Designated Health Service rules continue to shape how Florida healthcare providers structure their business arrangements, manage referrals, and maintain federal compliance. With ongoing updates to Stark Law exceptions and CMS definitions, understanding these requirements is critical for practices, diagnostic centers, laboratories, hospitals, and ancillary service providers across the state.

What Are Designated Health Services (DHS)?

Designated Health Services are specific categories of healthcare services that fall under federal Stark Law regulation. Stark Law prohibits physicians from referring Medicare or Medicaid patients to an entity with which they or their family members have a financial relationship unless an exception applies.

Common DHS categories include:

• Clinical laboratory services

• Physical and occupational therapy

• Radiology and imaging services

• DME and supplies

• Parenteral and enteral nutrients

• Home health services

• Outpatient prescription drugs

• Inpatient and outpatient hospital services

Because DHS categories surround high-risk referral areas, providers must document all financial relationships to avoid unintentional violations.

Why DHS Compliance Matters in Florida

Florida remains one of the most heavily regulated healthcare markets in the nation. In addition to federal Stark Law requirements, providers face strict oversight from:

• AHCA (Agency for Health Care Administration)

• CMS

• OIG

• State licensing boards

Non-compliance involving DHS can lead to:

• Civil monetary penalties

• Repayment of Medicare/Medicaid claims

• Exclusion from federal programs

• Potential False Claims Act liability

Given the financial and operational risks, even small administrative oversights—such as misclassified employee relationships, undocumented lease arrangements, or improper compensation models—can trigger audits.

Key Stark Law Requirements for DHS Providers

1. Financial Relationship Transparency

Any ownership interest, investment, or compensation arrangement must be documented and commercially reasonable.

2. Fair Market Value (FMV) Compensation

Compensation must not vary with the volume or value of referrals. FMV assessments should be updated regularly.

3. Bona Fide Employment Exception

Physician employees may be paid for legitimate clinical services if the arrangement meets Stark Law standards.

4. Space and Equipment Lease Exceptions

Many imaging centers or group practices share space. Leases must be:

• Written

• Set for at least one year

• Based on fair market value

• Not dependent on referral volume

5. Group Practice Structure Requirements

Group practices must satisfy strict tests related to:

• Unified business operations

• Profit-sharing rules

• Distribution of DHS revenue
  Failure to meet these rules means the practice can lose its DHS group designation and become incompatible with in-office ancillary service exceptions.

Common Compliance Issues in Florida Practices

Florida providers frequently encounter compliance gaps such as:

• Undocumented independent contractor agreements

• Improper supervision levels for diagnostic testing

• Lack of written time-share arrangements

• Referral tracking deficiencies

• Outdated FMV studies

These issues often surface during AHCA investigations or CMS audits—situations that can be prevented through regular internal compliance reviews.

How Florida Healthcare Law Firm Helps Providers Stay Compliant

Our legal team assists healthcare businesses with:

• Structuring and auditing physician relationships

• Designing Stark-compliant compensation models

• Reviewing DHS categories within practice operations

• Preparing for AHCA and CMS inspections

• Drafting lease, joint venture, and clinical services agreements

• Conducting full compliance program assessments

With decades of experience supporting Florida medical practices, we provide clear guidance that aligns with federal and state regulatory expectations.

Conclusion

Navigating Stark Law and DHS requirements is not optional—it's essential to protecting your practice from severe penalties. As regulations evolve, staying proactive with legal review and compliance planning will reduce risk and support operational stability across your healthcare business in Florida.

For tailored compliance assistance, contact Florida Healthcare Law Firm today.

And when evaluating your operational risk, always consider whether your service lines fall under a Designated Health Service classification.