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ARBOR HEALTH TECHNOLOGIES INC.

REVISED PHYSICIAN REFERRAL AND SELF-REFERRAL POLICY

Policy Number: AHT-COMP-2023-003

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SECTION 1: PURPOSE AND OVERVIEW

1.1 Purpose Statement

This Revised Physician Referral and Self-Referral Policy (this "Policy") governs all physician referral practices across Arbor Health Technologies Inc. ("AHT" or the "Company") and its twenty-three (23) outpatient clinics, branded as "Arbor Health Clinics," currently operating in four states: Massachusetts (14 clinics), Connecticut (4 clinics), Rhode Island (3 clinics), and New Hampshire (2 clinics).

The purpose of this Policy is to establish comprehensive requirements to ensure that all referrals for designated health services ("DHS"), as defined under the Physician Self-Referral Law (commonly referred to as the "Stark Law," codified at 42 U.S.C. § 1395nn and implementing regulations at 42 C.F.R. Part 411, Subpart J), and the Anti-Kickback Statute ("AKS," codified at 42 U.S.C. § 1320a-7b(b) and implementing regulations at 42 C.F.R. § 1001.952), comply with all applicable federal and state legal requirements.

This Policy applies with equal force to both referrals made by AHT-affiliated physicians (whether employed or contracted) and referrals received by AHT from external referral sources, including but not limited to physician practices managed by AHT through its ConnectiCare Physicians Network, LLC subsidiary.

This Policy reflects the findings and recommendations of the comprehensive AKS and Stark Law self-assessment conducted by Calderwood & Harkness LLP during the period from January 30, 2023 through July 12, 2023 (the "Self-Assessment"). The Self-Assessment was authorized by the AHT Board of Directors pursuant to Resolution No. 2023-01-004, adopted on January 24, 2023, and was undertaken in response to the compliance gap assessment previously completed by Grayson Whitaker & Associates LLP (Report No. GW-AHT-2022-Final, dated December 12, 2022). The Grayson Whitaker assessment identified seventeen (17) high-risk arrangements and twenty-three (23) moderate-risk arrangements across AHT's physician referral ecosystem, prompting the Board to authorize the comprehensive self-assessment and remediation engagement with Calderwood & Harkness.

This Policy is a core component of the remediation program recommended by Calderwood & Harkness and is intended to be read in conjunction with the other revised compliance policies and contract templates produced as part of that engagement. The adoption and implementation of this Policy represent AHT's commitment to maintaining a culture of compliance and to ensuring that all physician referral practices are conducted with the highest degree of legal and ethical integrity.

1.2 Background and Regulatory Context

AHT reported total net revenue of $214.3 million for the fiscal year ending December 31, 2022 ("FY2022"). Of this total, approximately sixty-one percent (61%), or $130.7 million, was derived from Medicare and Medicaid reimbursements. This significant reliance on federal healthcare program revenue makes compliance with the Stark Law and the Anti-Kickback Statute critically important to the organization's financial stability, operational integrity, and continued participation in federal healthcare programs. Any violation of these statutes could result in denial of payment, refund obligations, civil monetary penalties, treble damages under the False Claims Act, and exclusion from Medicare and Medicaid — consequences that would be catastrophic to AHT's operations and financial viability.

Commercial payer revenue constitutes the remaining thirty-nine percent (39%) of AHT's net revenue, totaling approximately $83.6 million in FY2022. Covenant Health Plans Inc. is AHT's largest commercial payer, contributing $38.6 million in revenue, or approximately eighteen percent (18%) of AHT's total net revenue. AHT's relationship with Covenant Health Plans includes value-based payment arrangements with quality metric incentive bonuses that totaled $2.1 million in FY2022. These value-based arrangements implicate both federal and state referral and anti-kickback laws and require careful structuring to comply with the applicable Stark Law value-based enterprise exceptions and AKS value-based arrangement safe harbors.

AHT's regulatory compliance landscape was further complicated by its acquisition of Lakeview Medical Associates, P.C. on August 15, 2022. This transaction, structured as an asset purchase for $11.4 million, brought fourteen (14) physicians (twelve employed and two independent contractors) into AHT's network, along with two clinic locations in Worcester and Shrewsbury, Massachusetts. The integration of Lakeview's legacy referral patterns, physician arrangements, and clinic operations heightened the need for standardized referral policies across both legacy AHT operations and newly integrated Lakeview operations. Several Lakeview-era referral arrangements were not fully restructured at the time of closing and require ongoing monitoring and remediation under this Policy.

AHT provides in-office ancillary services at multiple clinic locations, including clinical laboratory services, diagnostic imaging services (X-ray, ultrasound, and basic imaging), and physical therapy services. All of these service categories constitute designated health services under the Stark Law, and their provision by AHT gives rise to self-referral considerations that must be managed through strict compliance with the In-Office Ancillary Services Exception and other applicable Stark Law exceptions.

Additionally, AHT's private equity sponsor, Ridgeline Capital Partners Fund IV, L.P. ("Ridgeline"), which holds a seventy-two percent (72%) equity stake in AHT (acquired in January 2021 for $185 million), has identified compliance risk exposure as a strategic priority in connection with a potential exit or sale process anticipated in late 2024. A robust referral compliance program is essential to reducing regulatory risk, supporting accurate financial reporting, and maximizing enterprise value in connection with any future transaction.

1.3 Scope of Application

This Policy applies to the following individuals and entities:

1. Employed Physicians. All one hundred forty-seven (147) W-2 employed physicians of AHT, regardless of specialty, clinic location, or date of hire.

2. Independent Contractor and Medical Director Physicians. All thirty-eight (38) physicians engaged under independent contractor or medical director arrangements with AHT, including those providing services at AHT clinic locations and those providing administrative or oversight services on a part-time basis.

3. Lakeview Legacy Physicians. All fourteen (14) physicians integrated from the Lakeview Medical Associates, P.C. acquisition (twelve employed and two independent contractors), who are subject to this Policy in the same manner as all other AHT-affiliated physicians.

4. Clinical and Administrative Staff. All clinical and administrative staff involved in ordering, processing, scheduling, or billing DHS, including but not limited to clinic administrators, nursing staff who process referral orders, scheduling coordinators, and billing and coding personnel.

5. External Referral Entities. This Policy governs AHT's referral relationships with external entities including but not limited to Meridian Diagnostics LLC (mobile MRI and advanced diagnostic imaging provider at four AHT clinic locations), Pinnacle Laboratory Services Inc. (clinical laboratory testing provider for Rhode Island and southeastern Massachusetts clinics), and physician practices managed through ConnectiCare Physicians Network, LLC.

6. All AHT Clinic Locations. This Policy extends to all twenty-three (23) AHT clinic locations across Massachusetts, Connecticut, Rhode Island, and New Hampshire, including the two legacy Lakeview clinic locations in Worcester and Shrewsbury, Massachusetts.

7. All Payers. This Policy applies to referrals for services reimbursed by Medicare, Medicaid, and — to the extent required by applicable state law (including, without limitation, the Massachusetts anti-kickback law, M.G.L. c. 175H, § 3, which extends to all payers) — commercial payers.

1.4 Relationship to Other AHT Policies

This Policy is one component of AHT's comprehensive compliance framework, as revised through the Calderwood & Harkness engagement. This Policy must be read in conjunction with the following related AHT policies, all of which were developed or revised as part of the same engagement:

• Revised AHT Compliance Program Manual (AHT-COMP-2023-001), which establishes the overarching compliance program structure, governance framework, and compliance committee charter.

• Revised Physician Compensation Policy (AHT-COMP-2023-002), which establishes fair market value ("FMV") and commercial reasonableness standards for all physician compensation arrangements, utilizing benchmark sources including FMV opinions from Northbridge Valuation Advisors LLC, MGMA physician compensation and production survey data, and SullivanCotter physician compensation and productivity survey data.

• Revised Vendor and Third-Party Arrangement Policy (AHT-COMP-2023-004), which governs AHT's arrangements with vendors, suppliers, and third-party entities, including referral source entities.

• Revised Gifts, Meals, and Entertainment Policy (AHT-COMP-2023-005), which establishes limitations on gifts, meals, entertainment, and other items of value provided to or received from referral sources and other parties in a position to influence referral decisions.

• Fair Market Value Determination Procedures (AHT-COMP-2023-006), which sets forth the methodology, documentation requirements, and approval process for FMV determinations used to support physician compensation arrangements, lease arrangements, and other referral-related agreements.

• Non-Monetary Remuneration and Compliance Exception Tracking Protocol (AHT-COMP-2023-007), which establishes the centralized tracking system for items of non-monetary remuneration provided to or received from referral sources, including monitoring against the annual per-physician threshold under the Stark Law non-monetary compensation exception.

In the event of any conflict between this Policy and any of the above-referenced policies, the more restrictive provision shall control unless the CCO and General Counsel determine otherwise in writing.

SECTION 2: DEFINITIONS

The following definitions apply throughout this Policy. Except as otherwise specified, all defined terms are used consistently with their definitions under the Stark Law, the Anti-Kickback Statute, and their implementing regulations.

2.1 Designated Health Services (DHS)

"Designated Health Services" or "DHS" means those items or services identified by the Physician Self-Referral Law as subject to the prohibition on self-referral. The term is defined by 42 U.S.C. § 1395nn(h)(6) and 42 C.F.R. § 411.351 and encompasses the following ten (10) enumerated categories of services:

(a) Clinical laboratory services;

(b) Physical therapy services;

(d) Outpatient speech-language pathology services;

(e) Radiology and certain other imaging services;

(f) Radiation therapy services and supplies;

(g) Durable medical equipment and supplies;

(h) Parenteral and enteral nutrients, equipment, and supplies;

(i) Prosthetics, orthotics, and prosthetic devices and supplies;

(j) Home health services;

(k) Outpatient prescription drugs; and

(l) Inpatient and outpatient hospital services.

For purposes of AHT's operations, the DHS categories most relevant to referral compliance are: clinical laboratory services (provided at AHT in-office laboratories and referred externally to Pinnacle Laboratory Services Inc.), radiology and certain other imaging services (provided at AHT in-office diagnostic imaging suites and referred externally to Meridian Diagnostics LLC), physical therapy services (provided at AHT in-office physical therapy departments), and outpatient prescription drugs (dispensed at or through AHT clinic pharmacies where applicable). All AHT-affiliated physicians, clinic administrators, and billing staff must be aware of the full scope of DHS categories, as referrals for any DHS category are subject to this Policy.

2.2 Referral

"Referral" means, as defined at 42 C.F.R. § 411.351, the request by a physician for, or ordering of, or the certifying or recertifying of the need for, any designated health service, including a request by a physician for a consultation with another physician, and any test or procedure ordered by or to be performed by (or under the supervision of) that consultant. A referral also includes a request by a physician that includes the provision of any DHS, or the establishment of a plan of care by a physician that includes the provision of DHS.

For purposes of this Policy, it is important to distinguish between referrals "made by" a physician in his or her individual capacity and referrals that are attributable to a physician's group practice. Under the group practice rules set forth at 42 C.F.R. § 411.352, referrals made by a physician who is a member of a group practice may, in certain circumstances, be attributed to the group practice for purposes of the In-Office Ancillary Services Exception.

2.3 Financial Relationship

"Financial relationship" means either an ownership or investment interest or a compensation arrangement between a physician (or an immediate family member of the physician) and an entity, as defined at 42 C.F.R. § 411.354. The Stark Law prohibition on self-referral is triggered by the existence of a financial relationship; accordingly, understanding the scope and nature of financial relationships is critical to this Policy.

Ownership or Investment Interest. An "ownership or investment interest" in an entity may be through equity, debt, or other means, and includes an interest in an entity that holds an ownership or investment interest in any entity providing the DHS. Ownership or investment interests may be direct or indirect. Under 42 C.F.R. § 411.354(b), a direct ownership or investment interest exists when a physician (or immediate family member) holds an equity or debt interest in the entity furnishing DHS. An indirect ownership or investment interest exists through a chain of one or more intervening entities.

Compensation Arrangement. A "compensation arrangement" means any arrangement involving any remuneration between a physician (or an immediate family member) and an entity. Under 42 C.F.R. § 411.354(c), compensation arrangements may be direct or indirect. A direct compensation arrangement exists when remuneration passes between the referring physician (or immediate family member) and the entity furnishing DHS without any intervening entities or persons. An "indirect compensation arrangement" exists under the three-element test of 42 C.F.R. § 411.354(c)(2) when: (i) between the referring physician and the entity furnishing DHS there exists an unbroken chain of any number of persons or entities that have financial relationships between them; (ii) the referring physician receives aggregate compensation from the person or entity in the chain with which the physician has a direct financial relationship that varies with, or otherwise reflects, the volume or value of referrals or other business generated by the referring physician for the entity furnishing the DHS; and (iii) the entity furnishing DHS has actual knowledge of, or acts in reckless disregard or deliberate ignorance of, the fact that the referring physician receives aggregate compensation that varies with, or otherwise reflects, the volume or value of referrals or other business generated by the referring physician for the entity.

The indirect compensation arrangement analysis is of specific relevance to AHT's ConnectiCare Physicians Network MSA arrangements, where managed practice physicians refer patients to AHT-owned ancillary services through a chain of financial relationships involving management fees.

2.4 Immediate Family Member

"Immediate family member" is defined at 42 C.F.R. § 411.351 to include the following persons: spouse; natural or adoptive parent, child, or sibling; stepparent, stepchild, stepbrother, or stepsister; father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law; grandparent or grandchild; and spouse of a grandparent or grandchild.

Under the Stark Law, financial relationships of a physician's immediate family member are imputed to the physician for purposes of determining whether a financial relationship exists between the physician and a DHS entity. This imputation is of particular significance to AHT given the following known situation: Dr. Karen Ellsworth, the spouse of AHT's Chief Executive Officer, Dr. Nathan Ellsworth, holds a 4.2% passive equity interest in Pinnacle Laboratory Services Inc. ("Pinnacle"), an external clinical laboratory to which AHT physicians at Rhode Island and southeastern Massachusetts clinics refer approximately $1.65 million in outpatient laboratory work annually (FY2022 data). Because Dr. Karen Ellsworth is an immediate family member of Dr. Nathan Ellsworth, her ownership interest in Pinnacle is imputed to Dr. Ellsworth for Stark Law purposes, creating a financial relationship that requires exception coverage for any referrals from AHT physicians to Pinnacle.

2.5 Entity Furnishing DHS

"Entity furnishing DHS" means any entity that provides or furnishes designated health services, as defined at 42 C.F.R. § 411.351. For purposes of this Policy, the following entities furnish DHS in connection with AHT's operations:

AHT Internal DHS Entities. AHT itself furnishes DHS through its in-office clinical laboratory services, diagnostic imaging suites, and physical therapy departments at various clinic locations. A complete inventory of in-office ancillary services available at each AHT clinic location is set forth in Appendix A to this Policy.

External DHS Entities. AHT physicians also make referrals to external entities that furnish DHS, including:

• Meridian Diagnostics LLC — provides mobile MRI and advanced diagnostic imaging services at four (4) AHT clinic locations under a services/facility access agreement dated March 1, 2021. Total referral volume from AHT physicians to Meridian was $2.8 million in FY2022, encompassing approximately 4,200 scans. Meridian is sixty percent (60%) owned by Dr. Franklin Osei.

• Pinnacle Laboratory Services Inc. — provides clinical laboratory testing services for AHT's Rhode Island and southeastern Massachusetts clinics under a preferred laboratory agreement dated June 15, 2020. Total referral volume from AHT physicians to Pinnacle was $1.65 million in FY2022. Dr. Karen Ellsworth holds a 4.2% passive equity interest in Pinnacle.

2.6 Group Practice

"Group practice" is defined at 42 C.F.R. § 411.352 as a group of two or more physicians legally organized as a partnership, professional corporation, foundation, not-for-profit corporation, faculty practice plan, or similar association, that meets each of the following requirements:

(a) Unified Business. The group practice must have a unified business with centralized decision-making, consolidated billing, centralized accounting, and a compensation/profit-sharing system.

(b) Members of the Group. Each physician who is a member of the group must furnish substantially the full range of patient care services the physician routinely furnishes through the joint use of shared office space, facilities, equipment, and personnel.

(c) Substantially All Test. Substantially all (at least 75%) of the total patient care services of the group's members must be furnished through the group and billed under a billing number assigned to the group, and the amounts received must be treated as receipts of the group.

(d) Overhead and Income Distribution. The overhead expenses of, and income from, the practice must be distributed in accordance with methods previously determined, and the group must maintain records documenting the distribution methods.

(e) Volume/Value Referral Prohibition. No physician who is a member of the group may directly or indirectly receive compensation based on the volume or value of his or her referrals, except as permitted under the special rules for profit shares and productivity bonuses set forth at 42 C.F.R. § 411.352(i).

AHT employs physicians and operates clinics in a manner intended to satisfy the group practice definition. The applicability of the "group practice" definition to AHT's clinic operations is essential for reliance on the In-Office Ancillary Services Exception (42 C.F.R. § 411.355). The CCO is responsible for ensuring and certifying annually that AHT continues to meet all group practice requirements.

2.7 Fair Market Value (FMV) and Commercial Reasonableness

Fair Market Value. "Fair market value" is defined at 42 C.F.R. § 411.351, as updated by the CMS Final Rule on Stark Law Modernization (85 Fed. Reg. 77492, effective January 19, 2021), to mean the value in arm's-length transactions, consistent with the general market value of the subject transaction. "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 who are not otherwise in a position to generate business for the other party. Fair market value is determined without taking into account the volume or value of anticipated or actual referrals by the referring physician to the entity furnishing DHS.

Commercial Reasonableness. "Commercially reasonable" is defined at 42 C.F.R. § 411.351, as updated by the 2021 Stark modernization final rule, to mean that the particular arrangement furthers a legitimate business purpose of the parties to the arrangement and is sensible considering the characteristics of the parties, including their size, type, scope, and specialty. An arrangement may be commercially reasonable even if it does not result in a profit for one or more of the parties. Importantly, the arrangement must be one that a reasonable, informed party would enter into even in the absence of referrals.

2.8 Additional Defined Terms

The following additional defined terms are used throughout this Policy:

SECTION 3: REGULATORY FRAMEWORK

3.1 Stark Law Overview

The Physician Self-Referral Law, commonly known as the Stark Law, is codified at 42 U.S.C. § 1395nn and implemented through regulations at 42 C.F.R. Part 411, Subpart J. The Stark Law prohibits a physician from making a referral for designated health services to an entity with which the physician (or an immediate family member of the physician) has a financial relationship, unless the financial relationship falls within one of the enumerated statutory or regulatory exceptions. In addition, the entity that receives a prohibited referral may not present or cause to be presented a claim to Medicare or Medicaid for DHS furnished pursuant to such referral.

The Stark Law is a strict liability statute. Unlike the Anti-Kickback Statute, no showing of intent or knowledge is required to establish a violation. If a financial relationship exists between a referring physician and a DHS entity, and no exception applies, the referral is prohibited — regardless of whether the referral was clinically appropriate, whether the parties intended to comply with the law, or whether any actual harm resulted. This strict liability framework demands meticulous attention to the structure and documentation of all financial relationships between AHT physicians and DHS entities.

Penalties for Stark Law Violations. The consequences of a Stark Law violation are severe and include:

• Denial of payment for DHS furnished pursuant to a prohibited referral.

• Refund obligation for amounts collected for services provided in violation of the statute.

• Civil monetary penalties of up to $15,000 per service and up to $100,000 per arrangement for knowing violations or circumvention schemes, together with treble damages.

• Potential exclusion from federal healthcare programs (Medicare, Medicaid, TRICARE, and other programs).

• False Claims Act liability — claims submitted for DHS furnished pursuant to a prohibited referral may give rise to liability under the False Claims Act (31 U.S.C. §§ 3729-3733), with penalties of up to $27,894 per false claim (adjusted for inflation) plus treble damages.

Additionally, under 42 U.S.C. § 1320a-7k(d), an entity that has identified an overpayment — including an overpayment resulting from a Stark Law violation — must report and return the overpayment to the applicable federal healthcare program within sixty (60) days of identification. Failure to timely report and return an overpayment may itself constitute a violation of the False Claims Act.

3.2 Anti-Kickback Statute Overview

The Anti-Kickback Statute, codified at 42 U.S.C. § 1320a-7b(b), prohibits any person from knowingly and willfully soliciting, receiving, offering, or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward 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.

The AKS is an intent-based statute, but the standard of intent is expansively construed. Under the "one-purpose test," an arrangement violates the AKS if even one purpose of the remuneration is to induce or reward referrals of federally reimbursable business. It is not necessary that inducement of referrals be the sole, primary, or even a significant purpose of the arrangement — one purpose among many is sufficient to establish a violation.

Penalties for AKS Violations. The AKS is both a criminal statute and a basis for civil liability:

• Criminal penalties include fines of up to $100,000 per violation and imprisonment for up to ten (10) years.

• Civil monetary penalties of up to $100,000 per violation may be imposed, along with treble damages.

• False Claims Act liability — a claim resulting from a kickback arrangement constitutes a false or fraudulent claim under the False Claims Act (42 U.S.C. § 1320a-7b(g)).

• Exclusion from all federal healthcare programs.

Safe Harbors. The Department of Health and Human Services Office of Inspector General has promulgated regulatory safe harbors at 42 C.F.R. § 1001.952. Arrangements that meet all elements of an applicable safe harbor are protected from prosecution under the AKS. Failure to meet a safe harbor does not, in itself, constitute a violation — it merely means the arrangement lacks the regulatory protection of the safe harbor and must be evaluated based on the totality of the circumstances.

The AKS Final Rule on Safe Harbor Modernization (85 Fed. Reg. 77684, effective January 19, 2021) introduced new and modified safe harbors relevant to value-based arrangements, including those pertinent to AHT's value-based payment relationships with Covenant Health Plans Inc.

3.3 Applicable Stark Law Exceptions

The following Stark Law exceptions are the primary exceptions upon which AHT relies or expects to rely to support its physician referral practices. Each exception has specific elements that must be satisfied; failure to meet any single element of an exception renders the exception unavailable and the referral non-compliant.

Employment Exception (42 C.F.R. § 411.357(c)). This exception permits referrals where the physician's financial relationship with the DHS entity consists of compensation paid pursuant to a bona fide employment relationship, provided that the following conditions are met: (i) the employment is for identifiable services; (ii) the compensation paid is consistent with the fair market value of the services; (iii) the compensation is not determined in a manner that takes into account the volume or value of the physician's referrals (except as otherwise permitted); and (iv) the compensation is commercially reasonable even in the absence of referrals. This exception is the primary exception supporting referrals made by AHT's 147 employed physicians.

Personal Services Arrangement Exception (42 C.F.R. § 411.357(d)). This exception permits referrals where the physician's financial relationship with the DHS entity consists of compensation paid under a personal services arrangement, provided that: (i) the arrangement is set out in writing and signed by the parties; (ii) the writing specifies the services covered by the arrangement; (iii) the arrangement covers all services to be provided by the physician; (iv) the aggregate compensation is set in advance, does not exceed fair market value, and is not determined in a manner that takes into account the volume or value of referrals; (v) the term of the arrangement is at least one year; and (vi) the services do not involve the counseling or promotion of a business arrangement or activity that violates any state or federal law. This exception is the primary exception supporting the 38 independent contractor/medical director arrangements.

Fair Market Value Exception (42 C.F.R. § 411.357(l)). This exception permits referrals where the physician's financial relationship with the DHS entity consists of compensation paid pursuant to an arrangement in writing, for specifically identified items or services, at compensation that is set in advance, consistent with fair market value, and not determined in a manner that takes into account the volume or value of referrals, and that is commercially reasonable.

In-Office Ancillary Services Exception (42 C.F.R. § 411.355). This exception permits a group practice physician to refer for DHS that are: (i) furnished personally by the referring physician, by another physician who is a member of the same group practice, or by individuals who are directly supervised by the referring physician or another physician in the group practice; (ii) furnished in the same building in which the referring physician (or another member of the group practice) furnishes physician services, or in a centralized building used by the group practice; and (iii) billed by the group practice. This exception is addressed in detail in Section 5 of this Policy.

Indirect Compensation Arrangement Exception (42 C.F.R. § 411.357(p)). This exception permits referrals where the physician's financial relationship with the DHS entity constitutes an indirect compensation arrangement, provided that: (i) the compensation received by the referring physician is fair market value for services and items actually provided; (ii) the compensation is not determined in a manner that takes into account the volume or value of referrals; and (iii) the compensation arrangement is set out in writing, signed by the parties, and specifies the services covered. This exception is of particular relevance to AHT's ConnectiCare Physicians Network MSA arrangements.

Value-Based Enterprise Exceptions (42 C.F.R. §§ 411.357(aa)). The 2021 Stark modernization final rule introduced three new value-based exceptions: (i) the full financial risk exception; (ii) the meaningful downside financial risk exception; and (iii) the value-based arrangement exception. These exceptions are relevant to AHT's value-based payment arrangements with Covenant Health Plans Inc., including the quality metric incentive bonus programs that generated $2.1 million in FY2022.

3.4 Applicable AKS Safe Harbors

The following AKS safe harbors are the primary safe harbors upon which AHT relies or expects to rely to protect its physician-related compensation arrangements from AKS liability:

• Employment Safe Harbor (42 C.F.R. § 1001.952(i)): protects amounts paid by an employer to an employee for employment in the furnishing of any item or service reimbursable under a federal healthcare program.

• Personal Services and Management Contracts Safe Harbor (42 C.F.R. § 1001.952(d)): protects payments made by a principal to an agent for services rendered pursuant to a written agreement that specifies the services, the term, the aggregate compensation, and other required elements.

• Space Rental Safe Harbor (42 C.F.R. § 1001.952(b)): protects payments made for the rental of office space, provided the agreement is in writing, signed, specifies the premises, the term is at least one year, the aggregate rental is set in advance at FMV, the space is used exclusively by the lessee during the rental period, and the rental is not determined by volume or value of referrals.

• Equipment Rental Safe Harbor (42 C.F.R. § 1001.952(c)): protects payments made for the rental of equipment under the same structural requirements as the space rental safe harbor.

• Referral Services Safe Harbor (42 C.F.R. § 1001.952(f)): protects certain payments to referral services organizations under specified conditions.

• Value-Based Arrangement Safe Harbors (42 C.F.R. § 1001.952(ee)-(gg)): introduced by the 2021 AKS safe harbor modernization final rule, these safe harbors protect certain remuneration exchanged between participants in value-based arrangements, including arrangements involving care coordination, full financial risk, and meaningful downside risk.

3.5 State Law Overlay

Federal referral and anti-kickback laws are not the only legal constraints on AHT's referral practices. Several states in which AHT operates have enacted their own referral and anti-kickback statutes, some of which are broader in scope than their federal counterparts.

Massachusetts Anti-Kickback Law. Massachusetts General Laws Chapter 175H, Section 3 (M.G.L. c. 175H, § 3) prohibits the knowing or willful offering, paying, soliciting, or receiving of any remuneration to induce referrals for health care services. Unlike the federal AKS, which applies only to items and services reimbursable by federal healthcare programs, the Massachusetts anti-kickback law applies to all payers, including commercial insurance. This broader scope means that referral-related compensation arrangements at AHT's fourteen (14) Massachusetts clinic locations must satisfy not only federal Stark and AKS requirements but also the Massachusetts statute, even with respect to patients covered by commercial insurance. This is of particular significance to AHT's arrangements with Covenant Health Plans Inc. and other commercial payers.

Connecticut Referral Fee Prohibition. Connecticut General Statutes § 20-7a(d) prohibits licensed physicians from receiving or paying fees for the referral of patients. This prohibition is applicable to AHT's four (4) Connecticut clinics and to the ConnectiCare Physicians Network, LLC MSA arrangements with nine independently owned physician practices in Strathmore Mutual Insurance area. The management fee structure under the ConnectiCare MSAs must be carefully structured to avoid characterization as a referral fee.

Separate state-law memoranda have been prepared by Calderwood & Harkness LLP as part of the self-assessment engagement, specifically the Massachusetts Anti-Kickback Law Applicability Memorandum and the Connecticut Referral Fee Prohibition Applicability Memorandum. This Policy incorporates the requirements and recommendations analyzed in those memoranda, and covered personnel should consult those documents (available through the Compliance Department) for detailed state-law analysis.

3.6 OIG Compliance Guidance

In addition to statutory and regulatory requirements, AHT's referral compliance program is informed by guidance published by the OIG and CMS. Key guidance documents include:

• OIG Compliance Guidance for Individual and Small Group Physician Practices (65 Fed. Reg. 59434), which identifies referral compliance as a key risk area for physician practices and recommends specific internal controls, training, and monitoring procedures.

• CMS Final Rule on Stark Law Modernization (85 Fed. Reg. 77492, effective January 19, 2021), which updated the definitions of fair market value and commercial reasonableness, introduced value-based enterprise exceptions, and made other significant changes to the Stark regulatory framework.

• AKS Final Rule on Safe Harbor Modernization (85 Fed. Reg. 77684, effective January 19, 2021), which introduced new safe harbors for value-based arrangements, care coordination, and other areas relevant to evolving healthcare delivery models.

AHT's compliance program, including this Policy, is designed to be consistent with the principles and recommendations set forth in the foregoing guidance.

SECTION 4: PROHIBITED REFERRAL PRACTICES

4.1 General Prohibition

No AHT physician — whether employed or engaged under an independent contractor or medical director arrangement — may refer a patient for designated health services to any entity with which the physician or an immediate family member of the physician has a financial relationship, unless the referral falls within a recognized Stark Law exception and, where applicable, the underlying arrangement satisfies an AKS safe harbor. The burden of establishing that an exception or safe harbor applies rests with AHT and the referring physician, and all necessary documentation must be in place before referrals are made.

No AHT physician may solicit, receive, offer, or pay any form of remuneration — whether cash, in-kind benefits, non-monetary items of value, or through the reduction of an obligation — in exchange for, to induce, or to reward patient referrals. This prohibition applies regardless of whether the referral involves a federal healthcare program patient, a commercial insurance patient, or an uninsured or self-pay patient.

This prohibition is absolute and admits of no informal exceptions. Any physician who is uncertain whether a particular referral or arrangement is permissible must consult with the Compliance Department prior to making the referral.

4.2 Specific Prohibited Conduct

Without limiting the generality of Section 4.1, the following specific types of conduct are prohibited under this Policy:

1. Referrals Involving Ownership Interests. Referring patients to entities in which the physician or an immediate family member holds an ownership or investment interest, unless a Stark Law exception specifically applies to the ownership arrangement (e.g., the ownership/investment exception requirements of 42 C.F.R. § 411.356 are fully satisfied). Any physician who holds, or whose immediate family member holds, such an interest must disclose it in accordance with Section 7 and must not make referrals to the entity unless the Compliance Department has confirmed in writing that the applicable exception requirements are met.

2. Free or Below-Market-Value Items or Services. Receiving or providing free or below-market-value items or services (e.g., electronic interfaces, equipment, office supplies, software, or staffing support) from or to referral sources where the value exceeds the non-monetary remuneration exception threshold. For CY2023, the Stark Law non-monetary compensation exception permits items with an aggregate value of no more than $459 per physician per year. Items exceeding this threshold that are provided by or received from DHS entities in a referral relationship with AHT are prohibited unless covered by another exception. This prohibition applies regardless of whether the items are characterized as "promotional," "educational," or "operational."

3. CME Sponsorship Conditioned on Referrals. Accepting continuing medical education ("CME") sponsorship, educational grants, or other benefits from entities that receive referrals from AHT physicians, where such benefits are conditioned upon, correlated with, or provided in a manner that appears to reward referral volume. Legitimate, arm's-length CME sponsorship by industry participants may be permissible under certain circumstances, but must be reviewed and approved by the Compliance Department in advance.

4. Referrals Influenced by Financial Incentives. Making referrals that are influenced by financial incentives tied to the volume or value of referrals under any compensation arrangement. This includes, but is not limited to, bonus structures, profit-sharing formulas, productivity incentives, or any other compensation mechanism that directly or indirectly rewards a physician for generating DHS referrals.

5. Indirect Compensation Arrangements Without Exception Coverage. Referring patients to entities providing management services to or through AHT where the financial relationship creates an unbroken chain of compensation linked to referrals, and the indirect compensation arrangement does not meet the requirements of the applicable Stark exception (42 C.F.R. § 411.357(p)) and AKS safe harbor.

4.3 Illustrative Examples (Anonymized)

The following anonymized examples illustrate types of referral arrangements that raise compliance concerns. These examples are based on, and drawn from, actual situations identified during the Calderwood & Harkness self-assessment, with identifying details modified to protect confidentiality.

Example 1: Family Member Equity Interest. A physician's immediate family member holds a minority equity interest in an outside clinical laboratory. The physician routinely refers outpatient laboratory work to that entity. Under the Stark Law, the family member's ownership interest is imputed to the physician, creating a financial relationship. Unless the ownership interest satisfies all elements of a Stark exception — and the referral arrangement satisfies an AKS safe harbor — these referrals are prohibited. This scenario reflects actual risks identified in the self-assessment with respect to referrals to an external laboratory entity in which a CEO spouse holds a passive equity interest. The compliance response includes heightened monitoring of referral patterns, conflict-of-interest disclosures, and active restructuring discussions with the laboratory entity.

Example 2: Per-Procedure Facility Access Fee. An external diagnostic services provider pays a per-procedure fee to a clinic for facility access. The fee is structured on a per-scan basis and varies directly with the volume of diagnostic scans referred by the clinic's physicians. This arrangement does not satisfy the Stark space rental or equipment rental exception requirements, which mandate that rental charges be set in advance at fair market value and not vary with the volume or value of referrals. Nor does the arrangement satisfy the corresponding AKS safe harbors, which require fixed and predetermined rental amounts. This scenario reflects the self-assessment's findings regarding a mobile diagnostic imaging provider operating at multiple AHT clinic locations under a per-scan facility access agreement.

Example 3: Free Electronic Interface Exceeding Non-Monetary Remuneration Threshold. An external laboratory entity provides a clinic with a free electronic laboratory interface integrated into the clinic's EHR system. The estimated fair market value of the interface is $120,000 per year, far exceeding the $459 CY2023 annual per-physician threshold under the Stark non-monetary compensation exception. This arrangement constitutes impermissible non-monetary remuneration to a referral source unless it is restructured under a separate exception, such as a written fair market value license agreement. This scenario reflects the self-assessment's findings regarding an electronic interface provided by an external laboratory at no cost to AHT.

SECTION 5: IN-OFFICE ANCILLARY SERVICES EXCEPTION — REQUIREMENTS AND PROCEDURES

5.1 Overview of the In-Office Ancillary Services Exception (42 C.F.R. § 411.355)

The In-Office Ancillary Services Exception ("IOASE") is one of the most frequently relied-upon Stark Law exceptions and is of critical importance to AHT's operations. The IOASE permits a physician who is a member of a group practice to refer a patient for DHS that are furnished within the group practice's own facilities, subject to three core requirements:

(a) Furnishing Requirement. The DHS must be furnished personally by the referring physician, by another physician who is a member of the same group practice as the referring physician, or by individuals who are directly supervised by the referring physician or by another physician in the group practice.

(b) Location Requirement. The DHS must be furnished in the same building in which the referring physician (or another member of the group practice) furnishes physician services unrelated to the furnishing of DHS, or in a centralized building used by the group practice for the provision of some or all of the group practice's DHS.

(c) Billing Requirement. The DHS must be billed by the group practice, or by the physician performing or supervising the service, or by an entity that is wholly owned by the group practice.

Each of these requirements is addressed in detail in the subsections below, with specific application to AHT's clinic operations.

5.2 AHT Services Qualifying Under IOASE

AHT furnishes three categories of DHS at its clinic locations that may qualify for the IOASE:

Clinical Laboratory Services. AHT provides in-office clinical laboratory services at certain clinic locations that maintain on-site laboratory capabilities. These services include routine blood work, urinalysis, and basic point-of-care testing. A complete inventory of which AHT clinics maintain on-site laboratory capabilities is set forth in Appendix A. Referrals for in-office laboratory services at these locations may qualify for the IOASE, provided that all furnishing, location, and billing requirements are met. It is important to note that outpatient laboratory work referred to Pinnacle Laboratory Services Inc. under the preferred laboratory agreement dated June 15, 2020, at AHT's Rhode Island and southeastern Massachusetts clinics does not qualify for the IOASE. Pinnacle is an external, independently owned entity, not a part of AHT's group practice, and services furnished by Pinnacle cannot be treated as in-office ancillary services for IOASE purposes.

Diagnostic Imaging Services. AHT provides in-office diagnostic imaging services (X-ray, ultrasound, and basic imaging) at clinic locations equipped with on-site imaging suites. Referrals for these imaging services may qualify for the IOASE, subject to applicable furnishing, location, and billing requirements, including appropriate supervision standards. However, mobile MRI and advanced diagnostic imaging services provided by Meridian Diagnostics LLC at four AHT clinic locations under the services/facility access agreement dated March 1, 2021 require separate analysis. Meridian is an external entity operating under a facility access arrangement; it is not an AHT-owned service line. The Meridian arrangement does not qualify for the IOASE and must be analyzed under separate Stark exceptions and AKS safe harbors.

Physical Therapy Services. AHT provides in-office physical therapy services through AHT-employed physical therapists at designated clinic locations. These services may qualify for the IOASE, provided that the referring physician is a member of the group practice, the services are furnished under appropriate supervision, the services are delivered in the same building as the referring physician's office, and the services are billed by AHT.

5.3 "Same Building" Requirement

The IOASE requires that DHS be furnished in the "same building" as the referring physician's office. Under 42 C.F.R. § 411.351, a "same building" is defined as a building in which, on any given day, the referring physician furnishes physician services unrelated to the furnishing of DHS. A "centralized building" is defined as a building that is used by a group practice for the centralized provision of some or all of the group practice's DHS.

For AHT's purposes, the same-building requirement is met when a physician's clinic office and the ancillary service (laboratory, imaging, or physical therapy) are located within the same physical building. A complete list of AHT clinic locations and the in-office ancillary services available at each is set forth in Appendix A. Clinic administrators must ensure that this inventory is accurate and updated semi-annually.

Multi-Floor and Multi-Suite Considerations. At AHT clinic locations that occupy multiple floors or suites within a larger building (such as medical office buildings with multiple tenants), special care must be taken to confirm that the same-building requirement is met. The key question is whether the ancillary service space and the physician office space are within the same physical building structure. Separate buildings that are adjacent, connected by walkways, or located within the same complex do not automatically satisfy the same-building requirement unless they are within the same physical structure.

Legacy Lakeview Locations. The Worcester clinic at 75 Belmont Street, Worcester, MA 01605 and the Shrewsbury clinic at 310 Main Street, Suite 2A, Shrewsbury, MA 01545 are legacy Lakeview Medical Associates locations integrated into AHT following the August 15, 2022 acquisition. The same-building requirement for any on-site ancillary services at these locations must be verified by the Compliance Department. Dr. Vivian Chao, Regional Medical Director for Central Massachusetts and the Lakeview legacy region, is responsible for coordinating this verification with the Compliance Department.

5.4 Supervision Requirements

The IOASE requires that DHS be furnished personally by the referring physician, by a physician who is a member of the same group practice, or under the personal supervision of such a physician. The applicable level of supervision varies by service type:

Clinical Laboratory Services. Under CLIA standards and CMS regulations, clinical laboratory services generally require only "general supervision," meaning the procedure is furnished under the overall direction of a physician but does not require the physician's presence during the performance of the test or at the time the specimen is collected. This is the least restrictive supervision standard.

Diagnostic Imaging Services. For most diagnostic imaging services furnished under the IOASE, "direct supervision" is required. Direct supervision means the supervising physician must be present in the office suite (though not necessarily in the room) at the time the imaging study is performed. The supervising physician must be immediately available to provide assistance and direction throughout the performance of the procedure.

Physical Therapy Services. Supervision requirements for physical therapy services are governed by applicable state licensure requirements in Massachusetts, Connecticut, Rhode Island, and New Hampshire. AHT must ensure that the level of physician supervision provided at each clinic location meets the requirements of the state in which the clinic is located, as well as any additional CMS supervision requirements applicable under the IOASE.

Documentation of Supervision. For all DHS furnished under the IOASE, the supervising physician must be identified in the medical record. Contemporaneous records documenting the supervision provided must be maintained. ArborConnect should be configured to capture the identity of the supervising physician for each DHS encounter.

5.5 Billing Requirements

All in-office ancillary DHS qualifying for the IOASE must be billed by AHT, as the group practice or employing entity, under AHT's National Provider Identifier (NPI: 1497253810) and applicable Provider Transaction Access Numbers (PTANs). Services may not be billed by or through any entity other than AHT unless the entity is wholly owned by the group practice.

Proper billing requires the use of accurate billing codes (CPT, HCPCS), place of service codes that reflect the in-office setting, and any modifier codes applicable to in-office ancillary services. Billing and coding staff must receive specialized training on IOASE billing requirements (see Section 13.3).

AHT's ArborConnect EHR and practice management platform must be configured to enforce correct billing pathways for IOASE-qualifying services. Specifically, ArborConnect should route in-office ancillary service claims through a billing pathway that automatically associates the claim with the appropriate AHT billing number, place of service code, and supervising physician NPI. The ArborConnect configuration must be validated by the Compliance Department following any system update or modification.

5.6 Group Practice Requirements (42 C.F.R. § 411.352)

Reliance on the IOASE requires that AHT satisfy the definition of a "group practice" under 42 C.F.R. § 411.352. The group practice requirements are set forth in Section 2.6 of this Policy and include the unified business requirement, the substantially all test (at least 75% of total patient care services), the overhead and income distribution requirements, and the prohibition on volume/value-based referral compensation.

The CCO is responsible for conducting an annual certification that AHT continues to satisfy all elements of the group practice definition. This certification must be completed in writing, supported by documentation of AHT's billing data, compensation arrangements, and organizational structure, and submitted to the General Counsel for review. The annual certification for the current policy period must be completed no later than October 12, 2023, and annually thereafter.

Any change in AHT's organizational structure, compensation methodologies, or billing practices that could affect group practice status must be reported to the CCO immediately and evaluated for its impact on IOASE eligibility before the change is implemented.

5.7 Procedures for IOASE Compliance

The following operational procedures apply to all in-office ancillary service referrals:

1. Referral Order Entry. All in-office ancillary referral orders must be entered through the ArborConnect system. Each order must include order-specific documentation of the referring physician, the supervising physician (if different from the referring physician), the DHS category, the clinical indication for the service, and the clinic location where the service will be furnished.

2. Ancillary Services Inventory. Clinic administrators at each AHT clinic location must maintain a current inventory of ancillary services available at their location. This inventory must include the specific types of laboratory tests, imaging studies, and physical therapy services available on-site, as well as the equipment used to furnish those services. The inventory must be updated semi-annually and submitted to the Compliance Department for central recordkeeping. The current inventory is attached as Appendix A.

3. New Service Line Approval. Any new ancillary service line or new clinic location at which ancillary services will be offered must be vetted through the Compliance Department (Derek Huang) before AHT begins accepting referrals for services at that location. The Compliance Department must confirm IOASE eligibility — including the same-building requirement, supervision requirements, billing pathway configuration, and group practice status — before referrals may commence.

4. Quarterly IOASE Audit. The Compliance Department must conduct a quarterly audit of claims billed under the IOASE. The audit must verify that: (a) the services were furnished at an AHT clinic location with on-site ancillary capabilities; (b) appropriate supervision was documented; (c) the services were billed under AHT's NPI and PTAN; (d) the same-building requirement was met; and (e) no services were improperly classified as in-office ancillary services. Audit findings must be documented and reported to the CCO.

SECTION 6: PERMITTED REFERRAL PATHWAYS

6.1 Referrals for In-Office Laboratory Services

AHT physicians may order laboratory tests to be performed at AHT in-office laboratories within the same building as the referring physician's office, provided that all supervision, billing, and group practice requirements of the IOASE are satisfied as described in Section 5. In-office laboratory services are a core component of AHT's clinical operations and serve the legitimate purpose of providing patients with convenient, timely access to diagnostic testing.

Where in-office laboratory services are not available at a particular AHT clinic location — or where a specialized test is required that cannot be performed on-site — physicians may refer patients to external laboratories. Such referrals must be made based on clinical appropriateness, patient access, and quality considerations, and must not be influenced by any financial relationship between the physician (or an immediate family member) and the external laboratory.

Referrals to Pinnacle Laboratory Services Inc. AHT currently maintains a preferred laboratory agreement with Pinnacle Laboratory Services Inc. ("Pinnacle"), dated June 15, 2020. Under this agreement, Pinnacle provides clinical laboratory testing services for patients referred by AHT physicians at the Company's Rhode Island and southeastern Massachusetts clinics. Total referral volume from AHT physicians to Pinnacle was approximately $1.65 million in FY2022.

The Pinnacle arrangement is under active review and restructuring by the Compliance Department and outside counsel. The Calderwood & Harkness self-assessment identified multiple compliance concerns associated with this arrangement:

(a) No-Cost Electronic Laboratory Interface. Pinnacle provides AHT with a no-cost electronic laboratory interface integrated into the ArborConnect EHR system. The estimated fair market value of this interface is approximately $120,000 per year. This benefit vastly exceeds the $459 per-physician CY2023 annual threshold under the Stark Law non-monetary compensation exception and constitutes impermissible remuneration to a referral source absent coverage by another exception. The interface must be converted to a fair market value license arrangement.

(b) CME Sponsorship. Pinnacle sponsored four (4) continuing medical education events for AHT physicians during FY2022, with total sponsorship costs of $86,000. While CME sponsorship is not per se prohibited, the volume and value of these sponsorships, combined with the referral relationship, raise AKS concerns regarding remuneration to induce referrals.

(c) Dr. Karen Ellsworth's Equity Interest. Dr. Karen Ellsworth, the spouse of AHT CEO Dr. Nathan Ellsworth, holds a 4.2% passive equity interest in Pinnacle. As described in Section 2.4, this interest is imputed to Dr. Ellsworth for Stark Law purposes and creates a financial relationship requiring exception coverage.

Pending completion of the restructuring, all referrals to Pinnacle must be documented as clinically appropriate, and all referring physicians must be informed of the conflict-of-interest disclosure requirements set forth in Section 9 of this Policy. Physicians must not preferentially refer to Pinnacle based on financial incentives, relationships, or benefits received.

6.2 Referrals for Diagnostic Imaging Services

AHT physicians may order in-office diagnostic imaging studies (X-ray, ultrasound, and basic imaging) at AHT clinic locations equipped with on-site imaging capabilities, subject to the IOASE requirements set forth in Section 5. These in-office imaging services support AHT's mission of providing efficient, patient-centered care with rapid diagnostic turnaround.

For advanced imaging services — including magnetic resonance imaging ("MRI"), computed tomography ("CT"), and positron emission tomography ("PET") — that are not available at AHT in-office imaging suites, referrals to external imaging providers are permitted when clinically indicated. External imaging referrals must be

ARBOR HEALTH TECHNOLOGIES INC.
REVISED PHYSICIAN REFERRAL AND SELF-REFERRAL POLICY
Policy Number: AHT-COMP-2023-003
TABLE OF CONTENTS
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SECTION 1: PURPOSE AND OVERVIEW
1.1 Purpose Statement
This Revised Physician Referral and Self-Referral Policy (this "Policy") governs all physician referral practices across Arbor Health Technologies Inc. ("AHT" or the "Company") and its twenty-three (23) outpatient clinics, branded as "Arbor Health Clinics," currently operating in four states: Massachusetts (14 clinics), Connecticut (4 clinics), Rhode Island (3 clinics), and New Hampshire (2 clinics).
The purpose of this Policy is to establish comprehensive requirements to ensure that all referrals for designated health services ("DHS"), as defined under the Physician Self-Referral Law (commonly referred to as the "Stark Law," codified at 42 U.S.C. § 1395nn and implementing regulations at 42 C.F.R. Part 411, Subpart J), and the Anti-Kickback Statute ("AKS," codified at 42 U.S.C. § 1320a-7b(b) and implementing regulations at 42 C.F.R. § 1001.952), comply with all applicable federal and state legal requirements.
This Policy applies with equal force to both referrals made by AHT-affiliated physicians (whether employed or contracted) and referrals received by AHT from external referral sources, including but not limited to physician practices managed by AHT through its ConnectiCare Physicians Network, LLC subsidiary.
This Policy reflects the findings and recommendations of the comprehensive AKS and Stark Law self-assessment conducted by Calderwood & Harkness LLP during the period from January 30, 2023 through July 12, 2023 (the "Self-Assessment"). The Self-Assessment was authorized by the AHT Board of Directors pursuant to Resolution No. 2023-01-004, adopted on January 24, 2023, and was undertaken in response to the compliance gap assessment previously completed by Grayson Whitaker & Associates LLP (Report No. GW-AHT-2022-Final, dated December 12, 2022). The Grayson Whitaker assessment identified seventeen (17) high-risk arrangements and twenty-three (23) moderate-risk arrangements across AHT's physician referral ecosystem, prompting the Board to authorize the comprehensive self-assessment and remediation engagement with Calderwood & Harkness.
This Policy is a core component of the remediation program recommended by Calderwood & Harkness and is intended to be read in conjunction with the other revised compliance policies and contract templates produced as part of that engagement. The adoption and implementation of this Policy represent AHT's commitment to maintaining a culture of compliance and to ensuring that all physician referral practices are conducted with the highest degree of legal and ethical integrity.
1.2 Background and Regulatory Context
AHT reported total net revenue of $214.3 million for the fiscal year ending December 31, 2022 ("FY2022"). Of this total, approximately sixty-one percent (61%), or $130.7 million, was derived from Medicare and Medicaid reimbursements. This significant reliance on federal healthcare program revenue makes compliance with the Stark Law and the Anti-Kickback Statute critically important to the organization's financial stability, operational integrity, and continued participation in federal healthcare programs. Any violation of these statutes could result in denial of payment, refund obligations, civil monetary penalties, treble damages under the False Claims Act, and exclusion from Medicare and Medicaid — consequences that would be catastrophic to AHT's operations and financial viability.
Commercial payer revenue constitutes the remaining thirty-nine percent (39%) of AHT's net revenue, totaling approximately $83.6 million in FY2022. Covenant Health Plans Inc. is AHT's largest commercial payer, contributing $38.6 million in revenue, or approximately eighteen percent (18%) of AHT's total net revenue. AHT's relationship with Covenant Health Plans includes value-based payment arrangements with quality metric incentive bonuses that totaled $2.1 million in FY2022. These value-based arrangements implicate both federal and state referral and anti-kickback laws and require careful structuring to comply with the applicable Stark Law value-based enterprise exceptions and AKS value-based arrangement safe harbors.
AHT's regulatory compliance landscape was further complicated by its acquisition of Lakeview Medical Associates, P.C. on August 15, 2022. This transaction, structured as an asset purchase for $11.4 million, brought fourteen (14) physicians (twelve employed and two independent contractors) into AHT's network, along with two clinic locations in Worcester and Shrewsbury, Massachusetts. The integration of Lakeview's legacy referral patterns, physician arrangements, and clinic operations heightened the need for standardized referral policies across both legacy AHT operations and newly integrated Lakeview operations. Several Lakeview-era referral arrangements were not fully restructured at the time of closing and require ongoing monitoring and remediation under this Policy.
AHT provides in-office ancillary services at multiple clinic locations, including clinical laboratory services, diagnostic imaging services (X-ray, ultrasound, and basic imaging), and physical therapy services. All of these service categories constitute designated health services under the Stark Law, and their provision by AHT gives rise to self-referral considerations that must be managed through strict compliance with the In-Office Ancillary Services Exception and other applicable Stark Law exceptions.
Additionally, AHT's private equity sponsor, Ridgeline Capital Partners Fund IV, L.P. ("Ridgeline"), which holds a seventy-two percent (72%) equity stake in AHT (acquired in January 2021 for $185 million), has identified compliance risk exposure as a strategic priority in connection with a potential exit or sale process anticipated in late 2024. A robust referral compliance program is essential to reducing regulatory risk, supporting accurate financial reporting, and maximizing enterprise value in connection with any future transaction.
1.3 Scope of Application
This Policy applies to the following individuals and entities:
1. Employed Physicians. All one hundred forty-seven (147) W-2 employed physicians of AHT, regardless of specialty, clinic location, or date of hire.
2. Independent Contractor and Medical Director Physicians. All thirty-eight (38) physicians engaged under independent contractor or medical director arrangements with AHT, including those providing services at AHT clinic locations and those providing administrative or oversight services on a part-time basis.
3. Lakeview Legacy Physicians. All fourteen (14) physicians integrated from the Lakeview Medical Associates, P.C. acquisition (twelve employed and two independent contractors), who are subject to this Policy in the same manner as all other AHT-affiliated physicians.
4. Clinical and Administrative Staff. All clinical and administrative staff involved in ordering, processing, scheduling, or billing DHS, including but not limited to clinic administrators, nursing staff who process referral orders, scheduling coordinators, and billing and coding personnel.
5. External Referral Entities. This Policy governs AHT's referral relationships with external entities including but not limited to Meridian Diagnostics LLC (mobile MRI and advanced diagnostic imaging provider at four AHT clinic locations), Pinnacle Laboratory Services Inc. (clinical laboratory testing provider for Rhode Island and southeastern Massachusetts clinics), and physician practices managed through ConnectiCare Physicians Network, LLC.
6. All AHT Clinic Locations. This Policy extends to all twenty-three (23) AHT clinic locations across Massachusetts, Connecticut, Rhode Island, and New Hampshire, including the two legacy Lakeview clinic locations in Worcester and Shrewsbury, Massachusetts.
7. All Payers. This Policy applies to referrals for services reimbursed by Medicare, Medicaid, and — to the extent required by applicable state law (including, without limitation, the Massachusetts anti-kickback law, M.G.L. c. 175H, § 3, which extends to all payers) — commercial payers.
1.4 Relationship to Other AHT Policies
This Policy is one component of AHT's comprehensive compliance framework, as revised through the Calderwood & Harkness engagement. This Policy must be read in conjunction with the following related AHT policies, all of which were developed or revised as part of the same engagement:
• Revised AHT Compliance Program Manual (AHT-COMP-2023-001), which establishes the overarching compliance program structure, governance framework, and compliance committee charter.
• Revised Physician Compensation Policy (AHT-COMP-2023-002), which establishes fair market value ("FMV") and commercial reasonableness standards for all physician compensation arrangements, utilizing benchmark sources including FMV opinions from Northbridge Valuation Advisors LLC, MGMA physician compensation and production survey data, and SullivanCotter physician compensation and productivity survey data.
• Revised Vendor and Third-Party Arrangement Policy (AHT-COMP-2023-004), which governs AHT's arrangements with vendors, suppliers, and third-party entities, including referral source entities.
• Revised Gifts, Meals, and Entertainment Policy (AHT-COMP-2023-005), which establishes limitations on gifts, meals, entertainment, and other items of value provided to or received from referral sources and other parties in a position to influence referral decisions.
• Fair Market Value Determination Procedures (AHT-COMP-2023-006), which sets forth the methodology, documentation requirements, and approval process for FMV determinations used to support physician compensation arrangements, lease arrangements, and other referral-related agreements.
• Non-Monetary Remuneration and Compliance Exception Tracking Protocol (AHT-COMP-2023-007), which establishes the centralized tracking system for items of non-monetary remuneration provided to or received from referral sources, including monitoring against the annual per-physician threshold under the Stark Law non-monetary compensation exception.
In the event of any conflict between this Policy and any of the above-referenced policies, the more restrictive provision shall control unless the CCO and General Counsel determine otherwise in writing.
SECTION 2: DEFINITIONS
The following definitions apply throughout this Policy. Except as otherwise specified, all defined terms are used consistently with their definitions under the Stark Law, the Anti-Kickback Statute, and their implementing regulations.
2.1 Designated Health Services (DHS)
"Designated Health Services" or "DHS" means those items or services identified by the Physician Self-Referral Law as subject to the prohibition on self-referral. The term is defined by 42 U.S.C. § 1395nn(h)(6) and 42 C.F.R. § 411.351 and encompasses the following ten (10) enumerated categories of services:
(a) Clinical laboratory services;
(b) Physical therapy services;
(c) Occupational therapy services;
(d) Outpatient speech-language pathology services;
(e) Radiology and certain other imaging services;
(f) Radiation therapy services and supplies;
(g) Durable medical equipment and supplies;
(h) Parenteral and enteral nutrients, equipment, and supplies;
(i) Prosthetics, orthotics, and prosthetic devices and supplies;
(j) Home health services;
(k) Outpatient prescription drugs; and
(l) Inpatient and outpatient hospital services.
For purposes of AHT's operations, the DHS categories most relevant to referral compliance are: clinical laboratory services (provided at AHT in-office laboratories and referred externally to Pinnacle Laboratory Services Inc.), radiology and certain other imaging services (provided at AHT in-office diagnostic imaging suites and referred externally to Meridian Diagnostics LLC), physical therapy services (provided at AHT in-office physical therapy departments), and outpatient prescription drugs (dispensed at or through AHT clinic pharmacies where applicable). All AHT-affiliated physicians, clinic administrators, and billing staff must be aware of the full scope of DHS categories, as referrals for any DHS category are subject to this Policy.
2.2 Referral
"Referral" means, as defined at 42 C.F.R. § 411.351, the request by a physician for, or ordering of, or the certifying or recertifying of the need for, any designated health service, including a request by a physician for a consultation with another physician, and any test or procedure ordered by or to be performed by (or under the supervision of) that consultant. A referral also includes a request by a physician that includes the provision of any DHS, or the establishment of a plan of care by a physician that includes the provision of DHS.
For purposes of this Policy, it is important to distinguish between referrals "made by" a physician in his or her individual capacity and referrals that are attributable to a physician's group practice. Under the group practice rules set forth at 42 C.F.R. § 411.352, referrals made by a physician who is a member of a group practice may, in certain circumstances, be attributed to the group practice for purposes of the In-Office Ancillary Services Exception.
2.3 Financial Relationship
"Financial relationship" means either an ownership or investment interest or a compensation arrangement between a physician (or an immediate family member of the physician) and an entity, as defined at 42 C.F.R. § 411.354. The Stark Law prohibition on self-referral is triggered by the existence of a financial relationship; accordingly, understanding the scope and nature of financial relationships is critical to this Policy.
Ownership or Investment Interest. An "ownership or investment interest" in an entity may be through equity, debt, or other means, and includes an interest in an entity that holds an ownership or investment interest in any entity providing the DHS. Ownership or investment interests may be direct or indirect. Under 42 C.F.R. § 411.354(b), a direct ownership or investment interest exists when a physician (or immediate family member) holds an equity or debt interest in the entity furnishing DHS. An indirect ownership or investment interest exists through a chain of one or more intervening entities.
Compensation Arrangement. A "compensation arrangement" means any arrangement involving any remuneration between a physician (or an immediate family member) and an entity. Under 42 C.F.R. § 411.354(c), compensation arrangements may be direct or indirect. A direct compensation arrangement exists when remuneration passes between the referring physician (or immediate family member) and the entity furnishing DHS without any intervening entities or persons. An "indirect compensation arrangement" exists under the three-element test of 42 C.F.R. § 411.354(c)(2) when: (i) between the referring physician and the entity furnishing DHS there exists an unbroken chain of any number of persons or entities that have financial relationships between them; (ii) the referring physician receives aggregate compensation from the person or entity in the chain with which the physician has a direct financial relationship that varies with, or otherwise reflects, the volume or value of referrals or other business generated by the referring physician for the entity furnishing the DHS; and (iii) the entity furnishing DHS has actual knowledge of, or acts in reckless disregard or deliberate ignorance of, the fact that the referring physician receives aggregate compensation that varies with, or otherwise reflects, the volume or value of referrals or other business generated by the referring physician for the entity.
The indirect compensation arrangement analysis is of specific relevance to AHT's ConnectiCare Physicians Network MSA arrangements, where managed practice physicians refer patients to AHT-owned ancillary services through a chain of financial relationships involving management fees.
2.4 Immediate Family Member
"Immediate family member" is defined at 42 C.F.R. § 411.351 to include the following persons: spouse; natural or adoptive parent, child, or sibling; stepparent, stepchild, stepbrother, or stepsister; father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law; grandparent or grandchild; and spouse of a grandparent or grandchild.
Under the Stark Law, financial relationships of a physician's immediate family member are imputed to the physician for purposes of determining whether a financial relationship exists between the physician and a DHS entity. This imputation is of particular significance to AHT given the following known situation: Dr. Karen Ellsworth, the spouse of AHT's Chief Executive Officer, Dr. Nathan Ellsworth, holds a 4.2% passive equity interest in Pinnacle Laboratory Services Inc. ("Pinnacle"), an external clinical laboratory to which AHT physicians at Rhode Island and southeastern Massachusetts clinics refer approximately $1.65 million in outpatient laboratory work annually (FY2022 data). Because Dr. Karen Ellsworth is an immediate family member of Dr. Nathan Ellsworth, her ownership interest in Pinnacle is imputed to Dr. Ellsworth for Stark Law purposes, creating a financial relationship that requires exception coverage for any referrals from AHT physicians to Pinnacle.
2.5 Entity Furnishing DHS
"Entity furnishing DHS" means any entity that provides or furnishes designated health services, as defined at 42 C.F.R. § 411.351. For purposes of this Policy, the following entities furnish DHS in connection with AHT's operations:
AHT Internal DHS Entities. AHT itself furnishes DHS through its in-office clinical laboratory services, diagnostic imaging suites, and physical therapy departments at various clinic locations. A complete inventory of in-office ancillary services available at each AHT clinic location is set forth in Appendix A to this Policy.
External DHS Entities. AHT physicians also make referrals to external entities that furnish DHS, including:
• Meridian Diagnostics LLC — provides mobile MRI and advanced diagnostic imaging services at four (4) AHT clinic locations under a services/facility access agreement dated March 1, 2021. Total referral volume from AHT physicians to Meridian was $2.8 million in FY2022, encompassing approximately 4,200 scans. Meridian is sixty percent (60%) owned by Dr. Franklin Osei.
• Pinnacle Laboratory Services Inc. — provides clinical laboratory testing services for AHT's Rhode Island and southeastern Massachusetts clinics under a preferred laboratory agreement dated June 15, 2020. Total referral volume from AHT physicians to Pinnacle was $1.65 million in FY2022. Dr. Karen Ellsworth holds a 4.2% passive equity interest in Pinnacle.
2.6 Group Practice
"Group practice" is defined at 42 C.F.R. § 411.352 as a group of two or more physicians legally organized as a partnership, professional corporation, foundation, not-for-profit corporation, faculty practice plan, or similar association, that meets each of the following requirements:
(a) Unified Business. The group practice must have a unified business with centralized decision-making, consolidated billing, centralized accounting, and a compensation/profit-sharing system.
(b) Members of the Group. Each physician who is a member of the group must furnish substantially the full range of patient care services the physician routinely furnishes through the joint use of shared office space, facilities, equipment, and personnel.
(c) Substantially All Test. Substantially all (at least 75%) of the total patient care services of the group's members must be furnished through the group and billed under a billing number assigned to the group, and the amounts received must be treated as receipts of the group.
(d) Overhead and Income Distribution. The overhead expenses of, and income from, the practice must be distributed in accordance with methods previously determined, and the group must maintain records documenting the distribution methods.
(e) Volume/Value Referral Prohibition. No physician who is a member of the group may directly or indirectly receive compensation based on the volume or value of his or her referrals, except as permitted under the special rules for profit shares and productivity bonuses set forth at 42 C.F.R. § 411.352(i).
AHT employs physicians and operates clinics in a manner intended to satisfy the group practice definition. The applicability of the "group practice" definition to AHT's clinic operations is essential for reliance on the In-Office Ancillary Services Exception (42 C.F.R. § 411.355). The CCO is responsible for ensuring and certifying annually that AHT continues to meet all group practice requirements.
2.7 Fair Market Value (FMV) and Commercial Reasonableness
Fair Market Value. "Fair market value" is defined at 42 C.F.R. § 411.351, as updated by the CMS Final Rule on Stark Law Modernization (85 Fed. Reg. 77492, effective January 19, 2021), to mean the value in arm's-length transactions, consistent with the general market value of the subject transaction. "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 who are not otherwise in a position to generate business for the other party. Fair market value is determined without taking into account the volume or value of anticipated or actual referrals by the referring physician to the entity furnishing DHS.
Commercial Reasonableness. "Commercially reasonable" is defined at 42 C.F.R. § 411.351, as updated by the 2021 Stark modernization final rule, to mean that the particular arrangement furthers a legitimate business purpose of the parties to the arrangement and is sensible considering the characteristics of the parties, including their size, type, scope, and specialty. An arrangement may be commercially reasonable even if it does not result in a profit for one or more of the parties. Importantly, the arrangement must be one that a reasonable, informed party would enter into even in the absence of referrals.
2.8 Additional Defined Terms
The following additional defined terms are used throughout this Policy:
SECTION 3: REGULATORY FRAMEWORK
3.1 Stark Law Overview
The Physician Self-Referral Law, commonly known as the Stark Law, is codified at 42 U.S.C. § 1395nn and implemented through regulations at 42 C.F.R. Part 411, Subpart J. The Stark Law prohibits a physician from making a referral for designated health services to an entity with which the physician (or an immediate family member of the physician) has a financial relationship, unless the financial relationship falls within one of the enumerated statutory or regulatory exceptions. In addition, the entity that receives a prohibited referral may not present or cause to be presented a claim to Medicare or Medicaid for DHS furnished pursuant to such referral.
The Stark Law is a strict liability statute. Unlike the Anti-Kickback Statute, no showing of intent or knowledge is required to establish a violation. If a financial relationship exists between a referring physician and a DHS entity, and no exception applies, the referral is prohibited — regardless of whether the referral was clinically appropriate, whether the parties intended to comply with the law, or whether any actual harm resulted. This strict liability framework demands meticulous attention to the structure and documentation of all financial relationships between AHT physicians and DHS entities.
Penalties for Stark Law Violations. The consequences of a Stark Law violation are severe and include:
• Denial of payment for DHS furnished pursuant to a prohibited referral.
• Refund obligation for amounts collected for services provided in violation of the statute.
• Civil monetary penalties of up to $15,000 per service and up to $100,000 per arrangement for knowing violations or circumvention schemes, together with treble damages.
• Potential exclusion from federal healthcare programs (Medicare, Medicaid, TRICARE, and other programs).
• False Claims Act liability — claims submitted for DHS furnished pursuant to a prohibited referral may give rise to liability under the False Claims Act (31 U.S.C. §§ 3729-3733), with penalties of up to $27,894 per false claim (adjusted for inflation) plus treble damages.
Additionally, under 42 U.S.C. § 1320a-7k(d), an entity that has identified an overpayment — including an overpayment resulting from a Stark Law violation — must report and return the overpayment to the applicable federal healthcare program within sixty (60) days of identification. Failure to timely report and return an overpayment may itself constitute a violation of the False Claims Act.
3.2 Anti-Kickback Statute Overview
The Anti-Kickback Statute, codified at 42 U.S.C. § 1320a-7b(b), prohibits any person from knowingly and willfully soliciting, receiving, offering, or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward 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.
The AKS is an intent-based statute, but the standard of intent is expansively construed. Under the "one-purpose test," an arrangement violates the AKS if even one purpose of the remuneration is to induce or reward referrals of federally reimbursable business. It is not necessary that inducement of referrals be the sole, primary, or even a significant purpose of the arrangement — one purpose among many is sufficient to establish a violation.
Penalties for AKS Violations. The AKS is both a criminal statute and a basis for civil liability:
• Criminal penalties include fines of up to $100,000 per violation and imprisonment for up to ten (10) years.
• Civil monetary penalties of up to $100,000 per violation may be imposed, along with treble damages.
• False Claims Act liability — a claim resulting from a kickback arrangement constitutes a false or fraudulent claim under the False Claims Act (42 U.S.C. § 1320a-7b(g)).
• Exclusion from all federal healthcare programs.
Safe Harbors. The Department of Health and Human Services Office of Inspector General has promulgated regulatory safe harbors at 42 C.F.R. § 1001.952. Arrangements that meet all elements of an applicable safe harbor are protected from prosecution under the AKS. Failure to meet a safe harbor does not, in itself, constitute a violation — it merely means the arrangement lacks the regulatory protection of the safe harbor and must be evaluated based on the totality of the circumstances.
The AKS Final Rule on Safe Harbor Modernization (85 Fed. Reg. 77684, effective January 19, 2021) introduced new and modified safe harbors relevant to value-based arrangements, including those pertinent to AHT's value-based payment relationships with Covenant Health Plans Inc.
3.3 Applicable Stark Law Exceptions
The following Stark Law exceptions are the primary exceptions upon which AHT relies or expects to rely to support its physician referral practices. Each exception has specific elements that must be satisfied; failure to meet any single element of an exception renders the exception unavailable and the referral non-compliant.
Employment Exception (42 C.F.R. § 411.357(c)). This exception permits referrals where the physician's financial relationship with the DHS entity consists of compensation paid pursuant to a bona fide employment relationship, provided that the following conditions are met: (i) the employment is for identifiable services; (ii) the compensation paid is consistent with the fair market value of the services; (iii) the compensation is not determined in a manner that takes into account the volume or value of the physician's referrals (except as otherwise permitted); and (iv) the compensation is commercially reasonable even in the absence of referrals. This exception is the primary exception supporting referrals made by AHT's 147 employed physicians.
Personal Services Arrangement Exception (42 C.F.R. § 411.357(d)). This exception permits referrals where the physician's financial relationship with the DHS entity consists of compensation paid under a personal services arrangement, provided that: (i) the arrangement is set out in writing and signed by the parties; (ii) the writing specifies the services covered by the arrangement; (iii) the arrangement covers all services to be provided by the physician; (iv) the aggregate compensation is set in advance, does not exceed fair market value, and is not determined in a manner that takes into account the volume or value of referrals; (v) the term of the arrangement is at least one year; and (vi) the services do not involve the counseling or promotion of a business arrangement or activity that violates any state or federal law. This exception is the primary exception supporting the 38 independent contractor/medical director arrangements.
Fair Market Value Exception (42 C.F.R. § 411.357(l)). This exception permits referrals where the physician's financial relationship with the DHS entity consists of compensation paid pursuant to an arrangement in writing, for specifically identified items or services, at compensation that is set in advance, consistent with fair market value, and not determined in a manner that takes into account the volume or value of referrals, and that is commercially reasonable.
In-Office Ancillary Services Exception (42 C.F.R. § 411.355). This exception permits a group practice physician to refer for DHS that are: (i) furnished personally by the referring physician, by another physician who is a member of the same group practice, or by individuals who are directly supervised by the referring physician or another physician in the group practice; (ii) furnished in the same building in which the referring physician (or another member of the group practice) furnishes physician services, or in a centralized building used by the group practice; and (iii) billed by the group practice. This exception is addressed in detail in Section 5 of this Policy.
Indirect Compensation Arrangement Exception (42 C.F.R. § 411.357(p)). This exception permits referrals where the physician's financial relationship with the DHS entity constitutes an indirect compensation arrangement, provided that: (i) the compensation received by the referring physician is fair market value for services and items actually provided; (ii) the compensation is not determined in a manner that takes into account the volume or value of referrals; and (iii) the compensation arrangement is set out in writing, signed by the parties, and specifies the services covered. This exception is of particular relevance to AHT's ConnectiCare Physicians Network MSA arrangements.
Value-Based Enterprise Exceptions (42 C.F.R. §§ 411.357(aa)). The 2021 Stark modernization final rule introduced three new value-based exceptions: (i) the full financial risk exception; (ii) the meaningful downside financial risk exception; and (iii) the value-based arrangement exception. These exceptions are relevant to AHT's value-based payment arrangements with Covenant Health Plans Inc., including the quality metric incentive bonus programs that generated $2.1 million in FY2022.
3.4 Applicable AKS Safe Harbors
The following AKS safe harbors are the primary safe harbors upon which AHT relies or expects to rely to protect its physician-related compensation arrangements from AKS liability:
• Employment Safe Harbor (42 C.F.R. § 1001.952(i)): protects amounts paid by an employer to an employee for employment in the furnishing of any item or service reimbursable under a federal healthcare program.
• Personal Services and Management Contracts Safe Harbor (42 C.F.R. § 1001.952(d)): protects payments made by a principal to an agent for services rendered pursuant to a written agreement that specifies the services, the term, the aggregate compensation, and other required elements.
• Space Rental Safe Harbor (42 C.F.R. § 1001.952(b)): protects payments made for the rental of office space, provided the agreement is in writing, signed, specifies the premises, the term is at least one year, the aggregate rental is set in advance at FMV, the space is used exclusively by the lessee during the rental period, and the rental is not determined by volume or value of referrals.
• Equipment Rental Safe Harbor (42 C.F.R. § 1001.952(c)): protects payments made for the rental of equipment under the same structural requirements as the space rental safe harbor.
• Referral Services Safe Harbor (42 C.F.R. § 1001.952(f)): protects certain payments to referral services organizations under specified conditions.
• Value-Based Arrangement Safe Harbors (42 C.F.R. § 1001.952(ee)-(gg)): introduced by the 2021 AKS safe harbor modernization final rule, these safe harbors protect certain remuneration exchanged between participants in value-based arrangements, including arrangements involving care coordination, full financial risk, and meaningful downside risk.
3.5 State Law Overlay
Federal referral and anti-kickback laws are not the only legal constraints on AHT's referral practices. Several states in which AHT operates have enacted their own referral and anti-kickback statutes, some of which are broader in scope than their federal counterparts.
Massachusetts Anti-Kickback Law. Massachusetts General Laws Chapter 175H, Section 3 (M.G.L. c. 175H, § 3) prohibits the knowing or willful offering, paying, soliciting, or receiving of any remuneration to induce referrals for health care services. Unlike the federal AKS, which applies only to items and services reimbursable by federal healthcare programs, the Massachusetts anti-kickback law applies to all payers, including commercial insurance. This broader scope means that referral-related compensation arrangements at AHT's fourteen (14) Massachusetts clinic locations must satisfy not only federal Stark and AKS requirements but also the Massachusetts statute, even with respect to patients covered by commercial insurance. This is of particular significance to AHT's arrangements with Covenant Health Plans Inc. and other commercial payers.
Connecticut Referral Fee Prohibition. Connecticut General Statutes § 20-7a(d) prohibits licensed physicians from receiving or paying fees for the referral of patients. This prohibition is applicable to AHT's four (4) Connecticut clinics and to the ConnectiCare Physicians Network, LLC MSA arrangements with nine independently owned physician practices in Strathmore Mutual Insurance area. The management fee structure under the ConnectiCare MSAs must be carefully structured to avoid characterization as a referral fee.
Separate state-law memoranda have been prepared by Calderwood & Harkness LLP as part of the self-assessment engagement, specifically the Massachusetts Anti-Kickback Law Applicability Memorandum and the Connecticut Referral Fee Prohibition Applicability Memorandum. This Policy incorporates the requirements and recommendations analyzed in those memoranda, and covered personnel should consult those documents (available through the Compliance Department) for detailed state-law analysis.
3.6 OIG Compliance Guidance
In addition to statutory and regulatory requirements, AHT's referral compliance program is informed by guidance published by the OIG and CMS. Key guidance documents include:
• OIG Compliance Guidance for Individual and Small Group Physician Practices (65 Fed. Reg. 59434), which identifies referral compliance as a key risk area for physician practices and recommends specific internal controls, training, and monitoring procedures.
• CMS Final Rule on Stark Law Modernization (85 Fed. Reg. 77492, effective January 19, 2021), which updated the definitions of fair market value and commercial reasonableness, introduced value-based enterprise exceptions, and made other significant changes to the Stark regulatory framework.
• AKS Final Rule on Safe Harbor Modernization (85 Fed. Reg. 77684, effective January 19, 2021), which introduced new safe harbors for value-based arrangements, care coordination, and other areas relevant to evolving healthcare delivery models.
AHT's compliance program, including this Policy, is designed to be consistent with the principles and recommendations set forth in the foregoing guidance.
SECTION 4: PROHIBITED REFERRAL PRACTICES
4.1 General Prohibition
No AHT physician — whether employed or engaged under an independent contractor or medical director arrangement — may refer a patient for designated health services to any entity with which the physician or an immediate family member of the physician has a financial relationship, unless the referral falls within a recognized Stark Law exception and, where applicable, the underlying arrangement satisfies an AKS safe harbor. The burden of establishing that an exception or safe harbor applies rests with AHT and the referring physician, and all necessary documentation must be in place before referrals are made.
No AHT physician may solicit, receive, offer, or pay any form of remuneration — whether cash, in-kind benefits, non-monetary items of value, or through the reduction of an obligation — in exchange for, to induce, or to reward patient referrals. This prohibition applies regardless of whether the referral involves a federal healthcare program patient, a commercial insurance patient, or an uninsured or self-pay patient.
This prohibition is absolute and admits of no informal exceptions. Any physician who is uncertain whether a particular referral or arrangement is permissible must consult with the Compliance Department prior to making the referral.
4.2 Specific Prohibited Conduct
Without limiting the generality of Section 4.1, the following specific types of conduct are prohibited under this Policy:
1. Referrals Involving Ownership Interests. Referring patients to entities in which the physician or an immediate family member holds an ownership or investment interest, unless a Stark Law exception specifically applies to the ownership arrangement (e.g., the ownership/investment exception requirements of 42 C.F.R. § 411.356 are fully satisfied). Any physician who holds, or whose immediate family member holds, such an interest must disclose it in accordance with Section 7 and must not make referrals to the entity unless the Compliance Department has confirmed in writing that the applicable exception requirements are met.
2. Free or Below-Market-Value Items or Services. Receiving or providing free or below-market-value items or services (e.g., electronic interfaces, equipment, office supplies, software, or staffing support) from or to referral sources where the value exceeds the non-monetary remuneration exception threshold. For CY2023, the Stark Law non-monetary compensation exception permits items with an aggregate value of no more than $459 per physician per year. Items exceeding this threshold that are provided by or received from DHS entities in a referral relationship with AHT are prohibited unless covered by another exception. This prohibition applies regardless of whether the items are characterized as "promotional," "educational," or "operational."
3. CME Sponsorship Conditioned on Referrals. Accepting continuing medical education ("CME") sponsorship, educational grants, or other benefits from entities that receive referrals from AHT physicians, where such benefits are conditioned upon, correlated with, or provided in a manner that appears to reward referral volume. Legitimate, arm's-length CME sponsorship by industry participants may be permissible under certain circumstances, but must be reviewed and approved by the Compliance Department in advance.
4. Referrals Influenced by Financial Incentives. Making referrals that are influenced by financial incentives tied to the volume or value of referrals under any compensation arrangement. This includes, but is not limited to, bonus structures, profit-sharing formulas, productivity incentives, or any other compensation mechanism that directly or indirectly rewards a physician for generating DHS referrals.
5. Indirect Compensation Arrangements Without Exception Coverage. Referring patients to entities providing management services to or through AHT where the financial relationship creates an unbroken chain of compensation linked to referrals, and the indirect compensation arrangement does not meet the requirements of the applicable Stark exception (42 C.F.R. § 411.357(p)) and AKS safe harbor.
4.3 Illustrative Examples (Anonymized)
The following anonymized examples illustrate types of referral arrangements that raise compliance concerns. These examples are based on, and drawn from, actual situations identified during the Calderwood & Harkness self-assessment, with identifying details modified to protect confidentiality.
Example 1: Family Member Equity Interest. A physician's immediate family member holds a minority equity interest in an outside clinical laboratory. The physician routinely refers outpatient laboratory work to that entity. Under the Stark Law, the family member's ownership interest is imputed to the physician, creating a financial relationship. Unless the ownership interest satisfies all elements of a Stark exception — and the referral arrangement satisfies an AKS safe harbor — these referrals are prohibited. This scenario reflects actual risks identified in the self-assessment with respect to referrals to an external laboratory entity in which a CEO spouse holds a passive equity interest. The compliance response includes heightened monitoring of referral patterns, conflict-of-interest disclosures, and active restructuring discussions with the laboratory entity.
Example 2: Per-Procedure Facility Access Fee. An external diagnostic services provider pays a per-procedure fee to a clinic for facility access. The fee is structured on a per-scan basis and varies directly with the volume of diagnostic scans referred by the clinic's physicians. This arrangement does not satisfy the Stark space rental or equipment rental exception requirements, which mandate that rental charges be set in advance at fair market value and not vary with the volume or value of referrals. Nor does the arrangement satisfy the corresponding AKS safe harbors, which require fixed and predetermined rental amounts. This scenario reflects the self-assessment's findings regarding a mobile diagnostic imaging provider operating at multiple AHT clinic locations under a per-scan facility access agreement.
Example 3: Free Electronic Interface Exceeding Non-Monetary Remuneration Threshold. An external laboratory entity provides a clinic with a free electronic laboratory interface integrated into the clinic's EHR system. The estimated fair market value of the interface is $120,000 per year, far exceeding the $459 CY2023 annual per-physician threshold under the Stark non-monetary compensation exception. This arrangement constitutes impermissible non-monetary remuneration to a referral source unless it is restructured under a separate exception, such as a written fair market value license agreement. This scenario reflects the self-assessment's findings regarding an electronic interface provided by an external laboratory at no cost to AHT.
SECTION 5: IN-OFFICE ANCILLARY SERVICES EXCEPTION — REQUIREMENTS AND PROCEDURES
5.1 Overview of the In-Office Ancillary Services Exception (42 C.F.R. § 411.355)
The In-Office Ancillary Services Exception ("IOASE") is one of the most frequently relied-upon Stark Law exceptions and is of critical importance to AHT's operations. The IOASE permits a physician who is a member of a group practice to refer a patient for DHS that are furnished within the group practice's own facilities, subject to three core requirements:
(a) Furnishing Requirement. The DHS must be furnished personally by the referring physician, by another physician who is a member of the same group practice as the referring physician, or by individuals who are directly supervised by the referring physician or by another physician in the group practice.
(b) Location Requirement. The DHS must be furnished in the same building in which the referring physician (or another member of the group practice) furnishes physician services unrelated to the furnishing of DHS, or in a centralized building used by the group practice for the provision of some or all of the group practice's DHS.
(c) Billing Requirement. The DHS must be billed by the group practice, or by the physician performing or supervising the service, or by an entity that is wholly owned by the group practice.
Each of these requirements is addressed in detail in the subsections below, with specific application to AHT's clinic operations.
5.2 AHT Services Qualifying Under IOASE
AHT furnishes three categories of DHS at its clinic locations that may qualify for the IOASE:
Clinical Laboratory Services. AHT provides in-office clinical laboratory services at certain clinic locations that maintain on-site laboratory capabilities. These services include routine blood work, urinalysis, and basic point-of-care testing. A complete inventory of which AHT clinics maintain on-site laboratory capabilities is set forth in Appendix A. Referrals for in-office laboratory services at these locations may qualify for the IOASE, provided that all furnishing, location, and billing requirements are met. It is important to note that outpatient laboratory work referred to Pinnacle Laboratory Services Inc. under the preferred laboratory agreement dated June 15, 2020, at AHT's Rhode Island and southeastern Massachusetts clinics does not qualify for the IOASE. Pinnacle is an external, independently owned entity, not a part of AHT's group practice, and services furnished by Pinnacle cannot be treated as in-office ancillary services for IOASE purposes.
Diagnostic Imaging Services. AHT provides in-office diagnostic imaging services (X-ray, ultrasound, and basic imaging) at clinic locations equipped with on-site imaging suites. Referrals for these imaging services may qualify for the IOASE, subject to applicable furnishing, location, and billing requirements, including appropriate supervision standards. However, mobile MRI and advanced diagnostic imaging services provided by Meridian Diagnostics LLC at four AHT clinic locations under the services/facility access agreement dated March 1, 2021 require separate analysis. Meridian is an external entity operating under a facility access arrangement; it is not an AHT-owned service line. The Meridian arrangement does not qualify for the IOASE and must be analyzed under separate Stark exceptions and AKS safe harbors.
Physical Therapy Services. AHT provides in-office physical therapy services through AHT-employed physical therapists at designated clinic locations. These services may qualify for the IOASE, provided that the referring physician is a member of the group practice, the services are furnished under appropriate supervision, the services are delivered in the same building as the referring physician's office, and the services are billed by AHT.
5.3 "Same Building" Requirement
The IOASE requires that DHS be furnished in the "same building" as the referring physician's office. Under 42 C.F.R. § 411.351, a "same building" is defined as a building in which, on any given day, the referring physician furnishes physician services unrelated to the furnishing of DHS. A "centralized building" is defined as a building that is used by a group practice for the centralized provision of some or all of the group practice's DHS.
For AHT's purposes, the same-building requirement is met when a physician's clinic office and the ancillary service (laboratory, imaging, or physical therapy) are located within the same physical building. A complete list of AHT clinic locations and the in-office ancillary services available at each is set forth in Appendix A. Clinic administrators must ensure that this inventory is accurate and updated semi-annually.
Multi-Floor and Multi-Suite Considerations. At AHT clinic locations that occupy multiple floors or suites within a larger building (such as medical office buildings with multiple tenants), special care must be taken to confirm that the same-building requirement is met. The key question is whether the ancillary service space and the physician office space are within the same physical building structure. Separate buildings that are adjacent, connected by walkways, or located within the same complex do not automatically satisfy the same-building requirement unless they are within the same physical structure.
Legacy Lakeview Locations. The Worcester clinic at 75 Belmont Street, Worcester, MA 01605 and the Shrewsbury clinic at 310 Main Street, Suite 2A, Shrewsbury, MA 01545 are legacy Lakeview Medical Associates locations integrated into AHT following the August 15, 2022 acquisition. The same-building requirement for any on-site ancillary services at these locations must be verified by the Compliance Department. Dr. Vivian Chao, Regional Medical Director for Central Massachusetts and the Lakeview legacy region, is responsible for coordinating this verification with the Compliance Department.
5.4 Supervision Requirements
The IOASE requires that DHS be furnished personally by the referring physician, by a physician who is a member of the same group practice, or under the personal supervision of such a physician. The applicable level of supervision varies by service type:
Clinical Laboratory Services. Under CLIA standards and CMS regulations, clinical laboratory services generally require only "general supervision," meaning the procedure is furnished under the overall direction of a physician but does not require the physician's presence during the performance of the test or at the time the specimen is collected. This is the least restrictive supervision standard.
Diagnostic Imaging Services. For most diagnostic imaging services furnished under the IOASE, "direct supervision" is required. Direct supervision means the supervising physician must be present in the office suite (though not necessarily in the room) at the time the imaging study is performed. The supervising physician must be immediately available to provide assistance and direction throughout the performance of the procedure.
Physical Therapy Services. Supervision requirements for physical therapy services are governed by applicable state licensure requirements in Massachusetts, Connecticut, Rhode Island, and New Hampshire. AHT must ensure that the level of physician supervision provided at each clinic location meets the requirements of the state in which the clinic is located, as well as any additional CMS supervision requirements applicable under the IOASE.
Documentation of Supervision. For all DHS furnished under the IOASE, the supervising physician must be identified in the medical record. Contemporaneous records documenting the supervision provided must be maintained. ArborConnect should be configured to capture the identity of the supervising physician for each DHS encounter.
5.5 Billing Requirements
All in-office ancillary DHS qualifying for the IOASE must be billed by AHT, as the group practice or employing entity, under AHT's National Provider Identifier (NPI: 1497253810) and applicable Provider Transaction Access Numbers (PTANs). Services may not be billed by or through any entity other than AHT unless the entity is wholly owned by the group practice.
Proper billing requires the use of accurate billing codes (CPT, HCPCS), place of service codes that reflect the in-office setting, and any modifier codes applicable to in-office ancillary services. Billing and coding staff must receive specialized training on IOASE billing requirements (see Section 13.3).
AHT's ArborConnect EHR and practice management platform must be configured to enforce correct billing pathways for IOASE-qualifying services. Specifically, ArborConnect should route in-office ancillary service claims through a billing pathway that automatically associates the claim with the appropriate AHT billing number, place of service code, and supervising physician NPI. The ArborConnect configuration must be validated by the Compliance Department following any system update or modification.
5.6 Group Practice Requirements (42 C.F.R. § 411.352)
Reliance on the IOASE requires that AHT satisfy the definition of a "group practice" under 42 C.F.R. § 411.352. The group practice requirements are set forth in Section 2.6 of this Policy and include the unified business requirement, the substantially all test (at least 75% of total patient care services), the overhead and income distribution requirements, and the prohibition on volume/value-based referral compensation.
The CCO is responsible for conducting an annual certification that AHT continues to satisfy all elements of the group practice definition. This certification must be completed in writing, supported by documentation of AHT's billing data, compensation arrangements, and organizational structure, and submitted to the General Counsel for review. The annual certification for the current policy period must be completed no later than October 12, 2023, and annually thereafter.
Any change in AHT's organizational structure, compensation methodologies, or billing practices that could affect group practice status must be reported to the CCO immediately and evaluated for its impact on IOASE eligibility before the change is implemented.
5.7 Procedures for IOASE Compliance
The following operational procedures apply to all in-office ancillary service referrals:
1. Referral Order Entry. All in-office ancillary referral orders must be entered through the ArborConnect system. Each order must include order-specific documentation of the referring physician, the supervising physician (if different from the referring physician), the DHS category, the clinical indication for the service, and the clinic location where the service will be furnished.
2. Ancillary Services Inventory. Clinic administrators at each AHT clinic location must maintain a current inventory of ancillary services available at their location. This inventory must include the specific types of laboratory tests, imaging studies, and physical therapy services available on-site, as well as the equipment used to furnish those services. The inventory must be updated semi-annually and submitted to the Compliance Department for central recordkeeping. The current inventory is attached as Appendix A.
3. New Service Line Approval. Any new ancillary service line or new clinic location at which ancillary services will be offered must be vetted through the Compliance Department (Derek Huang) before AHT begins accepting referrals for services at that location. The Compliance Department must confirm IOASE eligibility — including the same-building requirement, supervision requirements, billing pathway configuration, and group practice status — before referrals may commence.
4. Quarterly IOASE Audit. The Compliance Department must conduct a quarterly audit of claims billed under the IOASE. The audit must verify that: (a) the services were furnished at an AHT clinic location with on-site ancillary capabilities; (b) appropriate supervision was documented; (c) the services were billed under AHT's NPI and PTAN; (d) the same-building requirement was met; and (e) no services were improperly classified as in-office ancillary services. Audit findings must be documented and reported to the CCO.
SECTION 6: PERMITTED REFERRAL PATHWAYS
6.1 Referrals for In-Office Laboratory Services
AHT physicians may order laboratory tests to be performed at AHT in-office laboratories within the same building as the referring physician's office, provided that all supervision, billing, and group practice requirements of the IOASE are satisfied as described in Section 5. In-office laboratory services are a core component of AHT's clinical operations and serve the legitimate purpose of providing patients with convenient, timely access to diagnostic testing.
Where in-office laboratory services are not available at a particular AHT clinic location — or where a specialized test is required that cannot be performed on-site — physicians may refer patients to external laboratories. Such referrals must be made based on clinical appropriateness, patient access, and quality considerations, and must not be influenced by any financial relationship between the physician (or an immediate family member) and the external laboratory.
Referrals to Pinnacle Laboratory Services Inc. AHT currently maintains a preferred laboratory agreement with Pinnacle Laboratory Services Inc. ("Pinnacle"), dated June 15, 2020. Under this agreement, Pinnacle provides clinical laboratory testing services for patients referred by AHT physicians at the Company's Rhode Island and southeastern Massachusetts clinics. Total referral volume from AHT physicians to Pinnacle was approximately $1.65 million in FY2022.
The Pinnacle arrangement is under active review and restructuring by the Compliance Department and outside counsel. The Calderwood & Harkness self-assessment identified multiple compliance concerns associated with this arrangement:
(a) No-Cost Electronic Laboratory Interface. Pinnacle provides AHT with a no-cost electronic laboratory interface integrated into the ArborConnect EHR system. The estimated fair market value of this interface is approximately $120,000 per year. This benefit vastly exceeds the $459 per-physician CY2023 annual threshold under the Stark Law non-monetary compensation exception and constitutes impermissible remuneration to a referral source absent coverage by another exception. The interface must be converted to a fair market value license arrangement.
(b) CME Sponsorship. Pinnacle sponsored four (4) continuing medical education events for AHT physicians during FY2022, with total sponsorship costs of $86,000. While CME sponsorship is not per se prohibited, the volume and value of these sponsorships, combined with the referral relationship, raise AKS concerns regarding remuneration to induce referrals.
(c) Dr. Karen Ellsworth's Equity Interest. Dr. Karen Ellsworth, the spouse of AHT CEO Dr. Nathan Ellsworth, holds a 4.2% passive equity interest in Pinnacle. As described in Section 2.4, this interest is imputed to Dr. Ellsworth for Stark Law purposes and creates a financial relationship requiring exception coverage.
Pending completion of the restructuring, all referrals to Pinnacle must be documented as clinically appropriate, and all referring physicians must be informed of the conflict-of-interest disclosure requirements set forth in Section 9 of this Policy. Physicians must not preferentially refer to Pinnacle based on financial incentives, relationships, or benefits received.
6.2 Referrals for Diagnostic Imaging Services
AHT physicians may order in-office diagnostic imaging studies (X-ray, ultrasound, and basic imaging) at AHT clinic locations equipped with on-site imaging capabilities, subject to the IOASE requirements set forth in Section 5. These in-office imaging services support AHT's mission of providing efficient, patient-centered care with rapid diagnostic turnaround.
For advanced imaging services — including magnetic resonance imaging ("MRI"), computed tomography ("CT"), and positron emission tomography ("PET") — that are not available at AHT in-office imaging suites, referrals to external imaging providers are permitted when clinically indicated. External imaging referrals must be

ARBOR HEALTH TECHNOLOGIES INC.

REVISED PHYSICIAN REFERRAL AND SELF-REFERRAL POLICY

TABLE OF CONTENTS

SECTION 1: PURPOSE AND OVERVIEW

SECTION 2: DEFINITIONS

SECTION 3: REGULATORY FRAMEWORK

SECTION 4: PROHIBITED REFERRAL PRACTICES

SECTION 6: PERMITTED REFERRAL PATHWAYS

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