[slide 1]
Welcome & Training Overview
Mandatory Annual Compliance Training — Anti-Kickback Statute & Physician Self-Referral Law
Prepared by Calderwood & Harkness LLP for Arbor Health Technologies Inc.
Audience: All 147 employed physicians, 38 independent contractor/medical directors, and relevant administrative staff (~1,340 total employees)
Training requirement established under AHT's Revised Compliance Program Manual
Annual completion required; attendance tracked by the Office of the Chief Compliance Officer
[slide 2]
Why This Matters: AHT's Regulatory Landscape
AHT FY2022 net revenue: $214.3 million
61% of net revenue ($130.7 million) derives from Medicare and Medicaid reimbursements
39% of net revenue ($83.6 million) from commercial payers
AHT operates across 4 states — subject to both federal and state anti-kickback and referral laws
Violations can result in exclusion from federal healthcare programs, civil monetary penalties, False Claims Act liability, and criminal prosecution
[slide 3]
The Anti-Kickback Statute (AKS) — Overview
Federal law: 42 U.S.C. § 1320a-7b(b)
Prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce or reward referrals for items or services reimbursable by federal healthcare programs
Applies to BOTH sides of a transaction — the offeror/payor AND the recipient/solicitor
"One purpose" test: a violation occurs if even ONE purpose of the remuneration is to induce referrals
Criminal statute: penalties include fines up to $100,000 per violation, imprisonment up to 10 years, and mandatory exclusion from federal healthcare programs
[slide 4]
AKS Safe Harbors — Key Protections
Safe harbors defined at 42 C.F.R. § 1001.952 — arrangements meeting ALL elements of a safe harbor are protected
Employment Safe Harbor: bona fide employment for identifiable services
Personal Services and Management Contracts Safe Harbor: written agreement, specified services, term ≥ 1 year, aggregate compensation set in advance at FMV, not determined by volume/value of referrals
Space Rental Safe Harbor: written agreement, specified premises, term ≥ 1 year, rent set in advance at FMV, not adjusted based on referral volume
Equipment Rental Safe Harbor: same structure as space rental — written, specified, fixed term, FMV, not volume-based
[slide 5]
The Physician Self-Referral Law (Stark Law) — Overview
Federal law: 42 U.S.C. § 1395nn
Prohibits a physician from referring patients for designated health services (DHS) to an entity with which the physician (or an immediate family member) has a financial relationship, unless an exception applies
Strict liability statute — no intent requirement; technical non-compliance alone creates a violation
DHS categories include: clinical laboratory, radiology/imaging, physical therapy, outpatient prescription drugs, DME, and others
Penalties: denial of payment, refund obligations, civil monetary penalties up to $15,000 per service, and potential False Claims Act exposure
[slide 6]
Stark Law Exceptions — Key Protections
Employment Exception (42 C.F.R. § 411.357(c)): compensation must be FMV, not based on volume/value of referrals (productivity bonuses permitted if based on personally performed services)
Personal Services Exception: written agreement, specified services, term ≥ 1 year (or holdover provisions), aggregate compensation set in advance at FMV, commercially reasonable
In-Office Ancillary Services Exception (IOASE): services furnished in the same building where referring physician provides services, supervised by referring or group physician, billed by the referring entity
Fair Market Value Exception: compensation consistent with FMV, not volume/value-based, commercially reasonable regardless of referrals
Indirect Compensation Arrangement Exception: for chains of financial relationships where the referring physician does not have a direct financial relationship with the DHS entity
[slide 7]
Fair Market Value and Commercial Reasonableness — Why They Matter
Fair Market Value (FMV): the value in arm's-length transactions consistent with the general market value of the arrangement
Commercial Reasonableness: the arrangement would make sense independent of referrals — a reasonable business purpose exists apart from generating referrals
AHT uses independent third-party appraisals from Northbridge Valuation Advisors LLC and benchmark data from MGMA and SullivanCotter
AHT Revised Physician Compensation Policy requires FMV certification for all physician compensation arrangements and annual recertification
Above-benchmark compensation (e.g., above 90th percentile) requires enhanced documentation and escalation to General Counsel and CCO
[slide 8]
State Law Overlay — Massachusetts and Connecticut
Massachusetts Anti-Kickback Law (M.G.L. c. 175H, § 3): applies to ALL payers, not just federal healthcare programs — covers commercial insurance arrangements
Connecticut Referral Fee Prohibition (Conn. Gen. Stat. § 20-7a(d)): prohibits fee-splitting and referral fees in connection with healthcare services
State laws may be broader than federal AKS/Stark — an arrangement compliant with federal law may still violate state law
AHT operates clinics in 4 states (MA, CT, RI, NH) — multi-state compliance is required
[slide 9]
AHT-Specific Policies You Need to Know
Revised AHT Compliance Program Manual — comprehensive compliance framework, hotline, investigation and disciplinary procedures
Revised Physician Compensation Policy — FMV standards, benchmark sources, approval workflows, annual recertification
Revised Physician Referral and Self-Referral Policy — in-office ancillary services rules, DHS tracking, Stark-compliant referral procedures
Revised Vendor and Third-Party Arrangement Policy — safe harbor checklists for all vendor relationships
Revised Gifts, Meals, and Entertainment Policy — dollar thresholds aligned with Stark non-monetary remuneration limit ($459/year in CY2023)
Non-Monetary Remuneration and Compliance Exception Tracking Protocol — centralized tracking of all non-cash benefits from vendors/referral sources
[slide 10]
Reporting Obligations — Your Responsibilities
Report concerns to Chief Compliance Officer Derek Huang or via the AHT Compliance Hotline
Non-retaliation policy: AHT prohibits retaliation against good-faith reporters
Obligation to report known or suspected violations of AKS, Stark, or AHT compliance policies
60-day repayment obligation: under 42 U.S.C. § 1320a-7k(d), AHT must report and return overpayments within 60 days of identification
Failure to report may result in disciplinary action up to and including termination
[slide 11]
Case Study 1: Volume-Based Facility Access Fees
Scenario: A healthcare company allows an outside imaging provider to perform scans at its clinic locations. The imaging provider pays the company a per-scan 'facility access fee.'
Problem: The per-scan fee varies directly with the volume of referrals — physicians at the company refer patients to the imaging provider, generating both referral revenue and per-scan fee income
AKS Issue: A per-scan fee tied to referral volume fails the space rental and equipment rental safe harbors, which require rental set in advance and not adjusted based on volume/value of referrals
Stark Issue: The variable fee fails the space and equipment rental exceptions for the same reasons
Solution: Restructure to a fixed monthly facility rental at fair market value, independent of scan volume
[slide 12]
Case Study 2: Free Technology and CME Sponsorship from a Laboratory
Scenario: A laboratory provides a healthcare company with a free electronic interface (estimated value $120,000/year) and sponsors CME events ($86,000/year). The CEO's spouse holds a 4.2% equity interest in the laboratory.
Problem 1: The free interface is remuneration linked to a referral relationship ($1.65 million in referrals in FY2022) — far exceeds the Stark non-monetary remuneration limit of $459/year
Problem 2: CME sponsorship by a referral source raises AKS concerns regarding remuneration to induce referrals
Problem 3: The CEO spouse's equity interest creates an ownership/investment interest requiring Stark exception analysis and conflict-of-interest disclosure
Solution: Convert the lab interface to a fair market value license agreement; separate CME sponsorship from the referral relationship; require conflict-of-interest disclosure
[slide 13]
Case Study 3: Above-Market Medical Director Compensation
Scenario: A healthcare company pays medical directors stipends ranging from $25,000 to $110,000/year, but documented time commitments average only 8.4 hours per month
Effective hourly rate: approximately $500/hour — above the 90th percentile for most specialties per MGMA and SullivanCotter benchmarks
AKS Risk: Above-FMV compensation to physicians who refer patients = potential remuneration to induce referrals
Stark Risk: Compensation in excess of FMV fails the personal services and fair market value exceptions
Solution: Restructure — align stipends with FMV ranges, increase and document actual hours, standardize duty descriptions
[slide 14]
Case Study 4: Management Services and Indirect Compensation
Scenario: A healthcare company provides billing, coding, IT, and practice management services to independently owned physician practices for a fee of 15% of collected net revenue
The managed practices refer patients to the company's own ancillary services (lab, imaging, physical therapy)
Stark Issue: An unbroken chain of financial relationships between the referring physician and the DHS entity creates an 'indirect compensation arrangement'
AKS Issue: The percentage-based fee varies with the practices' revenue, potentially including revenue from referred services — failing the management contracts safe harbor's requirement that compensation not be based on volume/value of referrals
Solution: Restructure fee formulas (consider fixed-fee or blended model); implement referral tracking safeguards; ensure indirect compensation arrangement exception requirements are met
[slide 15]
Lessons from Post-Acquisition Integration
Acquisitions inherit the compliance profile of the acquired entity's arrangements
Common gaps: missing FMV substantiation, expired agreement terms, holdover issues, non-compliant compensation formulas
All assumed arrangements must be reviewed against current AKS safe harbor and Stark exception requirements
Post-closing compliance assessment should be standard protocol for all future acquisitions
AHT's Revised Physician Compensation Policy and contract templates are designed to standardize all arrangements, including legacy agreements
[slide 16]
Value-Based Arrangements — New Exceptions and Safe Harbors
CMS Stark Modernization Final Rule (85 Fed. Reg. 77492, eff. Jan. 19, 2021): introduced value-based enterprise exceptions
AKS Safe Harbor Modernization Final Rule (85 Fed. Reg. 77684, eff. Jan. 19, 2021): introduced value-based arrangement safe harbors
AHT receives value-based incentive bonuses tied to quality metrics from its largest commercial payer ($2.1 million in FY2022)
Value-based arrangements must be structured to satisfy the specific requirements of the applicable exception/safe harbor
Consult the compliance office before entering into or modifying any value-based payment arrangement
[slide 17]
Practical Do's and Don'ts for AHT Personnel
DO refer patients based solely on clinical judgment — never based on financial relationships
DO report any gifts, items, or services received from vendors, laboratories, or other referral sources to the compliance office
DO NOT accept gifts or items of value from vendors/referral sources exceeding the $459 annual threshold without compliance approval
DO NOT enter into any side arrangement, consulting agreement, or referral agreement without prior compliance and legal review
DO NOT discuss referral volumes or revenue in the context of compensation negotiations with outside entities
DO maintain accurate time logs if you serve as a medical director or independent contractor
DO use AHT's approved contract templates for all new arrangements
[slide 18]
Voluntary Self-Disclosure — What You Should Know
CMS Self-Referral Disclosure Protocol (SRDP): voluntary mechanism to disclose Stark Law violations and negotiate resolution
OIG Self-Disclosure Protocol (SDP): voluntary mechanism to disclose AKS violations and negotiate resolution
AHT evaluated potential self-disclosure and determined that timely remediation of identified issues makes voluntary filing unnecessary at this time
The 60-day rule (42 U.S.C. § 1320a-7k(d)): identified overpayments must be reported and returned within 60 days
If you become aware of potential violations, prompt reporting enables AHT to assess disclosure obligations
[slide 19]
AHT Compliance Program Structure
Board Compliance Committee: provides board-level oversight of compliance program; charter adopted April 15, 2021 (amended October 30, 2022)
Chief Compliance Officer: Derek Huang — responsible for day-to-day compliance operations, training, investigations, and reporting
General Counsel: Patricia Yamamoto — legal oversight of compliance matters
CEO: Dr. Nathan Ellsworth — executive accountability for organizational compliance culture
Compliance Hotline: available 24/7 for anonymous reporting
External advisors: Calderwood & Harkness LLP (healthcare regulatory counsel); Northbridge Valuation Advisors LLC (FMV appraisals); Grayson Whitaker & Associates LLP (compliance consulting)
[slide 20]
Implementation Timeline and Next Steps
90-day implementation window for all revised policies, contract templates, and compliance procedures
All 38 medical director/IC agreements to be restructured with FMV-certified compensation and documented hours
All 14 Lakeview legacy employment agreements to be transitioned to AHT standardized templates
Third-party arrangements (imaging, laboratory, management services) to be restructured as applicable
Annual compliance training (this program) to be completed by all physicians and relevant staff
Annual FMV recertification for all physician compensation arrangements
[slide 21]
Questions & Contact Information
Chief Compliance Officer: Derek Huang — available for all compliance questions and concerns
General Counsel: Patricia Yamamoto — legal questions regarding arrangements and policies
AHT Compliance Hotline: 24/7 anonymous reporting
AHT Headquarters: 200 Concord Avenue, Suite 400, Cambridge, MA 02138
Copies of all revised policies available on AHT's internal compliance portal
Next annual training session: to be scheduled per the compliance training calendar