healthcare programs.
Relevance to AHT. The AKS is of paramount importance to AHT's compliance program given that approximately 61% of the Company's net revenue ($130.7 million in FY2022) is derived from Medicare and Medicaid reimbursements. Every financial relationship between AHT and a referral source — including the compensation of 147 employed physicians, the terms of 38 independent contractor and medical director arrangements, the management services fees charged through CPN, and all vendor relationships involving referral sources — must be structured and documented to satisfy an applicable AKS safe harbor or, at a minimum, to minimize the risk of a "one purpose" finding by a court or enforcement agency. The Grayson Whitaker gap assessment identified numerous arrangements that did not clearly satisfy safe harbor requirements and that have been prioritized for remediation.
2.2 Physician Self-Referral Law (Stark Law) (42 U.S.C. § 1395nn)
The Physician Self-Referral Law, commonly known as the "Stark Law," prohibits a physician from making a referral for designated health services ("DHS") payable by Medicare (or, in certain states, Medicaid) to an entity with which the physician or an immediate family member of the physician has a financial relationship (either an ownership or investment interest, or a compensation arrangement), unless an applicable exception is met. The prohibition is complemented by a corresponding prohibition on the entity from presenting or causing to be presented a claim to Medicare for DHS furnished pursuant to a prohibited referral.
The Stark Law is a strict liability statute. Unlike the AKS, no proof of intent is required. A technical violation — even one resulting from an inadvertent documentation error, an expired agreement, or a failure to meet a specific element of an exception — can give rise to liability. This strict liability standard makes meticulous attention to arrangement structure, documentation, and ongoing maintenance a compliance imperative for AHT.
The categories of DHS relevant to AHT's operations include:
• Clinical laboratory services (provided at AHT in-office laboratories across the 23 clinic locations);
• Radiology and certain other imaging services, including MRI, CT, and X-ray (provided at AHT diagnostic imaging facilities);
• Physical therapy services (provided at AHT physical therapy clinics co-located with certain Arbor Health Clinics);
• Outpatient prescription drugs (to the extent dispensed at AHT facilities).
The Stark Law provides for a number of exceptions under 42 C.F.R. § 411.350 et seq. that, if satisfied, permit referrals that would otherwise be prohibited. The following exceptions are of particular relevance to AHT:
(a) Employment Exception (42 C.F.R. § 411.357(c)): Applies to amounts paid by an employer to a physician (or immediate family member) who has a bona fide employment relationship with the employer, provided that the employment is for identifiable services, the compensation is consistent with FMV and does not take into account the volume or value of referrals, and the compensation is commercially reasonable even absent referrals. This exception is critical for AHT's 147 employed physicians.
(b) Personal Services Exception (42 C.F.R. § 411.357(d)): Applies to compensation paid under a written arrangement for identified services, provided that the arrangement covers all services to be provided, the aggregate compensation is set in advance, is consistent with FMV, and does not take into account the volume or value of referrals. This exception is applicable to AHT's independent contractor and medical director arrangements.
(c) Fair Market Value Exception (42 C.F.R. § 411.357(l)): Applies to certain compensation arrangements that do not otherwise satisfy a more specific exception, provided that the compensation is at FMV, is commercially reasonable, and does not take into account the volume or value of referrals.
(d) In-Office Ancillary Services Exception (42 C.F.R. § 411.355(b)): Permits a physician to refer patients for DHS to be provided within the physician's own group practice, subject to detailed requirements regarding supervision, location, and billing. This exception is relevant to DHS provided at AHT clinics under physician supervision.
(e) Space Rental Exception (42 C.F.R. § 411.357(a)): Applies to lease payments for the rental of office space, subject to requirements analogous to those under the AKS space rental safe harbor.
(f) Equipment Rental Exception (42 C.F.R. § 411.357(b)): Applies to lease payments for the rental of equipment, subject to similar requirements.
(g) Indirect Compensation Arrangements Exception (42 C.F.R. § 411.357(p)): Applies to certain indirect compensation arrangements where the physician does not have a direct financial relationship with the entity but has an indirect relationship through an unbroken chain of persons or entities, provided that the compensation received by the referring physician is FMV, is commercially reasonable, and is not determined in a manner that takes into account the volume or value of referrals.
(h) Value-Based Arrangements Exceptions (42 C.F.R. §§ 411.357(aa)–(bb)): Added by the CMS Stark Law Modernization Final Rule (85 Fed. Reg. 77492, effective January 19, 2021), these exceptions protect certain value-based arrangements among VBE participants.
Penalties for Stark Law Violations. The consequences of a Stark Law violation are substantial and include: denial of payment for DHS furnished pursuant to a prohibited referral; obligation to refund amounts collected for improperly referred services; civil monetary penalties of up to $15,000 per service furnished pursuant to a prohibited referral (and up to $100,000 for circumvention schemes); exclusion from federal healthcare programs; and potential liability under the False Claims Act for claims submitted in connection with prohibited referrals.
60-Day Repayment Obligation. Under 42 U.S.C. § 1320a-7k(d), a person who has received an overpayment must report and return the overpayment to the applicable federal healthcare program within sixty (60) days after the date on which the overpayment was identified (or should have been identified through the exercise of reasonable diligence). Failure to timely report and return an overpayment may give rise to False Claims Act liability. This obligation is directly relevant to AHT whenever a Stark Law violation results in claims for DHS that should not have been submitted.
CMS Self-Referral Disclosure Protocol (SRDP). CMS has established the Self-Referral Disclosure Protocol as a mechanism for entities to voluntarily disclose actual or potential Stark Law violations and to negotiate resolution, often at reduced settlement amounts. The evaluation of whether to utilize the SRDP is addressed in Section X of this Manual.
Non-Monetary Remuneration Exception. The Stark Law regulations provide a limited exception for non-monetary remuneration (items or services, other than cash or cash equivalents) provided by an entity to a referring physician, subject to an annual per-physician limit. For calendar year 2023, the non-monetary remuneration limit is $459 per physician per year. AHT must track all items of non-monetary remuneration provided to referring physicians to ensure compliance with this limit.
2.3 False Claims Act (31 U.S.C. §§ 3729–3733)
The federal False Claims Act ("FCA") imposes liability on any person who knowingly submits, or causes to be submitted, a false or fraudulent claim for payment to the United States Government, or who knowingly makes or uses a false record or statement material to a false or fraudulent claim. The FCA's scienter requirement is satisfied by actual knowledge, deliberate ignorance, or reckless disregard of the truth or falsity of the claim.
The FCA is particularly relevant to AHT's compliance program because claims submitted to Medicare or Medicaid pursuant to arrangements that violate the AKS or the Stark Law may constitute false claims. Under 42 U.S.C. § 1320a-7b(g), a claim that includes items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the FCA. Similarly, claims submitted for DHS furnished pursuant to a prohibited referral under the Stark Law are claims that the entity is not entitled to submit, and may give rise to FCA liability.
The FCA provides for treble damages (three times the amount of the Government's loss) plus per-claim civil penalties, which are adjusted periodically for inflation. The FCA also contains robust qui tam (whistleblower) provisions that permit private individuals to file suit on behalf of the Government and to receive a share of any recovery. Qui tam actions are a significant source of healthcare fraud enforcement, and AHT must be prepared to defend against potential qui tam claims by ensuring that its arrangements and billing practices comply with applicable law.
2.4 Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a)
The Civil Monetary Penalties Law ("CMPL") authorizes the OIG to impose civil monetary penalties, assessments, and exclusion from federal healthcare programs for a wide range of conduct, including submitting false claims, offering or receiving kickbacks, violating the Stark Law, making false statements, and other prohibited acts. The CMPL supplements the criminal penalties available under the AKS and provides the OIG with a powerful administrative enforcement tool. Penalties under the CMPL can be significant, including per-violation penalties and assessments of up to three times the amount claimed, in addition to exclusion from federal healthcare programs. The CMPL is relevant to AHT's compliance program in connection with the potential consequences of AKS, Stark Law, and billing violations.
2.5 Exclusion Authorities (42 U.S.C. § 1320a-7)
Federal law provides for the mandatory and permissive exclusion of individuals and entities from participation in federal healthcare programs. Mandatory exclusion is required for individuals convicted of certain offenses, including healthcare fraud, patient abuse, and felony convictions related to controlled substances. Permissive exclusion may be imposed for a broader range of conduct, including kickback violations, false claims, and other misconduct.
Exclusion has devastating consequences for a healthcare organization such as AHT. If AHT or any of its employees, physicians, or contractors were excluded from federal healthcare programs, the Company would be prohibited from billing Medicare and Medicaid for items or services furnished by, or at the direction of, the excluded individual. Given that 61% of AHT's net revenue ($130.7 million in FY2022) derives from Medicare and Medicaid, exclusion of any key personnel or of the Company itself would pose an existential threat to AHT's financial viability.
AHT is required to screen all employees, physicians, independent contractors, medical directors, and vendors against the OIG List of Excluded Individuals and Entities ("LEIE") and the General Services Administration System for Award Management ("SAM") prior to hire or engagement and on a monthly basis thereafter. Screening procedures are detailed in Appendix I of this Manual.
2.6 State Healthcare Fraud and Anti-Kickback Laws
In addition to federal law, AHT must comply with the healthcare fraud and anti-kickback laws of each state in which it operates. The following state-specific requirements are of particular significance:
Massachusetts (M.G.L. c. 175H, § 3). The Massachusetts anti-kickback law applies to AHT's fourteen (14) Massachusetts clinics. Critically, the Massachusetts statute is broader than the federal AKS in that it prohibits kickbacks in connection with any healthcare services, regardless of payer — including services reimbursed by commercial insurance and patient self-pay, not merely services reimbursed by federal healthcare programs. This means that AHT's commercial payer arrangements, including its relationship with Covenant Health Plans Inc. ($38.6 million, representing 18% of AHT revenue) and other commercial payer revenue (aggregating approximately $83.6 million), are subject to the Massachusetts anti-kickback prohibition. AHT's Massachusetts arrangements must be structured to comply with both federal and Massachusetts anti-kickback requirements.
Connecticut (Conn. Gen. Stat. § 20-7a(d)). The Connecticut referral fee prohibition applies to AHT's four (4) Connecticut clinics and to the ConnectiCare Physicians Network management services arrangements with nine independently owned physician practices in Strathmore Mutual Insurance area. The statute prohibits healthcare professionals from paying or receiving referral fees. AHT's management services fee structures and physician referral practices in Connecticut must be analyzed under this provision in addition to federal law.
Rhode Island and New Hampshire. AHT's three (3) Rhode Island clinics and two (2) New Hampshire clinics are subject to the applicable healthcare fraud, anti-kickback, and referral statutes of those respective states. While these statutes generally track the prohibitions of federal law, certain variations exist, and AHT personnel in these states must comply with all applicable state requirements.
Governing Standard. AHT personnel must comply with both federal and applicable state laws in all instances. Where state and federal requirements diverge, the more restrictive standard governs. The CCO is responsible for monitoring state-specific regulatory developments and ensuring that AHT's policies reflect the applicable requirements in each state of operation.
2.7 HIPAA and Other Applicable Regulations
AHT is a covered entity under the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and is subject to the HIPAA Privacy Rule (45 C.F.R. Parts 160 and 164, Subparts A and E) and the HIPAA Security Rule (45 C.F.R. Parts 160 and 164, Subparts A and C). AHT's obligations under HIPAA, including the protection of protected health information ("PHI"), the implementation of administrative, physical, and technical safeguards, and the notification of breaches, are addressed in AHT's separate HIPAA Compliance Policy, which is cross-referenced in Appendix D of this Manual.
AHT is also subject to billing and coding compliance requirements, including requirements for accurate documentation, proper code selection, and timely and accurate claims submission. AHT's billing and coding compliance obligations are addressed in the separate Billing and Coding Compliance Policy, which is cross-referenced in Appendix D.
AHT and its employed physicians, independent contractors, and other clinical personnel are subject to state licensure and scope of practice requirements in each state in which they practice. AHT is responsible for ensuring that all clinical personnel maintain current and valid licensure in the state(s) in which they provide patient care, and that clinical operations comply with applicable scope of practice limitations.
SECTION III: COMPLIANCE PROGRAM STRUCTURE AND GOVERNANCE
3.1 Seven Elements of an Effective Compliance Program
The OIG has identified seven elements of an effective compliance program. These elements, which are widely recognized as the framework for healthcare compliance programs, are:
1. Written policies, procedures, and standards of conduct that articulate the organization's commitment to compliance and set forth specific expectations for conduct;
2. Designation of a compliance officer and a compliance committee charged with operating and monitoring the compliance program;
3. Effective training and education for all affected personnel regarding compliance obligations and the organization's compliance policies;
4. Effective lines of communication between the compliance officer and all employees, including a mechanism for reporting suspected compliance violations without fear of retaliation;
5. Well-publicized disciplinary guidelines for enforcement of compliance standards;
6. An effective system for routine monitoring, auditing, and identification of compliance risks, including a mechanism for evaluating the effectiveness of the compliance program; and
7. Prompt response to detected offenses, including the development and implementation of corrective action plans and, where appropriate, voluntary self-disclosure and repayment.
This Manual addresses each of these seven elements as applied to AHT's specific operations, organizational structure, and risk profile. The sections of this Manual that correspond to each element are identified in the following table:
3.2 Board of Directors Oversight
The AHT Board of Directors (the "Board") retains ultimate oversight responsibility for the Company's compliance program. The Board recognizes that effective compliance governance begins at the highest level of the organization, and that the Board's active engagement in compliance oversight is essential to establishing a culture of compliance throughout AHT.
Board Compliance Committee. The Board has established a Board Compliance Committee (the "Committee") under the Compliance Committee Charter originally adopted on April 15, 2021, and amended on October 30, 2022. The full text of the Compliance Committee Charter is attached as Appendix A to this Manual. The Committee is a standing committee of the Board and is vested with the authority and responsibility to oversee the design, implementation, and effectiveness of the compliance program on behalf of the full Board.
Committee Composition. The Committee shall be composed of at least three (3) members of the Board, including at least one (1) independent director and at least one (1) Ridgeline Capital board designee. As of the effective date of this Manual, the Ridgeline Capital board designees who serve on the Committee are Claudia Sorrento, Managing Director, and Marcus Whitmore, Principal, of Ridgeline Capital Advisors LLC. The composition of the Committee is intended to ensure both independence of oversight and alignment with the interests of AHT's principal equity sponsor.
Quarterly Reporting. The Chief Compliance Officer shall report to the Board Compliance Committee on a quarterly basis, providing updates on compliance program activities, significant compliance issues and investigations, training completion rates, arrangement review and remediation status, risk assessment results, and any other matters of compliance significance. The quarterly report shall be provided in writing and supplemented by oral presentation.
Annual Compliance Program Effectiveness Review. The full Board shall conduct an annual review of the overall effectiveness of the compliance program, informed by the quarterly reports of the CCO, the results of the annual compliance risk assessment (Section IX), and any external audit or assessment findings.
Committee Meeting Schedule. The Board Compliance Committee shall meet at least quarterly, and shall convene special meetings as warranted by urgent or significant compliance matters. The Committee met with Calderwood & Harkness LLP on April 18, 2023, to receive an interim findings presentation, and on June 27, 2023, to receive and approve the final compliance program deliverables, including this Manual, demonstrating the Committee's active engagement in the compliance self-assessment and program revision process.
3.3 Chief Compliance Officer
Designation. Derek Huang serves as the Chief Compliance Officer of AHT and is the designated Compliance Officer for purposes of this Manual and the OIG's compliance program guidance.
Reporting Structure. The CCO reports directly to the Chief Executive Officer, Dr. Nathan Ellsworth, for administrative purposes. In addition, the CCO has a direct reporting line to the Board Compliance Committee, ensuring that the CCO has independent access to the Board for compliance matters without the necessity of intermediation by the CEO or any other member of management. This dual reporting structure is designed to protect the independence of the compliance function and to ensure that the Board receives unfiltered compliance information.
Independence. The CCO has the authority and the obligation to report directly to the Board Compliance Committee on any compliance matter, including matters involving senior management or the CEO, without prior approval from or notice to the CEO. The Board Compliance Committee Charter expressly provides for this right of direct access.
Responsibilities. The CCO is responsible for the day-to-day management and oversight of the compliance program, including the following functions:
(a) Development, implementation, and periodic updating of compliance policies, procedures, and standards of conduct, including this Manual and related policies referenced in the appendices;
(b) Oversight and coordination of the mandatory compliance training program for all AHT personnel;
(c) Management of the compliance hotline and all compliance reports and inquiries;
(d) Coordination of internal investigations of suspected compliance violations, including engagement of legal counsel as appropriate;
(e) Coordination of the annual compliance risk assessment and ongoing compliance monitoring activities;
(f) Coordination with external auditors and compliance consultants, including Grayson Whitaker & Associates LLP and Halsted Accounting Group LLP;
(g) Review and approval (in coordination with the General Counsel) of all new and amended arrangements with referral sources, using AKS safe harbor checklists and Stark exception analyses;
(h) Monitoring of federal and state regulatory developments affecting AHT's compliance obligations;
(i) Preparation and delivery of quarterly and annual compliance reports to the Board Compliance Committee;
(j) Maintenance of all compliance program records, including the Master Arrangement Inventory and Risk Scoring Matrix, training records, investigation files, and corrective action documentation;
(k) Maintenance of the centralized tracking log for non-monetary remuneration to and from referral sources; and
(l) Such other compliance functions as may be assigned by the Board Compliance Committee or as may be necessary to ensure the effectiveness of the compliance program.
Termination and Compensation Protection. The CCO may not be terminated, and the CCO's compensation may not be materially reduced, without the prior approval of the Board Compliance Committee. This protection is intended to safeguard the independence of the compliance function and to ensure that the CCO can perform compliance duties without fear of retaliation.
Staffing and Budget. The CCO shall be provided with dedicated compliance staff and sufficient budget resources to carry out the compliance program responsibilities described in this Manual across all twenty-three clinics, four states, and all business operations of AHT. The adequacy of compliance staffing and budget shall be reviewed annually by the Board Compliance Committee.
3.4 General Counsel Role
Patricia Yamamoto serves as General Counsel of AHT and is the primary legal advisor on compliance matters. The General Counsel plays a critical role in the compliance program, working in close coordination with the CCO on the following functions:
(a) Legal review and analysis of physician compensation arrangements, vendor contracts, management services agreements, and other arrangements involving referral sources, including safe harbor and exception analysis and FMV substantiation review;
(b) Engagement and oversight of outside counsel, including Calderwood & Harkness LLP (for healthcare regulatory matters) and Westbrook Hale LLP (Elena Marchetti, Partner, for corporate and employment matters with compliance implications), and external compliance consultants, including Grayson Whitaker & Associates LLP (Carolyn Fitch, Principal);
(c) Legal support for internal investigations, including preservation of attorney-client privilege and work product protections;
(d) Legal advice on voluntary self-disclosure, overpayment reporting, and government inquiry response; and
(e) Coordination with AHT's designated FMV appraiser, Northbridge Valuation Advisors LLC (Sandra Kilpatrick, Managing Director), on the scope, timing, and sufficiency of FMV opinions.
The General Counsel and the CCO are expected to work collaboratively, each bringing their respective expertise to the compliance program. Where matters implicate both legal risk and operational compliance, the General Counsel and CCO shall jointly assess the issues and determine the appropriate course of action, escalating to the Board Compliance Committee as warranted.
3.5 Compliance Committee (Operational)
AHT has established an Operational Compliance Committee (the "Operational Committee"), which is distinct from the Board Compliance Committee. The Operational Committee serves as the primary internal working group for compliance program implementation and oversight at the management level.
Composition. The Operational Committee is composed of the following members:
• CCO (Chair): Derek Huang
• General Counsel: Patricia Yamamoto
• Chief Financial Officer
• Chief Medical Officer
• Vice President of Operations
• Vice President of Human Resources
• Rotating clinic medical director representative (selected on a quarterly basis from among the AHT clinic medical directors)
Meeting Schedule. The Operational Committee meets monthly to review compliance issues, monitor the progress of compliance remediation activities, review proposed new arrangements with referral sources, assess training completion rates, review hotline reports and investigation status, and address other operational compliance matters.
Authority. The Operational Committee has the authority to direct operational compliance activities within AHT, to approve or disapprove proposed arrangements based on compliance analysis, and to implement corrective action plans for identified compliance issues. The Operational Committee is also empowered, and is expected, to escalate issues of material compliance significance to the Board Compliance Committee for review and action.
3.6 Departmental Compliance Liaisons
Each AHT clinic and each major corporate department shall designate an individual to serve as a Compliance Liaison. The Compliance Liaison program is designed to embed compliance awareness and compliance-related support at the local level, ensuring that compliance is not solely a centralized function but is integrated into the daily operations of each AHT facility and department.
Responsibilities. Compliance Liaisons serve as the local point-of-contact for compliance questions, facilitate compliance training sessions at the local level, assist in the identification and reporting of potential compliance issues, and serve as a resource for employees and contractors who have compliance-related concerns.
Designation. Across AHT's twenty-three (23) clinics and corporate departments, a minimum of twenty-five (25) Compliance Liaisons shall be designated at all times. Compliance Liaisons are selected by the CCO in consultation with the relevant clinic or departmental manager, and shall be individuals with sufficient seniority, knowledge, and credibility to perform the liaison function effectively.
Training. Compliance Liaisons receive enhanced compliance training in addition to the standard mandatory training required of all AHT personnel. Enhanced training covers arrangement review procedures, red flag identification, escalation protocols, and the compliance reporting process.
Quarterly Liaison Meetings. The CCO shall convene quarterly meetings of all Compliance Liaisons to discuss compliance developments, share best practices, review common compliance questions and issues, and provide ongoing education. These meetings serve as a communication channel between the compliance office and the frontline of AHT's operations.
SECTION IV: STANDARDS OF CONDUCT AND CODE OF ETHICS
4.1 General Standards of Conduct
AHT is committed to conducting its business with the highest standards of ethical conduct, integrity, and compliance with all applicable laws and regulations. Every individual who performs services on behalf of AHT — including directors, officers, employees, physicians, independent contractors, medical directors, agents, and business partners — is expected to uphold these standards in all aspects of their work.
The following general standards of conduct apply to all AHT personnel:
(a) Honest and Accurate Dealings. All dealings with patients, payers, government agencies, vendors, business partners, and other third parties shall be conducted honestly, accurately, and in good faith. AHT personnel shall not make false or misleading statements, submit inaccurate claims, or engage in deceptive practices.
(b) Prohibition on Fraud, Waste, and Abuse. AHT strictly prohibits fraud, waste, and abuse in all aspects of its operations, including billing and coding, claims submission, financial reporting, and the provision of clinical services.
(c) Compliance with Law. All AHT personnel must comply with all applicable federal and state laws, regulations, and AHT internal policies. Ignorance of the law is not a defense to a compliance violation.
(d) Duty to Report. Every AHT employee, physician, contractor, and agent has an affirmative duty to report suspected compliance violations through the channels described in Section VII of this Manual. Failure to report a known or suspected violation is itself a compliance violation.
(e) Non-Retaliation. AHT strictly prohibits retaliation against any individual who, in good faith, reports a suspected compliance violation, cooperates with a compliance investigation, or participates in a government inquiry. The non-retaliation policy is described in detail in Section 7.3 of this Manual.
4.2 Anti-Kickback and Referral Integrity Standards
The integrity of AHT's referral relationships is fundamental to the Company's compliance posture. AHT is committed to ensuring that all referral relationships are based solely on patient need, clinical judgment, and legitimate business considerations — never on the exchange of remuneration or other inducements.
The following specific standards govern anti-kickback and referral integrity at AHT:
(a) Prohibition on Inducements. No AHT employee, physician, contractor, or agent shall offer, pay, solicit, or receive any remuneration — whether in cash or in kind, directly or indirectly — to induce or reward referrals for items or services reimbursable by any federal or state healthcare program or, under Massachusetts law (M.G.L. c. 175H, § 3), any payer. This prohibition applies to all forms of remuneration, including compensation, gifts, meals, entertainment, free or discounted goods or services, loans, waivers of fees, and any other transfer of value.
(b) Prohibition on Volume-Based Referrals. No referral shall be made, accepted, or rewarded on the basis of the volume or value of past or anticipated business between the parties. All referral decisions shall be based on patient clinical need, quality of care, and other medically appropriate factors.
(c) Fair Market Value and Commercial Reasonableness. All physician compensation arrangements — including the compensation of the 147 employed physicians and the terms of the 38 independent contractor and medical director arrangements — must be at fair market value ("FMV") and commercially reasonable, irrespective of the volume or value of referrals. Compensation that is excessive, disproportionate to the services rendered, or that lacks a legitimate business justification independent of referral considerations is prohibited.
(d) Safe Harbor and Exception Compliance. All arrangements with referral sources must be structured to satisfy applicable AKS safe harbors and Stark Law exceptions, or must receive written approval from the CCO and General Counsel with a documented risk analysis. No arrangement with a referral source may be executed or amended without prior compliance review.
(e) Gifts, Meals, and Entertainment. AHT personnel are prohibited from providing or accepting gifts, meals, entertainment, or other items of value to or from referral sources in excess of applicable thresholds. The specific dollar limits and approval requirements are set forth in the Revised Gifts, Meals, and Entertainment Policy, which is cross-referenced in Appendix D. In particular, the Stark Law non-monetary remuneration exception limits non-monetary remuneration to a referring physician to $459 per physician per calendar year (CY2023). AHT must track all items of non-monetary remuneration to ensure compliance with this limit through the centralized tracking log maintained by the compliance office.