December 6, 2011 Attorney Michael Petrucci Vice President and General Counsel for First Group, Inc.

600 Vine Street, Suite 1400 Cincinnati, OH 45202 VIA EMAIL ONLY Dear Attorney Petrucci: As you know, on October 27, 2011, the Department of Social Services wrote to the Centers for Medicare and Medicaid Services (CMS) to seek a formal opinion about issues that the Department has raised about potential conflict of interest issues between First Transit, Inc.s contracts with CT Transit and Greater Hartford Transit Authority and the potential contract with the Department that would result from the Departments offer to negotiate a contract for the non-emergency medical transportation program for its Medicaid clients. At that time, the Department also halted negotiations with First Transit until resolution on the issue was reached. CMS recently informed us that it will not be issuing a formal opinion because it believes that the Department has more than enough information to make a determination on its own. CMS did however offer its opinions informally and verbally through multiple telephone conversations with the Department. The Department has conducted an extensive legal and factual analysis of the issues relevant to 42 CFR 440.170, 42 CFR 411.354, and 42 CFR 411.351 and has consulted with our Attorney Generals office. We have considered all aspects of this issue, including those presented by First Transit, and have determined that we must rescind our offer to negotiate a contract of September 19, 2011. Discussion Prior to the start of contract negotiations, the Departments negotiation team met to discuss those areas of First Transits proposal that should be further clarified. One of the topics of discussion raised by the Department was the importance of utilizing paratransit services when it is the least expensive, medically appropriate service. This was articulated in the RFP but had not been specifically addressed to the Departments satisfaction in First Transits proposal. This was one of the first items raised by the Department to First Transit in our initial negotiations conference call. It was at this time that the Department learned of a contractual relationship First Transit held with the Greater Hartford Transit Authority (GHTA), the only paratransit service entity serving the metropolitan Hartford region. Though the RFP did not require the disclosure of all

contracts, it did make clear that brokers were prohibited from having any of the relationships described at 42 CFR 440.170 on page 39 of the RFP. 42 CFR 440.170 (a) 4. (ii) (A) (1) specifically prohibits a broker from having a financial relationship with a transportation provider. Financial relationship is defined at 411.354(a)(ii) as a direct or indirect compensation arrangement with an entity that furnishes non-emergency medical transportation. The regulation goes on to define a direct financial relationship as one where remuneration passes between the [broker] and the entity furnishing [non-emergency medical transportation] without any intervening persons or entities. It is clear from a review of the contracts provided that First Transit not only has a direct financial relationship with Greater Hartford Transit Authority, but also with CT Transit, as both entities pay First Transit directly for services rendered and none of the exceptions under 411.351 apply, as the exceptions are conjunctive, requiring that all three exception criteria be met, and not disjunctive as First Transit suggests in its letter of November 10, 2011. Additionally, First Transits lease arrangement with GHTA constitutes a financial relationship. First Transits assertion that the referral is not a referral at all because the client referred requires certification by GHTA is moot. The CFR does not distinguish between referrals and certifications but rather notes that a broker may not refer to any other entity with which it has a financial relationship. Regardless of how much a broker might be incentivized or whether they would reap any financial benefit at all, the Code of Federal Regulations does not distinguish between the two under the regulations. Financial incentives are only necessary to disqualify a potential bidder in the event of indirect compensation relationships. Any direct compensation relationship, no matter how de minimus, is cause for disqualification. Since First Transit, Inc.s relationship with both GHTA and CT Transit is direct rather than indirect, the extent of conflicting financial incentives is immaterial. Nevertheless, we note First Transits contention that any financial incentives to make (or not to make) referrals to GHTA and/or CT Transit is de minimus is not persuasive. Documentation provided related to First Transits compensation for providing transportation management services to GHTA shows considerable variation in compensation, depending on the volume of services. Furthermore, it can reasonably be expected that a substantial number of individuals in the Hartford area will qualify for paratransit services, which implicates and causes potential conflicts with First Transits existent contractual arrangements with GHTA. The significance of the potential conflicts only reinforces our determination that First Transits existing, direct compensation arrangements with GHTA and CT Transit make it impermissible for the Department to retain First Transit as a non-emergency medical transportation broker under the RFP. Conclusion As a result of our findings, the Department believes that it cannot move forward with negotiations with First Transit. Were there an audit by CMS our federal match would be jeopardized and even if there were no potential of a financial detriment, the regulations

prohibit the contractual relationships. We see no viable way to negotiate around this issue. Accordingly, the Department has no choice but to rescind its offer to First Transit to negotiate a contract and move forward with the next bidder. Should you have any follow up questions for the Department, please do not hesitate to contact me via email at julia.lentini@ct.gov or via phone at 860-424-5940. Sincerely,

Julia K. Lentini Staff Attorney Cc: Roderick L. Bremby, Commissioner Claudette J. Beaulieu, Deputy Commissioner Kathleen M. Brennan, Deputy Commissioner Astread Ferron-Poole, Chief of Staff Mark Schaefer, Director of Medical Care Administration David Dearborn, Director of Communications Hugh Barber, Assistant Attorney General Tom Irvin, First Transit, Inc., Region Vice President Timothy Corey, HinckleyAllenSnyder, LLP for First Transit, Inc. Christopher Morog, HinckleyAllenSnyder, LLP, for First Transit, Inc.