Medical Clinic Contracting with Associates

This policy clarifies the application of the GST/HST to payments made between parties within a medical practice organization with respect to the organization’s operating expenses.

Sample Ruling 7: Medical Clinic Contracting with Associates
 Statement of Facts

1. Practitioner A is a sole proprietor operating a medical practice under the name Clinic XYZ. The sole proprietor owns the practice and all related assets of the practice.

2. Practitioner A contracts with independent contractor associates whereby the associates will render health care services to individuals at Clinic XYZ and agree to pay Clinic XYZ for the use of the facility, medical equipment, and supplies of administrative services.

3. Clinic XYZ does not invoice the associates specifically for the use of the clinic, medical equipment, or administrative services. Rather, the associates and Practitioner A enter into an arrangement whereby the associates will assign to Clinic XYZ the fees payable to them by the provincial health insurance plan. Pursuant to this arrangement, Clinic XYZ will forward the associates’ billings to the provincial health insurance plan for the health care services the associates rendered using their billing numbers for this purpose. Clinic XYZ will collect these fees, remit 60% of the fees to the associates and withhold the remaining 40% in exchange for providing the use of the clinic, medical supplies, and administrative services.

Ruling Requested

The 40% of the associates’ fees that Clinic XYZ withholds is not consideration for a taxable supply and accordingly, no GST/HST applies to this portion of the associates’ fees not remitted to the associates.

Ruling Given

Based on the facts set out above, we rule that the 40% portion of the associates’ fees that Clinic XYZ does not remit to the associates is consideration paid by the associates for a taxable supply consisting of the use of the facility and medical equipment and administrative services. This supply by Clinic XYZ is a commercial activity and if Clinic XYZ is registered or is required to be registered (i.e., is not a small supplier), the GST/HST applies to the consideration paid by the associates for this supply (i.e., the portion of the associates’ fees withheld by Clinic XYZ).

While Clinic XYZ collected the fees payable by the provincial health insurance plan, it did not provide health care services to patients. Clinic XYZ is collecting the amount from the provincial health insurance plan on behalf of the associates. The associates and Practitioner A have an agreement that the associates will pay Clinic XYZ for the use of its facilities. Therefore, the amount of the associates’ fees withheld by Clinic XYZ is not consideration for a supply of health care services; rather the amount withheld is consideration for a taxable supply made by Clinic XYZ to the associates.

Definitions and Interpretations


1. Under Part II of Schedule V to the Act, supplies of many health care services are exempt. In general terms, health care services have to promote physical and mental health, and the protection against disease. These services must be performed by health care professionals who are entitled to provide the health care services listed below.

Services Provided by Medical Practitioners and Practitioners

2. A supply of a prescribed diagnostic, treatment or other health care service (e.g., a laboratory testing service) when made on the order of a medical practitioner or practitioner is exempt.

3. A supply made by a medical practitioner of a consultative, diagnostic, treatment or other health care service rendered to an individual (other than a surgical or dental service that is performed for cosmetic purposes and not for medical or reconstructive purposes) is exempt.

4. A supply of any of the following services when rendered to an individual, where the supply is made by a practitioner of the service, is exempt:

(a) optometric services;
(b) chiropractic services;
(c) physiotherapy services;
(d) chiropodic services;
(e) podiatric services;
(f) osteopathic services;
(g) audiological services;
(h) speech-therapy services;
(i) occupational therapy services; and
(j) psychological services when provided by a practitioner who is registered in the Canadian Register of Health Service Providers in Psychology.

5. Only health care services that promote physical and mental health and protection against disease are exempt; other professional services provided by medical practitioners and practitioners (e.g., witness fees for court appearances) are taxable unless exempted by some other provision of the Act. For example, when such supplies are made by hospital authorities that are also charities, the supplies are likely to be exempted by virtue of section 2 of Part VI of Schedule V.

Institutional Health Care Services

6. Institutional health care services made by the operator of a health care facility to a patient or resident of the facility are exempt. [When a medical or prosthesis is installed in a health care facility in conjunction with an exempt institutional health care service, the supply of the prosthesis is also exempt. For example, when medical treatment in a hospital involves the installation of a prosthesis such as an artificial hip, the supply of the prosthesis by the hospital is exempt.] Exempt institutional health care services do not include medical or dental services performed for purely cosmetic purposes.

7. A supply of food and beverages, including the services of a caterer, made to an operator of a health care facility under a contract to provide, on a regular basis, meals for the patients or residents of the facility is exempt.

8. Fees charged by health care facilities to their patients or residents to cover accommodation and other institutional health care services are exempt. However, separate charges for other services, provided on a commercial basis by these facilities, that are not health related (e.g., parking and meals served in a cafeteria to visitors), are taxable.

9. The definition of “health care facility” under Part II (Health Care Services) of Schedule V to the Act includes a facility operated for the purpose of providing residents of the facility who have limited physical or mental capacity for self-supervision and self-care with:

(a) nursing and personal care under the direction or supervision of qualified medical and nursing care staff or other personal and supervisory care (other than domestic services of an ordinary household nature);

(b) assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of residents; and

(c) meals and accommodation.

Cosmetic Surgery for Medical or Reconstructive Purposes

10. Surgical and dental procedures that alter or enhance a patient’s appearance but have no medical or reconstructive purpose, are considered to be cosmetic surgery and, generally, are taxable. Refer to paragraph 6 of this memorandum for more information on this subject.

11. However, cosmetic surgery that is performed for medical or reconstructive reasons is exempt. An example of this type of surgery is skin grafting performed on a burn victim.

12. In certain circumstances, provincial and territorial health insurance plans consider cosmetic surgery to be medically necessary and therefore an insured service. In these cases, the service is exempt. Such surgery is usually evaluated on a case-by-case basis. The criteria for finding cosmetic surgery to be medically necessary include:

(a) the surgery is to alter a significant defect in appearance caused by disease, trauma, or congenital deformity; and
(b) it is recommended by a mental health facility, or
(c) the patient is less than eighteen years of age and the defect is in an area of the body which normally and usually would not be clothed.

Nursing Services

13. A supply of a nursing service provided by a registered nurse, a registered nursing assistant or a licensed practical nurse is exempt where:

(a) the service is provided to an individual in a health care facility or in the individual’s place of residence;
(b) the service is a private-duty nursing service; or
(c) the supply is made to a public sector body (for example, a school authority, a hospital authority or a municipality).

14. Nurses may provide their services directly to patients or they may be hired by employment agencies who specialize in the provision of health care providers. In either case, the charge for their services is exempt.

Dental Hygienist Services

15. A supply of a dental hygienist service is exempt regardless of whether the hygienist is self-employed or is an employee of a management corporation or a medical practitioner.