Designated Health Services (DHS): The Key to the Stark Law City

Episode Date: July 23, 2024

In this episode of Stark Integrity, Bob Wade (Captain Integrity) focuses on one of the most fundamental—and often misunderstood—concepts in Stark Law:

Designated Health Services (DHS).

The episode makes clear that if you do not understand DHS, you cannot properly analyze Stark Law risk—because:

DHS is the gateway to Stark Law applicability.

Why DHS Matters

At a high level, Stark Law only applies when there is:

• A referral
• For Designated Health Services
• Payable by Medicare (or Medicaid in many cases)

If DHS is not involved:

Stark Law does not apply.

This makes DHS the first—and most critical—step in any Stark analysis.

What Are Designated Health Services?

Designated Health Services are a defined set of healthcare services identified by regulation.

They generally include categories such as:

• Clinical laboratory services
• Physical therapy and occupational therapy
• Radiology and imaging services
• Durable medical equipment (DME)
• Outpatient prescription drugs
• Inpatient and outpatient hospital services

The key point:

These categories are not intuitive—they are regulatory constructs.

DHS Is Often Defined by Codes

One of the most practical insights from this episode is that DHS is frequently determined by:

CPT and HCPCS codes.

This means:

• Whether a service is DHS is not based on how it feels or is described
• It is based on whether it falls within specific code-driven categories

The takeaway:

DHS is a technical determination—not a conceptual one.

The Importance of Precision

Because DHS is defined so precisely:

• Small differences in services can lead to different outcomes
• Misclassification can result in incorrect Stark analysis
• Assumptions can create risk

This reinforces a critical principle:

You must analyze DHS carefully—there is no room for approximation.

When Stark Law Does Not Apply

The episode also highlights that Stark Law does not apply in every situation.

If any of the required elements are missing—particularly DHS—then:

The Stark Law framework is not triggered at all.

This is an important distinction because:

• Not every financial relationship requires Stark analysis
• Not every referral creates risk

The key takeaway:

DHS is what activates the Stark Law “city.”

Understanding the Concept of a “Referral”

Another important component tied to DHS is the definition of a:

Referral.

Not every action by a physician is considered a referral, and:

• Some services may be personally performed
• Some arrangements may fall outside referral concepts

This matters because Stark requires:

A referral for DHS.

Without both pieces:

• The law does not apply

Common Areas of Confusion

The episode highlights several areas where organizations often struggle:

• Assuming all services are DHS
• Failing to verify services at the code level
• Confusing DHS categories with general service descriptions
• Overlooking when DHS is not present

These mistakes can lead to:

• Over-analysis
• Under-analysis
• Incorrect conclusions

Because ultimately:

Everything depends on getting DHS right at the start.

DHS as the Entry Point to Analysis

A helpful way to think about DHS:

It is the front door to Stark Law.

Before considering:

• Exceptions
• Compensation structures
• Fair market value
• Commercial reasonableness

You must first answer:

Is DHS involved?

If the answer is no:

The rest of the Stark analysis is unnecessary.

Practical Compliance Considerations

From a compliance perspective, organizations should:

• Identify which services qualify as DHS
• Map services to CPT/HCPCS codes
• Train teams on DHS categories
• Incorporate DHS analysis into review processes
• Avoid assumptions based on general descriptions

Because:

Accurate DHS identification is the foundation of Stark compliance.

Key Takeaways

• DHS is the gateway to Stark Law applicability
• If DHS is not present, Stark Law does not apply
• DHS categories are defined by regulation—not intuition
• Code-level analysis is often required (CPT/HCPCS)
• Precision is critical—small differences matter
• Many compliance errors stem from misunderstanding DHS
• DHS should always be the starting point in Stark analysis

Final Thoughts

This episode reinforces a foundational truth in Stark Law:

You cannot analyze what you have not defined.

Designated Health Services determine:

• Whether Stark applies
• Whether risk exists
• Whether further analysis is required

Without a clear understanding of DHS:

• Even sophisticated compliance programs can reach flawed conclusions

Ultimately:

DHS is not just a concept—it is the key that unlocks the entire Stark Law framework.

Because in Stark Law:

If you do not enter through the right door, you are not in the city.

Click here to listen to this Stark Integrity Podcast Episode:
https://podcasts.apple.com/us/podcast/designated-health-services-dhs-the-key-to-the-stark-law-city/id1588939373?i=1000663150495&l=fr-FR