For Florida healthcare providers, understanding Designated Health Services (DHS) is no longer optional—it's a core compliance responsibility. Federal enforcement has intensified, CMS audits have increased, and AHCA now places heightened scrutiny on medical practices involved in diagnostic testing, imaging, DME, therapy services, and hospital-based service lines.
This guide provides the most current, detailed, and compliance-oriented explanation of DHS rules, Stark Law exceptions, common audit triggers, and the legal steps providers must follow to stay compliant in 2025.
What Are Designated Health Services?
DHS refers to specific categories of healthcare services regulated under the federal Physician Self-Referral Law (Stark Law). These services represent areas with high referral volume and are therefore monitored closely to prevent financial conflicts of interest.
DHS includes:
Clinical laboratory services
Physical and occupational therapy
Radiology, MRI, CT, and diagnostic imaging
Durable medical equipment (DME) and supplies
Prosthetics and orthotics
Parenteral and enteral nutrients
Home health services
Outpatient prescription drugs
Inpatient and outpatient hospital services
Because these categories generate significant Medicare claims, improper referrals can result in substantial penalties.
Why DHS Compliance Matters More in Florida
Florida consistently ranks among the highest states for:
Healthcare fraud investigations
CMS billing audits
OIG enforcement actions
AHCA site inspections
Medicare overpayment recoveries
Stark Law violations involving DHS can lead to:
Civil monetary penalties exceeding $15,000 per service
Repayment of all Medicare claims tied to improper referrals
False Claims Act liability
Program exclusion and loss of credentialing
Contract terminations with payors
Even unintentional errors—like expired contracts, informal leases, or undocumented supervision—can trigger major compliance issues.
Core Stark Law Rules Governing DHS
DHS compliance revolves around strict, zero-flexibility rules. Providers must understand the following:
1. Financial Relationships Must Be Properly Structured
Any financial relationship between a physician and an entity providing DHS must be:
Documented in writing
Signed by all parties
Commercially reasonable
Set at fair market value
Not tied to referral volume
Informal or expired agreements remain the #1 cause of Stark violations.
2. Fair Market Value (FMV) Documentation
FMV must support:
Physician compensation
Medical director agreements
Diagnostic supervision payments
Space/equipment rental rates
Call coverage contracts
CMS expects FMV analyses to be updated routinely, especially when reimbursement trends shift.
3. Stark Law Exceptions Must Be Met Completely
Common exceptions for DHS include:
In-office ancillary services
Bona fide employment
Personal service arrangements
Space and equipment leases
Group practice exceptions
Missing even one technical requirement—such as the one-year term, signature, or FMV documentation—invalidates the entire exception.
4. Group Practices Must Meet Federal Standards
A practice must satisfy specific criteria to qualify as a Stark-compliant group, including:
Unified business operations
Central decision-making structure
Integrated medical and financial systems
Defined profit distribution models
In Florida, many practices fail this test due to inconsistent administrative policies or outdated group structures.
5. Shared Space, Time-Share, & Co-Location Risks
Florida providers frequently operate:
Shared imaging suites
Part-time office locations
DME storage areas
Therapy rooms with rotating schedules
Every arrangement must be documented with precise:
Time blocks
Exclusive-use requirements
Fair market rental calculations
Non-referral-based payment terms
CMS has repeatedly cited co-location arrangements as high-risk.
Common DHS Compliance Problems in Florida Practices
Florida Healthcare Law Firm has identified the following recurring patterns during client audits:
1. Informal or Verbal Agreements
Providers often collaborate without written contracts—creating immediate Stark exposure.
2. Non-Compliant Imaging Agreements
MRI, CT, and ultrasound centers face the highest risk due to supervision, space rental, and referral relationships.
3. Inaccurate or Outdated FMV Assessments
Many compensation arrangements are based on old market rates or unsupported benchmarks.
4. Misclassification of Workers
Physicians classified as independent contractors without proper documentation often generate DHS compliance failures.
5. Lack of Referral Tracking
Many practices do not track DHS referrals accurately, making it impossible to detect internal compliance violations.
6. Overlapping Time-Share Leases
Shared medical space requires extremely precise contract language. Florida audits routinely flag these setups.
How Florida Healthcare Law Firm Helps Providers Achieve DHS Compliance
Our attorneys offer full-spectrum compliance support, including:
Stark Law and DHS compliance audits
FMV and commercial reasonableness analysis
Physician employment and contractor agreement reviews
Lease and time-share compliance restructuring
Diagnostic supervision policy development
DME and imaging compliance assessments
Internal referral monitoring systems
AHCA, CMS, and OIG audit response support
We ensure that your financial relationships, contracts, supervision models, and operational structures align with federal and state regulations.
Best Practices for DHS Compliance in 2025
To minimize audit risk, Florida healthcare entities should:
Conduct a full annual compliance review
Renew contracts before expiration
Maintain current FMV reports
Standardize supervision requirements
Use written documentation for all financial arrangements
Avoid referral-based compensation
Maintain detailed logs for time-share and space use
Train staff on DHS categories and Stark rules
Implement a referral oversight program
Practices that follow these steps significantly reduce exposure to penalties and investigations.
Conclusion
DHS compliance remains one of the most critical legal responsibilities for Florida healthcare providers. As enforcement intensifies, practices must strengthen documentation, refine internal controls, and proactively monitor their contractual and financial arrangements. With expert legal guidance and a structured compliance program, your organization can confidently operate within Stark Law and federal DHS regulations while reducing audit risk.
For personalized support and professional compliance evaluation, Florida Healthcare Law Firm provides strategic guidance to help providers meet every Designated Health Service requirement and maintain long-term regulatory protection.
