South Dakota Healthcare
Compliance Guide

South Dakota presents a generally favorable regulatory environment for healthcare companies, particularly those leveraging telehealth, though it maintains a conservative stance on certain aspects of healthcare delivery. The state has historically been proactive in adopting telehealth-friendly policies, especially accelerated by the COVID-19 pandemic, which solidified many temporary flexibilities into permanent law. Key regulatory bodies include the South Dakota Board of Medical and Osteopathic Examiners, the South Dakota Board of Nursing, and the South Dakota Board of Pharmacy, which collectively govern licensure, scope of practice, and prescribing. The business climate is generally pro-business, with a strong emphasis on rural access to care, making telehealth a critical component of healthcare strategy. Recent legislative actions have focused on codifying telehealth definitions, ensuring payment parity for certain services, and clarifying provider-patient relationship establishment. However, companies must navigate the state's nuanced Corporate Practice of Medicine (CPOM) doctrine, which, while not as strict as some states, still imposes constraints on non-physician ownership and control of medical practices. The state also maintains specific requirements for controlled substance prescribing via telehealth and clear delineations for mid-level provider scope of practice, which are crucial for multi-state operations. Overall, South Dakota offers a promising market for compliant healthcare businesses, provided they meticulously adhere to state-specific regulations regarding professional licensure, service delivery, and corporate structure.

South Dakota does not have a statutory Corporate Practice of Medicine (CPOM) doctrine explicitly prohibiting corporations from employing physicians or owning medical practices. However, the South Dakota Board of Medical and Osteopathic Examiners (SDBMOE) implicitly enforces CPOM principles through its regulations concerning professional licensure, ethical conduct, and the prohibition against fee-splitting and the unlicensed practice of medicine. The legal basis for CPOM enforcement in South Dakota primarily stems from the SDBMOE's authority to regulate the practice of medicine and ensure that medical decisions remain solely within the purview of licensed physicians, free from corporate influence or control by non-licensed individuals. Specifically, South Dakota Codified Law (SDCL) Chapter 36-4 outlines the requirements for practicing medicine and surgery, emphasizing that only licensed individuals may engage in such activities. While a lay corporation may own the assets of a medical practice, it generally cannot employ physicians or direct their clinical judgment. The SDBMOE views arrangements where non-licensed entities control or interfere with medical practice as potentially violating professional standards and prohibitions against aiding and abetting the unlicensed practice of medicine.

Permitted Ownership Structures:

• Physician-Owned Entities: Licensed physicians may form professional corporations (PCs) or professional limited liability companies (PLLCs) to practice medicine. These entities must be owned and controlled by licensed professionals.
• Lay Ownership of Assets: Non-physician entities can own the non-clinical assets (e.g., real estate, equipment, administrative staff) of a medical practice. However, they cannot directly employ physicians or exercise control over clinical decisions.

Restrictions and Impact on Specific Businesses:

• Non-Physician Ownership: Non-physicians generally cannot own or control entities that directly provide medical services or employ physicians. This means a lay corporation cannot be the direct employer of physicians providing medical care.
• Fee-Splitting: SDCL 36-4-26 prohibits fee-splitting, which is the division of professional fees for medical services with any person not licensed to practice medicine. This is a critical consideration for management services organizations (MSOs).
• Telehealth Companies: Telehealth companies must structure their operations to ensure that medical services are provided by physician-owned professional entities. The telehealth platform (MSO) can provide administrative, technical, and marketing services, but the clinical entity must maintain independent control over medical decisions and physician employment.
• Medspas: Medspas offering medical services (e.g., injectables, laser treatments) must operate under the direct supervision and control of a licensed physician. The physician must be responsible for all medical aspects, including delegation and supervision. Non-physician ownership of the medical component is problematic. Often, a separate professional entity employs the medical staff, while a lay entity handles the spa's aesthetic services and facility.
• Dental Practices & Chiropractic Clinics: Similar to medical practices, dental and chiropractic practices are generally subject to professional ownership requirements, ensuring that only licensed dentists or chiropractors own and control the professional entity. SDCL Chapter 36-6 (Dentistry) and 36-5 (Chiropractic) govern these professions.
• Wellness Clinics: If a wellness clinic provides services that constitute the practice of medicine (e.g., IV therapy, hormone therapy, prescribing medications), it falls under the same CPOM considerations. The medical component must be professionally owned and operated, with clear separation from any lay-owned administrative or facility services. The SDBMOE's position on what constitutes the 'practice of medicine' is broad, encompassing diagnosis, treatment, operation, or prescription for any human disease, pain, injury, deformity, or physical or mental condition (SDCL 36-4-1).

South Dakota has a progressive stance on telehealth, particularly following legislative actions that codified many pandemic-era flexibilities. The establishment of a valid provider-patient relationship via telehealth is explicitly permitted. SDCL 34-52-1 defines 'telehealth' as the use of electronic information and communication technologies to provide health care services, including diagnosis, consultation, treatment, education, and care management, when the patient and provider are in different locations. Crucially, the law states that a health care professional may establish a patient-provider relationship through telehealth, provided they meet the same standards of care as if the services were provided in person.

Permitted Modalities:

• Video (Synchronous Audio-Visual): This is the preferred and most robust modality for establishing a new patient-provider relationship and for complex consultations. It is explicitly permitted and widely used.
• Audio-Only (Synchronous Audio): South Dakota allows for audio-only telehealth services. SDCL 34-52-1(6) includes 'audio-only telephone' in the definition of telehealth. However, providers must ensure that the standard of care can be met via audio-only, and it may be less appropriate for initial comprehensive evaluations or services requiring visual assessment.
• Asynchronous (Store-and-Forward): This modality, involving the transmission of medical information (e.g., images, data) for later review, is also permitted. SDCL 34-52-1(6) includes 'store-and-forward technology.' It is typically used for specific diagnostic or monitoring purposes rather than for initial comprehensive consultations.

Telehealth Registration Requirements: South Dakota does not have a separate telehealth registration requirement for licensed providers. Providers must hold an active, unencumbered South Dakota license for their respective profession (e.g., medical, nursing, pharmacy) to provide telehealth services to patients located in South Dakota. Out-of-state providers must obtain a full South Dakota license or practice under an interstate compact if applicable (e.g., IMLC for physicians, NLC for nurses) to render services to South Dakota residents.

Informed Consent Requirements: Providers must obtain informed consent from the patient before providing telehealth services. SDCL 34-52-2 requires that a health care professional providing telehealth services must obtain the patient's informed consent. This consent must include information about the nature of the telehealth services, potential risks, benefits, and alternatives to telehealth. It should also cover privacy and security protocols. While not explicitly mandated by statute, best practice dictates documenting this consent in the patient's medical record.

Geographic Restrictions: There are no specific geographic restrictions within South Dakota for telehealth services. Providers can offer telehealth to patients located anywhere within the state, subject to meeting all other licensure and practice requirements. However, providers must be physically located in a state where they are licensed to practice when rendering services, and the patient must be located in South Dakota for South Dakota law to apply to the patient-provider encounter.

South Dakota's prescribing rules for telehealth largely align with in-person prescribing standards, with specific considerations for controlled substances. The overarching principle is that the standard of care for prescribing via telehealth must be equivalent to that of in-person care. SDCL 34-52-2 explicitly states that a health care professional providing telehealth services must adhere to the same standards of care as if the services were provided in person.

Controlled Substance Prescribing via Telehealth:

• Schedules Permitted: South Dakota generally permits the prescribing of Schedule II, III, IV, and V controlled substances via telehealth, provided a legitimate patient-provider relationship has been established and an appropriate medical examination (which can be via telehealth) has been conducted. The federal Ryan Haight Online Pharmacy Consumer Protection Act of 2008, as modified by the COVID-19 public health emergency (PHE) waivers, governs this. Post-PHE, the DEA has proposed new rules that would generally require an in-person medical evaluation for Schedule II and certain Schedule III-V non-narcotic controlled substances, with exceptions for a 30-day supply. South Dakota's state law does not impose additional barriers beyond federal requirements in this regard, but providers must remain current with federal DEA regulations, especially concerning the post-PHE landscape.
• DEA Requirements: Prescribers must hold a valid DEA registration. All controlled substance prescriptions must comply with DEA regulations for electronic prescribing (EPCS) where applicable, and state-specific requirements for prescription content.
• PDMP Checking: South Dakota mandates the use of its Prescription Drug Monitoring Program (PDMP), known as the South Dakota Prescription Drug Information System (SDPDIS). SDCL 34-20E-10 requires prescribers to review the patient's prescription drug history in the SDPDIS before prescribing an opioid or benzodiazepine, and periodically thereafter for ongoing treatment. This requirement applies equally to telehealth prescribing.
• Quantity or Refill Limitations: State law does not impose specific quantity or refill limitations for telehealth prescriptions that differ from in-person prescriptions, beyond what is generally applicable to all controlled substance prescribing (e.g., 90-day limit for Schedule II, no refills). However, the prescriber's professional judgment and the standard of care dictate appropriate quantities and refills.
• Special Rules for Specific Drug Classes:
  • GLP-1s (e.g., Ozempic, Wegovy): Prescribing GLP-1 agonists for weight loss or diabetes management via telehealth is permitted, provided the patient-provider relationship is appropriately established, a thorough medical evaluation is conducted, and the prescribing is medically necessary and within the prescriber's scope of practice. No specific state-level restrictions beyond general prescribing guidelines.
  • Testosterone/Hormone Therapy: Prescribing hormone replacement therapy (HRT) via telehealth is allowed under the same conditions as other medications. Comprehensive evaluation, including lab work, is essential to meet the standard of care.
  • Stimulants (e.g., Adderall, Ritalin): Prescribing Schedule II stimulants for ADHD via telehealth is particularly sensitive. While permitted under federal waivers during the PHE, the long-term federal rules will likely require an in-person evaluation for initial prescriptions. South Dakota does not impose additional state-specific restrictions beyond federal guidelines, but prescribers must exercise extreme caution and adhere to the highest standards of care, including thorough diagnostic workups and ongoing monitoring.

South Dakota defines the scope of practice for various healthcare professionals through specific statutes and administrative rules, influencing how mid-level providers can operate, particularly in telehealth and specialized clinics like medspas.

Nurse Practitioners (NPs): South Dakota grants full practice authority (FPA) to Nurse Practitioners. SDCL 36-9A-15 states that an advanced practice registered nurse (APRN), which includes NPs, may practice without a collaborative agreement after completing 1,040 hours of practice under a collaborative agreement or after completing 1,040 hours of practice in another state or jurisdiction where the APRN had full practice authority. This means that after meeting the experience requirement, NPs in South Dakota can diagnose, treat, and prescribe independently within their scope of practice, without direct physician supervision or a collaborative agreement. This makes South Dakota an attractive state for telehealth companies utilizing NPs. However, NPs must still practice within their educational and certification boundaries.

Physician Assistants (PAs): PAs in South Dakota practice under the supervision of a licensed physician. SDCL 36-4A-1 defines a physician assistant as a person who is qualified by academic and practical training to provide patient services under the supervision of a licensed physician. While PAs have broad prescriptive authority, including controlled substances, their practice is always linked to a supervising physician. The degree of supervision is determined by the supervising physician, the PA's experience, and the complexity of the medical condition, but the physician retains ultimate responsibility. A written supervision agreement is required, outlining the scope of practice and supervisory arrangements (SDCL 36-4A-15). PAs cannot practice independently.

Delegation Rules for Medical Assistants (MAs) in Medspas: In medspas, the delegation of medical tasks to unlicensed personnel, such as Medical Assistants, is strictly governed by the South Dakota Board of Medical and Osteopathic Examiners. Generally, MAs can perform administrative tasks and certain clinical tasks that do not require independent medical judgment, under the direct supervision of a physician or other licensed practitioner (e.g., NP, PA) who is physically present in the facility. Tasks like injections (e.g., Botox, fillers), laser treatments, or other procedures that constitute the practice of medicine cannot be delegated to an MA. These procedures must be performed by a licensed physician, NP, or PA, or a registered nurse (RN) under appropriate supervision and within their scope of practice. The physician is ultimately responsible for all delegated tasks and must ensure the delegate is competent and properly supervised. SDCL 36-4-1 defines the practice of medicine, and any procedure falling under this definition must be performed by a licensed professional.

Supervision Requirements:

• NPs: After meeting the 1,040-hour experience requirement, NPs do not require ongoing physician supervision or collaborative agreements.
• PAs: Always require a supervising physician and a written supervision agreement. The level of supervision varies but the physician is ultimately responsible.
• RNs: Practice under the direction of a physician or NP/PA for medical procedures, or independently within their nursing scope. Delegation to RNs for certain medical procedures (e.g., IVs, injections) is common but requires appropriate orders and oversight.
• Unlicensed Personnel (e.g., MAs): Can only perform tasks that do not constitute the practice of medicine, or tasks explicitly delegated under direct supervision by a licensed professional, who must be physically present and immediately available.

Navigating business structures in South Dakota requires careful consideration of the state's implicit Corporate Practice of Medicine (CPOM) principles and professional licensure laws. The primary goal is to ensure that medical decision-making and the direct provision of healthcare services remain under the control of licensed professionals, while allowing for efficient business operations.

PC-MSO Structures:

• When Needed: The Professional Corporation (PC) and Management Services Organization (MSO) structure is highly recommended, and often necessary, for any healthcare business in South Dakota that involves non-physician ownership or investment, or provides services that fall under the definition of the 'practice of medicine' (SDCL 36-4-1). This structure legally separates the clinical practice from the administrative and business functions.
• PC (Professional Entity): This entity (e.g., Professional Corporation or Professional LLC) must be owned by licensed healthcare professionals (e.g., physicians, NPs, PAs, depending on the service). It employs the licensed providers, holds the professional licenses, and directly provides all clinical services. All medical decisions, patient care, and prescribing authority reside within the PC.
• MSO (Management Services Organization): This entity can be owned by non-licensed individuals or corporations. It provides non-clinical, administrative, and management services to the PC, such as billing, scheduling, marketing, IT, human resources (for non-clinical staff), and facility management. The MSO charges the PC a fair market value fee for these services.

Fee-Splitting Rules: SDCL 36-4-26 explicitly prohibits fee-splitting, stating that no physician may divide any professional fee for medical services with any person not licensed to practice medicine. This is a critical consideration for MSO agreements. The MSO fee must be a fixed fee or a percentage of gross revenue that is not tied to the volume or value of referrals or specific procedures. It must represent fair market value for the services rendered by the MSO, independent of the professional services provided by the PC. Structuring the MSO fee as a percentage of net profits or on a per-patient basis can be construed as illegal fee-splitting or illegal remuneration.

Management Services Agreement (MSA) Requirements: An MSA is the foundational contract between the PC and the MSO. Key requirements and considerations include:

• Fair Market Value (FMV): All services provided by the MSO to the PC must be compensated at FMV. This is crucial for avoiding fee-splitting and potential Stark Law/Anti-Kickback Statute implications (though federal laws apply primarily to federal healthcare programs, state boards may look to these principles).
• No Control Over Clinical Decisions: The MSA must explicitly state that the MSO has no authority or control over the PC's clinical decisions, hiring/firing of clinical staff, or professional judgment.
• Term and Termination: Clear terms for the agreement's duration and conditions for termination.
• Services Provided: A detailed list of administrative and non-clinical services the MSO provides.
• Compliance: Provisions ensuring both parties comply with all applicable state and federal laws.

Professional Corporation Requirements:

• Ownership: Professional Corporations (PCs) and Professional Limited Liability Companies (PLLCs) in South Dakota must be owned by licensed professionals of the same profession (e.g., physicians owning a medical PC, dentists owning a dental PC). SDCL 47-11B-1 et seq. governs Professional Service Corporations. All shareholders, directors, and officers who provide professional services must be licensed in the state.
• Name: The entity name must comply with professional board rules and typically include terms like 'P.C.' or 'P.L.L.C.'
• Purpose: The PC's sole purpose must be to render the specific professional services for which its owners are licensed.

Structuring Ownership for Compliance:

• Direct Patient Care: Ensure that any entity directly providing medical, dental, or chiropractic services is a professionally owned PC or PLLC.
• Non-Clinical Functions: All non-clinical functions (marketing, technology, billing, facilities) can be housed in a separate, lay-owned MSO.
• Clear Separation: Maintain clear contractual and operational separation between the clinical and administrative entities to avoid any perception of corporate influence over medical judgment or illegal fee-splitting. This includes separate bank accounts, distinct branding (if desired, though co-branding is common), and clear roles for personnel.

South Dakota's legislative session and regulatory bodies consistently review and update healthcare policies, particularly concerning telehealth and professional practice. For 2024-2026, several areas are seeing continued attention:

Telehealth Legislation:

• Codification of PHE Flexibilities: Following the COVID-19 Public Health Emergency, South Dakota has largely codified its telehealth flexibilities into permanent law, particularly regarding the establishment of patient-provider relationships and payment parity. While no major new legislative overhauls are anticipated immediately, minor refinements to definitions or specific service coverage may occur in future legislative sessions. The focus remains on maintaining access to care, especially for rural populations.
• Interstate Licensure Compacts: South Dakota is an active participant in several interstate licensure compacts, which significantly streamline multi-state practice for eligible professionals:
  • Interstate Medical Licensure Compact (IMLC): South Dakota is a member state, allowing eligible physicians to obtain expedited licensure to practice in other compact states, including via telehealth. This is a critical component for telehealth companies seeking to expand physician networks.
  • Nurse Licensure Compact (NLC): South Dakota is a party to the NLC, enabling registered nurses (RNs) and licensed practical nurses (LPNs) to practice in other compact states without obtaining additional licenses. This applies to APRNs (including NPs) as well, once they meet specific requirements for multi-state licensure under the NLC.
  • Physical Therapy Compact: South Dakota is a member.
  • Psychology Interjurisdictional Compact (PSYPACT): South Dakota is a member, allowing eligible psychologists to practice telepsychology and temporary in-person psychology in other compact states.

Controlled Substance Prescribing:

• DEA Rulemaking Impact: The primary recent development affecting controlled substance prescribing via telehealth is the ongoing rulemaking by the U.S. Drug Enforcement Administration (DEA) post-PHE. South Dakota prescribers must remain vigilant regarding the final federal rules on the in-person examination requirement for initial controlled substance prescriptions via telehealth. State law generally defers to federal guidelines on this matter, so any federal changes will directly impact South Dakota practice.
• PDMP Enhancements: The South Dakota Prescription Drug Information System (SDPDIS) continues to be enhanced, with ongoing efforts to improve data integration and user experience. While no major legislative changes to the mandatory use of the PDMP are anticipated, administrative rules may be updated to reflect system improvements or new reporting requirements.

Corporate Practice of Medicine (CPOM):

• No Major Legislative Changes: There have been no recent legislative efforts to explicitly codify or significantly alter South Dakota's implicit CPOM doctrine. The SDBMOE continues to enforce CPOM principles through its existing authority, focusing on preventing unlicensed practice and maintaining professional control over medical judgment. Companies should not anticipate a loosening of these standards in the near future.

Board Actions and Enforcement:

• Regulatory boards, particularly the SDBMOE, continue to issue guidance and take enforcement actions related to scope of practice, telehealth standards of care, and proper supervision. Companies should monitor board newsletters and public meeting minutes for any new interpretive guidance or enforcement trends that could impact their operations.

Entering the South Dakota healthcare market, whether through telehealth or brick-and-mortar expansion, requires a methodical approach to compliance. Adhering to these steps will mitigate risks and ensure a smooth operational launch.

Step-by-Step Compliance Checklist:

1. Entity Formation: Establish a professionally owned entity (PC or PLLC) for clinical services and a separate MSO for administrative services. Ensure proper registration with the South Dakota Secretary of State.
2. Professional Licensure: Verify all providers (physicians, NPs, PAs, RNs) hold active, unencumbered South Dakota licenses or are eligible to practice under relevant interstate compacts (IMLC, NLC, PSYPACT). Initiate licensing applications well in advance, as processing times can vary.
3. DEA Registration: Ensure all prescribers of controlled substances have valid South Dakota-specific DEA registrations.
4. MSA Development: Draft a robust Management Services Agreement (MSA) between the PC and MSO, ensuring fair market value for services, clear separation of clinical and administrative control, and strict adherence to anti-fee-splitting rules.
5. Telehealth Policy & Procedure: Develop comprehensive telehealth policies and procedures covering patient intake, informed consent, privacy (HIPAA), data security, emergency protocols, and documentation standards, all compliant with SDCL 34-52.
6. Prescribing Protocols: Implement strict prescribing protocols, especially for controlled substances, including mandatory PDMP checks (SDPDIS), adherence to federal DEA rules (especially post-PHE for initial controlled substance prescribing), and robust medical necessity documentation.
7. Scope of Practice Verification: Clearly define roles and responsibilities for all clinical staff based on their South Dakota scope of practice. For PAs, ensure a valid supervision agreement is in place. For NPs, verify they meet the 1,040-hour experience for full practice authority.
8. Informed Consent: Implement a clear process for obtaining and documenting patient informed consent for telehealth services, as required by SDCL 34-52-2.
9. Billing & Reimbursement: Understand South Dakota's payment parity laws for telehealth and ensure billing practices comply with state and federal regulations, as well as payer-specific policies.
10. Ongoing Monitoring: Establish a system for continuous monitoring of regulatory changes from the SDBMOE, Board of Nursing, Board of Pharmacy, and state legislature.

Common Pitfalls to Avoid:

• Ignoring CPOM: Assuming South Dakota has no CPOM can lead to illegal ownership structures or fee-splitting arrangements. Always use the PC-MSO model for lay investment.
• Inadequate Provider Licensure: Operating with providers not properly licensed in South Dakota or under a valid compact is a significant compliance risk.
• Non-Compliant MSO Fees: Structuring MSO fees based on a percentage of professional fees or revenue without clear fair market value justification can be deemed illegal fee-splitting.
• Lax Telehealth Standards: Failing to meet the same standard of care for telehealth as in-person care, especially for initial patient evaluations or controlled substance prescribing.
• Lack of PDMP Use: Non-compliance with mandatory SDPDIS checks for opioids and benzodiazepines.
• Improper Delegation: Allowing unlicensed personnel (e.g., MAs in medspas) to perform tasks outside their legal scope or without proper supervision.

Timeline Expectations:

• Provider Licensure: 2-6 months, depending on the board and completeness of application. Interstate compact applications are generally faster.
• Entity Formation: 1-2 weeks for basic registration with the Secretary of State.
• DEA Registration: 2-4 weeks after state licensure.
• Contracting (MSA): 1-3 months, depending on complexity and legal review.
• Overall Setup: Expect a minimum of 3-6 months for full operational readiness, including legal review, policy development, and credentialing.