14 April 2000 Headquarter Letter 7741

CCRA rejected the position that the operator of a medical clinic supplied institutional health care services to its patients on the basis the health care services rendered by the physicians were described in paragraph (h), i.e., services rendered by persons who received remuneration for the services from the operator. Instead, CCRA maintained its position that

"where a corporation or other company, including a medical clinic, contracts for services and property, including the premises, supplies, staff, etc., that it in turn provides to the physicians with respect to their medical practices, and the clinic is entitled under an agreement with the physician to retain a certain percentage of their ... billings, the clinic is providing management services to the physicians. It is our view that the portion of the physicians' ... income that the clinic retains is a charge to the physicians for the clinics' operating and administrative expenses."

"'Case room' is the official term for a delivery or birthing room for maternity patients."

With respect to a medical clinic that retained physicians to provide services to patients, CCRA indicated that notwithstanding that the billings for the services were made by the clinic, it was reasonable to characterize the arrangement as involving the receipt of proceeds by the physicians, with the share of the clinic in the proceeds representing consideration for the provision by it of taxable administration and operational services. Therefore, the portion of the proceeds belonging to the physicians remained exempt pursuant to section 9.