Understanding Designated Health Service requirements is essential for every Florida healthcare provider operating in today’s highly regulated environment. Federal Stark Law rules combined with state-level oversight make compliance a top priority for medical practices, diagnostic centers, DME suppliers, imaging facilities, and physician groups. This in-depth 2025 guide explains what DHS includes, why enforcement continues to rise, and how Florida practices can stay fully compliant.
What Exactly Are Designated Health Services (DHS)?
Designated Health Services refer to ten specific categories of healthcare services that fall under the federal Physician Self-Referral Law (Stark Law). This law prohibits physicians from referring Medicare or Medicaid patients for these services when they—or an immediate family member—have a financial relationship with the entity providing the service, unless a legally recognized exception applies.
The 10 DHS Categories
Clinical laboratory services
Physical therapy services
Occupational therapy services
Radiology and imaging services
Durable medical equipment (DME)
Parenteral and enteral nutrients, equipment, and supplies
Prosthetics, orthotics, and related supplies
Home health services
Outpatient prescription drugs
Hospital inpatient and outpatient services
These categories are the most heavily monitored healthcare services in the U.S., particularly for Medicare and Medicaid billing.
Why DHS and Stark Law Compliance Matter in 2025
Federal enforcement has increased significantly due to:
A rise in fraud-prevention initiatives
AI-driven audit tools
More aggressive CMS oversight
Focus on improper diagnostic and DME referrals
Higher scrutiny of physician compensation models
In Florida, AHCA adds another layer of regulation for Medicaid participation, making compliance even more essential for providers across the state.
High-Risk Scenarios for Florida Providers
1. Physician Ownership in Diagnostic Facilities
If a Florida physician owns or invests in:
MRI centers
CT or ultrasound facilities
Laboratory testing services
they may violate Stark Law if referrals are made without meeting a valid exception.
2. Compensation and Bonus Structures
Compensation tied—even indirectly—to the volume or value of DHS referrals is strictly prohibited unless a detailed exception applies.
Risk areas include:
Productivity bonuses
Referral-based bonuses
Percentage-based profit distributions
Medical director payments not supported by FMV
3. In-Office Ancillary Services (IOAS)
The IOAS exception is widely used but commonly misunderstood. It requires strict compliance regarding:
Location
Supervision
Group practice structure
On-site services
Even minor operational errors may result in violations.
4. Space & Equipment Leasing
Shared office space or leased medical equipment arrangements are common in Florida, but they must satisfy all exception requirements, including FMV, commercially reasonable terms, and written agreements.
5. DME and Supply Referral Relationships
DME suppliers in Florida face intense scrutiny. Any financial relationship between a provider and a DME company must be structured under a valid exception.
Compliance Strategies That Protect Florida Healthcare Practices
1. Conduct Annual Stark Law & DHS Audits
A yearly audit helps verify:
Ownership structures
Referral practices
Contract relationships
Financial arrangements
Billing and documentation
This is one of the strongest risk-reduction tools for 2025.
2. Confirm Every Financial Relationship Fits a Stark Exception
Common Stark Law exceptions include:
In-Office Ancillary Services (IOAS)
Fair Market Value (FMV) compensation
Employment relationships
Rental of office space or equipment
Personal services (medical director) arrangements
Non-monetary compensation exceptions
Each exception has strict, non-negotiable terms that must be met.
3. Maintain Fair Market Value Documentation
You must maintain evidence that all payments are FMV, especially for:
Medical director roles
Consulting services
Lease agreements
Shared space
Physician compensation
FMV documentation is frequently requested during Florida audits.
4. Train All Physicians and Administrative Staff
Annual training should cover:
What qualifies as DHS
Stark Law exceptions
Referral rules
Audit response procedures
Financial arrangements to avoid
Training strengthens your legal defense and reduces accidental violations.
5. Strengthen Internal Referral Tracking
Multi-specialty practices and integrated groups should use compliance software to monitor:
Referral volumes
Referral sources
DHS utilization patterns
This helps identify issues before regulators do.
Penalties for Non-Compliance
Violating DHS laws can result in:
Repayment of all improperly billed claims
Stark Law penalties up to $27,750 per service
Treble damages
Exclusion from Medicare/Medicaid
Corporate Integrity Agreements
Additional AHCA penalties for Medicaid providers
These penalties can severely impact a practice’s operations and financial stability.
Best Practices for Structuring Compliant Arrangements
1. Use Written Agreements for All Relationships
Every arrangement involving compensation, shared resources, or referrals should be documented.
2. Ensure Terms Are Commercially Reasonable
Agreements must make business sense apart from referrals.
3. Avoid Percentage-Based Compensation
These models often imply referral-volume influence, which violates Stark Law.
4. Review Lease Terms Annually
Rent must reflect FMV and not fluctuate with referral patterns.
When to Seek Legal Guidance
Consult a healthcare attorney if your practice:
Owns or invests in imaging or diagnostic equipment
Shares office space or equipment with other providers
Uses productivity or referral-based bonuses
Provides in-office lab or therapy services
Works with DME suppliers
Bills Medicare/Medicaid for Stark-governed services
Professional review ensures structures remain compliant.
Conclusion
Designated Health Services remain one of the most important compliance areas for Florida healthcare providers in 2025. With increasing federal audits, stricter oversight, and evolving rules, medical practices must prioritize accurate documentation, proper financial structures, and strong internal compliance programs. Understanding these regulations and proactively addressing risk ensures your organization operates safely and avoids significant legal exposure.
By following these best practices, your Florida healthcare operation can maintain stability, protect revenue, and navigate the evolving regulatory landscape surrounding Designated Health Service and Stark Law requirements.
