Understanding how Designated Health Service rules apply to your practice is essential for avoiding costly regulatory mistakes. Florida remains one of the most scrutinized healthcare markets, making DHS compliance a core operational requirement for physician practices, diagnostic centers, hospitals, and ancillary healthcare providers.
What Are Designated Health Services?
The federal Physician Self-Referral Law (Stark Law) regulates certain healthcare services known as Designated Health Services (DHS). When a physician has a financial relationship with an entity offering DHS, they cannot refer Medicare or Medicaid patients to that entity unless a Stark Law exception applies.
CMS categorizes DHS as:
Clinical laboratory services
Outpatient prescription drugs
Physical and occupational therapy
Radiology and diagnostic imaging
Durable medical equipment and supplies
Prosthetics, orthotics, and related equipment
Inpatient and outpatient hospital services
Parenteral and enteral nutrients
Home health services
These categories involve services with high referral potential, which is why federal oversight is strict.
Why DHS Compliance Matters Most in Florida
Florida healthcare entities face layers of regulatory scrutiny involving:
AHCA (Agency for Health Care Administration)
CMS
OIG
DOH and professional boards
Noncompliance with Stark Law involving DHS can result in:
Civil monetary penalties
Recoupment of Medicare payments
False Claims Act exposure
Federal program exclusion
Investigation by AHCA or OIG
For a Florida practice, even a simple documentation error can escalate into a full compliance review.
Core Stark Law Requirements You Must Meet
DHS compliance hinges on strict adherence to Stark’s technical rules. Key areas include:
1. Written Documentation for Financial Relationships
Any financial relationship—ownership, compensation, or investment—must be:
In writing
Commercially reasonable
Independent of referral volume
Signed by all parties
Unwritten or expired contracts remain one of the most common causes of violations.
2. Fair Market Value (FMV) Compensation
Physician payments must match FMV. That includes:
Salaries
Medical director compensation
Administrative payments
Productivity bonuses
Florida audits frequently identify issues where compensation indirectly rewards referrals.
3. Strict Use of Stark Law Exceptions
Some commonly used exceptions include:
In-office ancillary services
Bona fide employment
Space or equipment rental
Personal service arrangements
Isolated transactions
Each has precise criteria. Missing one requirement means the entire arrangement becomes noncompliant.
4. DHS Group Practice Requirements
To qualify for the in-office ancillary service exception, a group practice must satisfy:
Unified business operations
Consistent profit distribution
Centralized decision-making
Integrated clinical workflow
If your group practice structure does not meet the legal definition, DHS referrals become prohibited.
5. Lease, Rental & Shared Space Agreements
Shared imaging centers, therapy clinics, and diagnostic services must follow specific rules:
One-year written lease
FMV rent
No charges based on referrals
Clearly defined space and time blocks
Time-share arrangements are especially high-risk in Florida because they are often informal or poorly documented.
Common DHS Compliance Problems in Florida Practices
Many Florida providers unknowingly expose themselves to Stark violations through:
Undocumented or expired agreements
Paying physicians based on revenue tied to DHS services
Incomplete supervision protocols for imaging and testing
Misclassification of employees vs. independent contractors
Overlapping time-share locations
Lack of routine FMV reviews
Missing written physician service logs
These issues often surface when AHCA or CMS evaluates a facility’s billing patterns.
Risk Areas Often Missed by Practices
1. Clinical Laboratory Arrangements
Joint venture labs or shared lab equipment must be compliant down to the contract language.
2. Imaging Center Ownership
Radiology and MRI centers are among the most DHS-sensitive operations in Florida.
3. DME and Supply Sales
DME arrangements can be high-risk if any physician involved in referrals has ownership interest.
4. Hospital Service Lines
Hospitals must maintain strict DHS policies for physician relationships, privileging, and referral tracking.
How Florida Healthcare Law Firm Helps Providers Stay Compliant
We provide full regulatory support for DHS-related operations, including:
Stark Law and DHS compliance audits
Contract drafting, review, and restructuring
FMV and commercial reasonableness assessments
Development of internal referral policies
Compliance program design and implementation
Assistance during AHCA, CMS, or OIG inquiries
Guidance for practice acquisitions and joint ventures
Our team understands the complexities of Florida’s healthcare environment and provides practical, business-aligned solutions.
Compliance Best Practices for 2025
To reduce risk, every Florida healthcare entity offering DHS should:
Update all contracts annually
Perform independent FMV evaluations
Document supervision protocols for imaging and diagnostic testing
Review group practice structures for Stark alignment
Avoid informal arrangements or handshake deals
Conduct internal compliance audits twice yearly
Maintain referral logs and lease records
Proactive compliance is always less risky—and less expensive—than reactive legal defense.
Conclusion
Florida’s regulated healthcare environment demands precision in how practices manage referrals, financial relationships, and service arrangements. With Stark Law evolving and enforcement increasing, aligning your operations with DHS requirements is essential for long-term stability and protection. For personalized guidance, consult the Florida Healthcare Law Firm and ensure your organization remains compliant with every Designated Health Service rule.
