Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
TO:
[Client]
FROM:
Brian Olsen
Senior Rulings Officer
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
Case Number:
115028
Date:
May 20, 2011
Subject:
GST/HST RULING
Entitlement to 83% Rebate - [operator of a nursing home]
This is in response to your referral dated May 27, 2009, regarding the eligibility of [...] [operator of a nursing home] ([the Operator]) to claim an 83% public service body (PSB) rebate as a facility operator under section 259 of the Excise Tax Act in respect of its operations. We apologize for the delay in responding to your enquiry.
HST applies at the rate of 15% in Nova Scotia, 13% in Ontario, New Brunswick, and Newfoundland and Labrador, and 12% in British Columbia. GST applies at the rate of 5% in the remaining provinces and territories.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
BACKGROUND
Based on the information provided in the letters (incl. enclosures) from [...] ([the Firm]) dated [mm/dd/yyyy], and [mm/dd/yyyy], as well as the information available on the website of [the Operator], our understanding of the facts is as follows:
1. [The Operator] is governed by a [...] in conjunction with [...]. You have indicated that it is a division (BN [...]) of [...] ([the Corporation]), and not a separate legal entity.
2. [The Corporation] is a registered charity within the meaning assigned to that expression by subsection 248(1) of the Income Tax Act. [The Corporation] has been designated as a hospital authority for GST/HST purposes by the Minister of National Revenue and is therefore a "public institution" for GST/HST purposes, as that term is defined in subsection 123(1).
3. As a division of [the Corporation], [the Operator] is a public institution for GST/HST purposes. Accordingly, [the Operator] is not a "charity" for GST/HST purposes, as that term is defined in subsection 123(1).
4. [The Operator] operates a nursing home (Home), located at [...] in [City 1], Ontario, in which it provides care and services to residents who have been evaluated by a Community Care Access Centre (CCAC) as requiring 24-hour supervision. CCAC's are the local organizations established by the Ministry of Health and Long-Term Care (MOHLTC) to provide access to government-funded home and community services and long-term care homes in Ontario. With respect to [the Operator's] operation of the Home, [the Corporation] is licensed under the Nursing Homes Act (iFootnote 1) to operate a nursing home.
5. The Home is made up of [...] resident "home areas" with a total of approximately [...] beds. Each home area is self-contained with its own dining room, lounge area, nursing station, laundry room, and activity room. The home area [...] is a secure area that houses residents who suffer from cognitive impairments and who require complex care. The [...] home areas [...] house residents who require various levels of care.
6. The Home contains a treatment room that is equipped with an examination table, dental chair and other relevant dental equipment and medical supplies. The Home uses medical supplies typically found in hospitals including gloves, IV equipment, masks, syringes, bandages and similar items.
7. The Home uses specialized equipment, such as:
- hospital beds with adjustable railings;
- call bells;
- specialized mattresses;
- CAD pumps;
- suctioning pumps;
- oxygen;
- lifts, including hygiene chair lift;
- elevator operation;
- shower chair, portable commodes;
- bladder scanner, [vital] signs monitor, wheelchairs; and
- medication carts.
8. All of the Home's beds are long-term care beds; [the Operator] does not currently offer respite, short stay, or convalescent care at the Home.
9. According to [the Firm's] [...], dated [mm/dd/yyyy] (Technical Analysis):
- All of the residents of the Home suffer from mild to severe dementia, Alzheimer's or other cognitive deficiencies.
- Certain residents require dialysis and chemotherapy. The treatments are provided off-site; however, the attending physician and health care staff are required to monitor and provide other health care services to these residents who traditionally would have remained in hospital
- Certain residents receive IV therapy. The [correspondence] indicates that nursing homes, such as [...] [the Home], have been encouraged to admit residents who require IV therapy in order to open up hospital beds.
- Approximately one third of the Home's residents pass away each year. In the Technical Analysis, [the Firm] suggests that this is an indicator of the degree of high-level health care provided at [...] [the Home], considering the majority of residents who pass away receive palliative care.
10. [The Operator] operates the Home in accordance with the Long Term Care Homes Program Manual (Manual) developed by the MOHLTC. The Manual is the core text governing the operation of long-term care homes in the province of Ontario. It contains policies, standards and norms covering various aspects of the Long Term Care Homes Program, including Resident Care and Financial Policies.
11. [The Operator] receives base funding from the MOHLTC that is calculated using a set per diem rate based on the number of beds occupied. The per diem rate depends on the Level of Care Classification assigned to each resident.
12. Residents of the Home are classified by the MOHLTC using the Resident Classification System for Long-term Care Facilities. This system is based on the Resident Classification System developed by the province of Alberta. Briefly, under this system, each resident is placed into one of seven classification categories "A" through "G" based on an analysis of eight classification indicators. According to the Manual, categories A and B represent light care; C, D, and E represent medium care; and F and G represent heavy care.
13. The eight classification indicators are organized into three domains of care. Tab 0807-01 of the Manual defines the domains of care as:
- Activities of Daily Living (ADL):
• eating;
• toileting;
• transferring; and
• dressing.
- Behaviours of Daily Living (BDL):
• potential for injury to self or others; and
• ineffective coping.
- Continuing Care Level (CCL):
• urinary continence; and
• bowel continence.
14. In addition, the following indicators are considered:
- memory and orientation;
- medications;
- communication;
- therapeutic interventions;
- external demand level (family involvement);
- language;
- marital status;
- current medical diagnosis; and
- rehabilitation.
15. According to the Technical Analysis, the residents at the Home fell into the following classification categories for the year [yyyy]:
Category No. of Residents
A [...]
B [...]
C [...]
D [...]
E [...]
F [...]
G [...]
Total [...]
16. [The Operator] provides a holistic approach to health care. Services are provided by a team of professionals according to a health care plan prepared for each resident.
17. The specific services provided to the residents include:
- nursing care and assistance with feeding, toileting, bathing and dressing;
- continence management and bladder scanning;
- pain management;
- drugs and biologicals;
- physiotherapy;
- occupational therapy;
- palliative care (hydration, suctioning, special medication);
- tube feeding;
- wound care;
- foot care;
- dietary services;
- laboratory services, radiological and other diagnostic services; and
- suctioning for residents with a tracheotomy.
18. In accordance with provincial legislation, each resident at the Home must have a physician. If an incoming resident does not have a physician, [the Operator] will assign one. Residents are entitled to keep their own physician if the physician signs an agreement with [the Operator]; however, residents generally agree to have a physician assigned to them at the Home.
19. The Home has [...] attending physicians, including the medical director (who is also an attending physician). Each physician is onsite at the Home [...] per week. A physician is on call [...] days per week. A copy of the agreement between [the Operator] and the Medical Director was provided for our review.
20. Pursuant to the Attending Physician agreement between the physicians and [the Operator], each resident's physician is responsible for providing all medical orders and directing all medical interventions and treatments. A resident's physician assesses a registrant, orders changes in medications, and requisitions diagnostic testing and treatments.
21. Each physician has [...] in which resident issues are recorded. In addition, any test results, referrals, consultations, or prescriptions will be noted in the [...] for 'review and sign-off'. At the beginning of each shift, the physician will review the [...] and meet with the nurses on each floor for an update regarding each resident.
22. Most residents meet with the Medical Director [...] per week and their own physician [...] when the physician performs "medical rounds". Residents will meet with their physician on a more frequent basis in the case of an emergency, or if the need arises.
23. Each resident of the Home has a medical chart similar to the medical chart found in a hospital. The medical chart contains the resident's care plan, a list of the resident's allergies, laboratory and other test results, consultations, any medications the resident is taking, treatments, referrals, and other related information.
24. The nursing personnel assist the physicians in assessing residents and performing a multitude of duties, such as drawing blood, starting an intravenous, performing glucose scans and giving residents injections and other medications.
25. A nurse will accompany the physician during medical rounds to record any changes, treatment progress, medical requests or information relating to each resident. During a shift-change, the nursing staff will discuss any issues or events pertaining to residents that occurred during their shift. These discussions are documented and brought to the attention of the physician.
26. [The Operator] is not registered for GST/HST purposes, but claims a 50% public service body (PSB) rebate on expenses incurred to operate the Home.
27. [The Operator] is a Canadian health organization accredited by Accreditation Canada (formerly the Canadian Council on Health Services Accreditation). Accreditation Canada is a not-for-profit, independent organization that provides health organizations with an external peer review to assess the quality of their services based on standards of excellence.
OPINION REQUESTED
[The Firm] submits that [the Operator] is a facility operator for purposes of claiming the public service body (PSB) rebate and, as such, [the Operator] is entitled to claim an 83% PSB rebate of the GST for non-creditable tax charged [...], to the extent that the non-creditable tax charged was incurred for the purpose of making facility supplies. You would like our opinion on this matter.
OPINION GIVEN
Based on our review of the documentation provided, and our discussions with [[the Firm], it is our view that [the Operator], a hospital authority, is not entitled to claim an 83% PSB rebate (iiFootnote 2) of the non-creditable tax charged in respect of its operation of the Home as the Home is not a public hospital or a qualifying facility where facility supplies are made.
COMMENTS
To be eligible for an 83% PSB rebate available under section 259, an entity must be a "hospital authority", a "facility operator" or an "external supplier".
A "hospital authority" is defined in subsection 123(1) as an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority for GST/HST purposes.
A "facility operator" is defined in subsection 259(1) to mean "a charity, a public institution or a qualifying non-profit organization (other than a hospital authority), that operates a qualifying facility". An "external supplier" is defined in subsection 259(1) to mean "a charity, a public institution or a qualifying non-profit organization (other than a hospital authority or a facility operator), that makes ancillary supplies, facility supplies or home medical supplies".
As a division of [the Corporation], an entity that has been designated as a hospital authority for GST/HST purposes, [the Operator] is not a "facility operator" or an "external supplier" as the definition for each of these terms specifically excludes a hospital authority.
Generally speaking, section 259 provides that a hospital authority is entitled to claim an 83% PSB rebate of non-creditable tax charged, to the extent that it intends to consume, use or supply property or services in the course of operating a public hospital, operating a qualifying facility for use in making facility supplies, or making facility supplies, ancillary supplies or home medical supplies.
Operating a public hospital
GST/HST Policy Statement P-245 Determination of "...activities engaged in by the person in the course of operating a public hospital" for purposes of the 83% public service body rebate for hospital authorities (P-245) describes the criteria that must be met in order for a particular facility to be considered a public hospital for GST/HST purposes. P-245 also explains which activities carried on by a hospital authority constitute "activities engaged in by the person in the course of operating a public hospital".
In accordance with Policy P-245, a facility must have all of the following characteristics in order to be considered a public hospital:
• The services of medical practitioners, nursing staff and allied health professionals are available at all times to carry out the examination and diagnosis of patients and the provision of treatment and care.
• The services of health care personnel and health care equipment are utilized for the provision of health care services to the general public. This includes accommodation for laboratory, radiological and other diagnostic services, the administration of drugs, the use of operating rooms, case rooms, medical or surgical supplies and equipment.
• Inpatient beds and services are provided. Patients are assigned a bed in order to receive diagnostic services, medical treatment and care. Inpatient services are also provided in the public hospital to ensure the patient's necessities of life and comfort, such as nursing services on a 24-hour basis, food services and laundry services.
• Operational and capital funding is received from provincial or territorial governments for the provision of publicly insured inpatient and outpatient hospital services.
• The hospital authority operates the public hospital under the laws of provincial or territorial governments respecting hospitals.
The Home, a long-term care facility, is not a public hospital for GST/HST purposes as the facility does not meet all of the criteria described in P-245. In that regard, any entitlement to an 83% PSB rebate that [the Corporation] may have with respect to its operation of a public hospital does not extend to [the Operator's] operation of the Home.
Operating a qualifying facility for use in making facility supplies
As indicated above, a hospital authority is also entitled to an 83% PSB rebate to the extent that it intends to consume, use or supply property or services in the course of operating a qualifying facility for use in making facility supplies. Therefore, it must be determined whether the Home is a "qualifying facility", as that term is defined in subsection 259(2.1).
Subsection 259(2.1) provides that a facility, or part of a facility, other than a public hospital, is a qualifying facility for a fiscal year, or any part of a fiscal year, of the operator if:
(a) supplies of services that are ordinarily rendered during that fiscal year or part to the public at the facility or part would be facility supplies if the references in the definition of "facility supply" in subsection 259(1) to "public hospital or qualifying facility" were references to the facility or part;
(b) an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part; and
(c) an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.
Facility supply
Subsection 259(1) defines the term "facility supply" as an exempt supply (other than a prescribed supply) of property or a service in respect of which
(a) the property is made available, or the service is rendered, to an individual at a public hospital or qualifying facility as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, which process
(i) is undertaken in whole or in part at the public hospital or qualifying facility,
(ii) is reasonably expected to take place under the active direction or supervision, or with the active involvement, of
(A) a physician acting in the course of the practise of medicine,
(B) a midwife acting in the course of the practise of midwifery,
(C) if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner acting in the course of the practise of a nurse practitioner, or
(D) a prescribed person acting in prescribed circumstances, and
(iii) in the case of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, requires or is reasonably expected to require that
(A) a registered nurse be at the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,
(B) a physician or, if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner, be at, or be on-call to attend at, the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,
(C) throughout the process, the individual be subject to medical management and receive a range of therapeutic health care services that includes registered nursing care, and
(D) it not be the case that all or substantially all of each calendar day or part during which the individual stays at the public hospital or qualifying facility is time during which the individual does not receive therapeutic health care services referred to in clause (C), and
(b) if the supplier does not operate the public hospital or qualifying facility, an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.
A "physician" is defined in subsection 259(1) of the ETA as a person who is entitled under the laws of a province to practise the profession of medicine.
The definition of "facility supply" in subsection 259(1) is to be applied on a supply-by-supply basis. In order for a particular supply to be a "facility supply" as defined in subsection 259(1), the supply must first be an exempt supply (other than a prescribed supply). Exempt supplies are found in Schedule V to the ETA.
Section 2 of Part VI of Schedule V exempts a supply of personal property or a service made by a public institution, unless the supply is specifically excluded under paragraphs (a) to (p) of that section. Given that [the Operator] is a public institution, section 2 of Part VI would generally exempt supplies of personal property or services made by [the Operator].
Section 2 of Part II of Schedule V may also apply to exempt certain supplies of property or services made by [the Operator]. Section 2, as it read [...], applied to a supply of an institutional health care service made by the operator of a health care facility if the service was rendered to a patient or resident of the facility, but not including a supply of property or a service that was made for cosmetic purposes and not for medical or reconstructive purposes. The terms "institutional health care service" and "health care facility" are defined in section 1 of Part II of Schedule V.
Paragraph (a), subparagraphs (a)(i) and (a)(ii) and clause (a)(ii)(A) of the definition of "facility supply" in subsection 259(1) further require that the exempt supply of property be made available, or the exempt supply of a service be rendered, at a public hospital or qualifying facility and be part of a medically necessary process of health care for an individual. This process must be undertaken in whole or in part at the public hospital or qualifying facility and reasonably be expected to take place under the active direction or supervision, or with the active involvement, of a physician acting in the course of practise of medicine (or in certain circumstances, a midwife, a nurse practitioner or a prescribed person in prescribed circumstances).
In circumstances where chronic care requires the individual to stay overnight at the public hospital or qualifying facility, the definition of "facility supply" in subsection 259(1) provides that the process must require, or reasonably be expected to require, the additional elements referred to in clauses (a)(iii)(A) to (D) of the definition of "facility supply". That is, a registered nurse must be at the public hospital or qualifying facility at all times when the individual is there; a physician or, if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner, must be at, or be on-call to attend at, the public hospital or qualifying facility at all times when the individual is there; the individual must be subject to medical management and receive a range of therapeutic health care services that include registered nursing care, for at least 10% of each day while the individual is at the public hospital or qualifying facility.
A supply that does not meet all of the above requirements is not a facility supply for purposes of section 259.
Part of a medically necessary process of health care for an individual
The ETA does not define the term "process"; therefore, we can consider the common or ordinary meaning of the term, keeping in mind the context in which it appears. In general terms, a process is a series of actions, operations or events that are undertaken in order to achieve a particular result or that are conducing to an end. A process may take place over a short period of time (as would typically be the case with a specific treatment or health care procedure) or, alternatively, a process may encompass an ongoing series of actions, operations or events that take place over a significant period of time. For purposes of the definition of "facility supply" in subsection 259(1), the expression "medically necessary process" generally refers to the series of medically necessary actions, operations or events that are undertaken for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care.
In the context of a long-term care facility, the "medically necessary process of health care" will generally be the series of actions, operations or events that:
• are in respect of a particular resident at the long-term care facility;
• have been determined to be medically necessary by a physician acting in the course of the practise of medicine; and
• are undertaken for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care.
The medically necessary process of health care for a particular resident of a long-term care facility may be identified with reference to a care plan, progress notes, or similar records maintained by a physician who attends to the resident at the facility.
In addition to the requirement that an exempt supply be part of a medically necessary process of health care, in order for a particular supply to qualify as a facility supply, the medically necessary process of health care must be reasonably expected to take place under the active direction or supervision, or with the active involvement, of a physician acting in the course of the practise of medicine (or, in certain circumstances, a midwife, a nurse practitioner or a prescribed person in prescribed circumstances).
Active direction or supervision, or with the active involvement, of a physician
The term "active" is not defined in the ETA, nor is the phrase "active direction or supervision, or with the active involvement, of a physician". The meaning of the phrase "active direction or supervision, or with the active involvement, of a physician" can be ascertained by considering the grammatical and ordinary meaning of the term "active" in the context in which it appears, and by considering the legislative purpose of the definition of "facility supply", as expressed by the Department of Finance.
With respect to the phrase "active direction or supervision, or with the active involvement, of a physician", [the Firm] suggests in its Technical Analysis that "the terms and phrases in this provision should be read in their grammatical and ordinary sense" and refers to "Driedger Construction of Statutes, 1974" (iiiFootnote 3) . Presumably, this is a reference to the modern principle of statutory interpretation (also known as the modern approach or modern rule), initially described by Elmer Driedger in The Construction of Statutes, First Edition as follows:
To-day there is only one principle or approach, namely, the words of an Act are to be read in their entire context in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act and the intention of Parliament. (ivFootnote 4)
The modern principle is supported by numerous Supreme Court of Canada (SCC) decisions, including Canada Trustco Mortgage Co. v. Canada (vFootnote 5) , Placer Dome Canada Ltd. v. Ontario (Minister of Finance) (viFootnote 6) and Lipson v. Canada (viiFootnote 7) . In Canada Trustco Mortgage Co., after acknowledging the modern principle, McLachlin C.J. adds at para. 10 and 11 that:
The interpretation of a statutory provision must be made according to a textual, contextual and purposive analysis to find a meaning that is harmonious with the Act as a whole. When the words of a provision are precise and unequivocal, the ordinary meaning of the words play a dominant role in the interpretative process. On the other hand, where the words can support more than one reasonable meaning, the ordinary meaning of the words plays a lesser role
...
There is no doubt today that all statutes [...] must be interpreted in a textual, contextual and purposive way.
At para. 47 of Canada Trustco Mortgage Co., McLachlin C.J. quotes P.W. Hogg and
J.E. Magee, Principles of Canadian Income Tax Law (4th ed. 2002):
After all, language can never be interpreted independently of its context, and legislative purpose is part of the context. It would seem to follow that consideration of legislative purpose may not only resolve patent ambiguity, but may, on occasion, reveal ambiguity in apparently plain language.
Similarly, in Placer Dome Canada Ltd., the SCC elaborates on the application of the modern principle when, after suggesting that it applies to taxation statutes no less than it does to other statutes, Lebel J. states (referring to Canada Trustco Mortgage Co.):
[B]ecause of the degree of precision and detail characteristic of many tax provisions, a greater emphasis has often been placed on textual interpretation where taxation statutes are concerned
...
Where the words of a statute are precise and unequivocal, those words will play a dominant role in the interpretive process.
On the other hand, where the words of a statute give rise to more than one reasonable interpretation, the ordinary meaning of words will play a lesser role, and greater recourse to the context and purpose of the Act may be necessary
...
[E]ven where the meaning of particular provisions may not appear to be ambiguous at first glance, statutory context and purpose may reveal or resolve latent ambiguities.
The application of a textual, contextual and purposive approach to statutory interpretation, as described in Canada Trustco Mortgage Co. and Placer Dome Canada Ltd., is further supported by Lipson v. Canada, in which the SCC states:
In determining the purpose of the relevant provision(s) of the Act, a court must take a unified textual, contextual and purposive approach to statutory interpretation...This approach is, of course, not unique to the GAAR... the approach to statutory interpretation is the same for provisions of the ITA as for those of any other statute: it is necessary "to determine the intention of the legislator by considering the text, context and purpose of the provisions at issue".
In our view, the meaning of the phrase "active direction or supervision, or with the active involvement, of a physician" can be ascertained by considering the grammatical or ordinary sense of the term "active" in the context of the provision in which it appears, while also considering the intent of the legislation.
Given that the term "active" is not defined by the legislation, we can consider the ordinary meaning of the term, keeping in mind the context in which it appears. One way to establish the common or ordinary meaning of a particular term is to consider the dictionary definition of the term. In that regard, the following dictionary definitions were reviewed:
• The Concise Oxford Dictionary, 9th Edition
consisting in or marked by action; energetic; diligent
• Dorland's Medical Dictionary, 30th Edition
characterized by action; not passive; not expectant.
• Merriam-Webster Online Dictionary
characterized by action rather than by contemplation or speculation
quick in physical movement: lively
marked by vigorous activity: busy
• Cambridge Online Dictionary
active (busy/involved)
busy with or ready to perform a particular activity
physically/mentally active
She's very active in (= involved in) local politics.
The dictionary definitions above suggest that the term "active" is generally understood to describe something that is characterized by action or marked by activity. When looked upon collectively, synonyms of the term "active", which include "busy", "involved", "lively" and "vigorous", exemplify what may be considered an ordinary meaning of the term. It follows that a facility supply must be part of a process that is reasonably expected to take place under direction or supervision, or with involvement, that is characterized by the action, or marked by the activity, of a physician. The direction, supervision or involvement of the physician must not be passive or inactive, and must be such that it may reasonably be described by the synonyms busy, involved, lively or vigorous, when these synonyms are considered in their cognate sense.
An analysis of the grammatical and ordinary meaning of the term "active" as it appears in the phrase "active direction or supervision, or with the active involvement, of a physician" must also consider the presumption against tautology, which is described in Sullivan on the Construction of Statutes, Fifth Edition (Sullivan) as follows:
It is presumed that the legislature avoids superfluous or meaningless words, that it does not pointlessly repeat itself or speak in vain. Every word in a statute is presumed to make sense and to have a specific role to play in advancing the legislative purpose.
...
[E]very word and provision found in a statute is supposed to have a meaning and a function. For this reason courts should avoid, as much as possible, adopting interpretations that would render any portion of a statute meaningless or pointless or redundant. (viiiFootnote 8)
In accordance with the presumption against tautology, the phrase "active direction or supervision, or with the active involvement, of a physician" must be interpreted such that the term "active" has a significant and effective meaning that serves to advance the legislative purpose of the provision. Likewise, the meaning assigned to the term "active" must effectively cause the phrase "under the active direction or supervision, or with the active involvement, of a physician" to contemplate a scenario that is beyond, or, in this case, is more restrictive than, a scenario that would be contemplated by the phrase if the term "active" were absent.
The term "active" is used in the definition of "facility supply" in subsection 259(1) in order to advance a legislative purpose that is expressed, in part, through the requirement that in order for a facility supply to exist, there must be a medically necessary process of health care that is not merely under the direction or supervision, or with the involvement, of a physician, but rather is under the "active direction or supervision", or with the "active involvement", of a physician. In that regard, a number of Department of Finance documents pertaining to the definition of "facility supply" in subsection 259(1) were consulted.
In the 2003 Federal Budget document, 2003 Budget Plan, the Department of Finance announced its intent to review the GST/HST rebate available for health care:
In recent years the restructuring of health care delivery has resulted in some services formerly provided in hospitals being performed in other non-profit institutions, which are entitled to the lesser rebate of GST/HST. The Department of Finance is undertaking discussions with the provinces and territories to assess and improve the current application of the health care rebate with respect to health care functions that are moved outside of hospitals.
The Department of Finance introduced the expansion of the 83% rebate in the 2005 Federal Budget document, 2005 Budget Plan Annex 8 Tax Measures: Supplementary Information:
Further to extensive consultations with provincial and territorial health and finance authorities, the budget proposes to extend, effective January 1, 2005, the application of the 83-per-cent rebate to eligible charities and non-profit organizations that provide health care services similar to those traditionally performed in hospitals.
The statements made by the Department of Finance in the 2003 and 2005 Federal Budget documents indicate that the expansion of the 83% PSB rebate was intended to apply to qualifying facilities and entities that provide a high level of care similar to that which has traditionally been provided in hospitals. It is our understanding that it was not the intent of the Department of Finance to make the 83% PSB rebate available to nursing homes and similar long-term care operations that do not make supplies of health care services similar to those traditionally provided in hospitals. This intent is effectively expressed in the legislation through the use of the term "active" in the phrase "active direction or supervision, or with the active involvement, of a physician", as well as the other requirements of the definition of "facility supply" in subsection 259(1).
Accordingly, the 83% PSB rebate is limited to facilities where physicians are actively involved in the medically necessary process of health care by diagnosing and treating injuries, illnesses, or disabilities. These types of facilities include, for example, those that offer a high level of therapeutic care, cancer clinics, day surgery clinics and community health centres that render primary care services.
In the Technical Analysis, [the Firm] refers to the ordinary meaning of the term "active":
The ordinary meaning of the word "active" throughout various dictionaries has common links. "Active" includes action, operation, activity, work and function. "Active" also causes change, action or motion. The most common definition of "active" throughout all dictionaries is causing change. Therefore, provided a physician is causing change through "direction", "supervision", or "involvement", the physician's "direction", "supervision", or involvement will be
"active". (ixFootnote 9)
The Technical Analysis does not elaborate on what is meant by the expression "causing change" or the phrase "that causes change". It is not clear how the term "change" is to be interpreted in this context. The expression "causing change" and the phrase "that causes change" suggest that it is necessary to consider the extent to which the direction, supervision or involvement can be said to result in some sort of change. This 'results-based' or 'output-based' interpretation of the term "active" and the phrase "active direction or supervision, or with the active involvement, of a physician" does not appear to be supported by the legislation.
It has also been suggested that the term "active" can be defined based on the number of visits to a particular facility by a physician (i.e., a test based on the frequency of physician visits). In the context of a long-term care facility, such a quantitative approach may provide an indication as to whether the direction, supervision or involvement of a physician could, potentially, be described as "active"; however, an approach of this type is by no means conclusive. The approach must also consider the nature of the visits and the level of care required by, and provided to, the individual who is subject to the visits.
[The Operator] and the Home
[The Corporation] holds a nursing home licence (Licence Number [...]) issued under the Ontario Nursing Homes Act (NHA) to establish, operate and maintain a nursing home at [...] [City 1], Ontario.
The NHA governs the establishment and operation of nursing homes located in the Province of Ontario. A "nursing home" is defined in the NHA as "any premises maintained and operated for persons requiring nursing care or in which such care is provided to two or more unrelated persons..." Subsection 4(1) of the NHA provides that no person shall establish, operate or maintain a nursing home except under the authority of a licence issued by the Director (i.e., an officer of the MOHLTC) under the NHA.
The NHA and Regulation 832 to the NHA set out the rules governing the operation (e.g., resident admission eligibility; resident payment; qualifications, powers and duties of staff) and funding (e.g., subsidy calculations) in respect of a nursing home. Subsection 50(1) of Regulation 832 requires the licensee of a nursing home to appoint a physician as a medical director for the home. Regulation 832 also requires the administrator of a nursing home to retain a physician for a resident who does not have his/her own physician.
Under Regulation 832, a physician (or a registered nurse in the extended class) retained by either a resident or the licensee for a resident must a) visit the resident and review the resident's medication and diet at least once every three months; b) make an annual physical examination of the resident and file with the administrator a written report of the examination and his/her findings with respect to the examination; and c) make any additional attendances as the resident's condition requires. A nursing home licensee is also required to have a physician on call to provide emergency services where a resident's physician or substitute physician is not available. A licensee is also required to ensure that twenty-four hour nursing service is available in the home. At least one registered nurse who is a member of the regular nursing staff of the nursing home must be on duty and present at all times.
In addition to the NHA and Regulation 832, the policies of the MOHLTC described in the Long-Term Care Homes Program Manual (Manual) apply to all long-term care homes operating in the Province of Ontario. As the operator of a nursing home, [the Operator] is required to abide with the policies, procedures, standards and safeguards described in the Manual.
Tab 1012-01 requires an attending physician to assess, plan, implement and evaluate the residents' medical care and participate in the interdisciplinary approach to care. Tab 1012-02 of the Manual requires that a medical director be appointed by the administrator of a long-term care home and where a resident does not have their own physician, an attending physician must be appointed to them on the advice of the medical director. A "medical director" is defined as "a physician who provides the clinical and administrative direction for the medical services of the facility. The medical director may also be the attending physician". Residents' medical care is described in Tab 1012-02 Manual as, but is not limited to, the following:
• Admission and annual assessment
• TB surveillance
• Writing medical orders
• Medication reviews
• Medical charting and documentation
• Providing/arranging for 24-hour medical coverage
• Clinical care (e.g., maintenance of skin integrity; management of falls, incontinence)
The nursing and personal care services provided to residents of a long-term care facility are described in Tab 0801-01 of the Manual and are included in the charge for basic accommodation, as described in Tab 0608-01.
Information under the heading "Medical Care" in Tab 0608-01 indicates that residents of a long-term care facility may continue to have their personal physicians take care of them. Where a resident does not have a personal physician, Regulation 832 requires that a nursing home appoint a physician to attend and prescribe medication or treatment for the resident. Tab 0903-01 provides that each resident's plan shall be reviewed, at least quarterly, and where necessary revised, by the physician, nursing staff, the dietician or food service supervisor or other care team members as appropriate.
The physician involvement at the Home is consistent with the requirements imposed on [the Operator] by the Nursing Homes Act and the Manual.
In the Technical Analysis, [the Firm] submits that the physicians at the Home provide the following "active direction":
• Examining patients and establishing a care plan for each resident, to be implemented by a team of health care providers;
• Monitoring the health care of each resident;
• Requisitioning medical orders and directing medical interventions and treatments;
• Ordering changes in medications;
• Requesting diagnostic tests; and
• Deciding on transfer of residents to other care facilities.
[The Firm] also submits that the physicians at the Home provide the following "active supervision":
• Reviewing the [...] that contains resident issues and discussing issues with the health care team;
• Discussing resident issues with nursing staff on a continuous basis;
• Reviewing each resident's care plan;
• Evaluating physical and psychological assessments;
• Responding to medical concerns identified by the health care team; and
• Reviewing and signing verbal orders/directions and laboratory results.
With respect to the physician involvement, [the Firm] suggests that the "active direction" and "active supervision" discussed above indicates that the physician is "actively involved". [The Firm] goes on to suggest that there is further support that there is "active involvement" of a physician based on the fact that physicians are required to:
• Be available at all times;
• Meet with residents on a [...] basis, or on a more frequent or as-needed basis;
• Document each consultation and review resident progress notes during each shift;
• Participate in family conferences regarding the care of each resident;
• Participate in geriatric training;
• Conduct physical assessments and determine treatment based on the assessment;
• Monitor and review resident diagnoses; and
• Conduct mortality reviews.
Further, in a letter dated [mm/dd/yyyy], [the Firm] suggests that residents of the Home experience multiple health care issues that require different medical interventions. A small sample of [...] documents were included with the letter. In addition, one resident's Care Plan was submitted for our review. In the [mm/dd/yyyy] letter, [the Firm] suggests that the sample provided indicates that the residents require regular and continuous supervision.
We note that the documentation submitted by [the Firm] was appropriately sanitized such that any information that could identify a resident was removed.
Based on the information provided by [the Firm], as well as the requirements set out in the Nursing Homes Act and the Manual, it is evident that physicians are involved in the health care of the residents at the Home. However, the information provided does not demonstrate that the level of physician involvement is to the same extent as would traditionally be found in a hospital setting, as contemplated by the phrase "under the active direction or supervision, or with the active involvement, of a physician" in subparagraph (a)(ii) of the definition of "facility supply".
In order to conclude that a particular supply is a facility supply, it is not sufficient that there be some active direction or supervision, or some active involvement, of a physician in a medically necessary process of which that supply is a part; rather, we must be able to conclude that, when looked upon in its entirety, it is reasonably expected that a medically necessary process of health care takes place under the active direction or supervision, or with the active involvement, of a physician. Further, with respect to a medically necessary process of health care that is purported to take place under the active direction or supervision, or with the active involvement, of a physician, one would expect that the physician's role in the process would be readily identifiable, even self-evident, and not merely passive or incidental to the process.
In the context of an exempt supply made by [the Operator] at the Home, we can consider a medically necessary process of health care for a particular resident to encompass the medically necessary actions, operations or events that are undertaken for the purpose of maintaining the resident's health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care to the resident. This medically necessary process is undertaken in accordance with the Nursing Homes Act, the Manual and the policies in place at the Home and is reflected in the documentation provided by [the Firm], as described above.
It is our position that the medically necessary process of health care for residents at the Home, when looked upon in its entirety, does not take place under physician direction or supervision, or with physician involvement, that is "active" when the meaning of that term is ascertained by considering the grammatical and ordinary meaning of the term "active" in the context in which it appears, and by considering the legislative purpose of the definition of "facility supply", as discussed above.
A review of the information provided indicates that, generally speaking, the physicians at the Home visit the residents according to a predetermined schedule to perform routine observations and basic 'check-ups', and to (again, generally speaking) review the records maintained by the nursing and support staff at the Home. In certain circumstances they may visit on an as-needed basis; however, as illustrated by the [...], this does not appear to be the norm. In fact, there were often gaps of [...] weeks or more between the dates shown in the [...].
We note that administrative or managerial services supplied to [the Operator] by a physician acting in the capacity as Medical Director do not demonstrate the existence of a facility supply as these services are not in respect of a medically necessary process of health care for a particular individual.
The vast majority of care services provided at the Home are rendered by the nursing and support staff, with minimal instruction, management or supervision by a physician. In that regard, the items listed in the Technical Analysis as evidence that the health care provided at the Home is under the "active direction", "active supervision" or "active involvement" of a physician do not sufficiently demonstrate that the "active direction or supervision, or with the active involvement, of a physician" criteria is met. The health care needs of the residents of the Home are not such that they require the active direction, supervision or involvement of a physician and, accordingly, such involvement has not been demonstrated.
Based on the information provided, the direction, supervision or involvement of the physicians at the Home is not 'characterized by action' or 'marked by activity' as contemplated by the use of the term "active" in the phrase "active direction or supervision, or with the active involvement, of a physician". Similarly, the physician direction, supervision, or involvement would not be described by the synonyms of the term "active" (eg., busy, involved, lively, vigorous) when these synonyms are considered collectively.
That said, in accordance with a textual, contextual and purposive approach to interpreting the term "active" in the context of the phrase "active direction or supervision, or with the active involvement, of a physician", it can be argued that the grammatical or ordinary meaning of the term "active" will play a lesser role, and a greater emphasis can be placed upon the context and the purpose of the legislation.
The level of care provided at the Home is akin to that which is traditionally provided in a nursing home or similar long-term care facility. While it is acknowledged that the level of care required by an elderly individual who resides in a nursing home, such as the Home, can be higher than that of an elderly individual living in their own home in the community, there is nothing in the information provided by [the Firm] to suggest that the extent of the physician direction, supervision or involvement is similar to that which is found in a hospital setting. As noted above, it was not the intent of the Department of Finance to extend the application of the 83% PSB rebate to all facilities providing health care services, but rather, only to those facilities that provide health care similar to that traditionally provided in hospitals.
If we were to accept the conclusion that [the Firm] has suggested, namely, that "supplies made by [the Operator] are under the "active direction, supervision, or involvement" of a physician" (xFootnote 10) , it would result in an interpretation of the phrase "under the active direction or supervision, or with the active involvement, of a physician" that renders the term "active" as superfluous or insignificant (and therefore violates the principle against tautology), and is contrary to the purpose of the legislative provisions that extend the application of the 83% PSB rebate.
To summarize, any exempt supplies that [the Operator] may make as part of a medically necessary process of health care for a resident at the Home are not reasonably expected to take place under the active direction or supervision, or with the active involvement, of a physician; therefore, subparagraph (a)(ii) of the definition of "facility supply" is not met. Consequently, the Home is not a "qualifying facility" as defined in subsection 259(2.1).
Given that [the Operator] does not make facility supplies at the Home and, therefore, does not meet the requirements of paragraph 259(2.1)(a), the other requirements of subsection 259(2.1) have not been considered.
Making facility supplies, ancillary supplies or home medical supplies
An 83% PSB rebate is also available to a hospital authority to the extent that it makes facility supplies, ancillary supplies or home medical supplies. The definition of "facility supply" was considered above as part of our analysis of the term "qualifying facility". The terms "ancillary supply" and "home medical supply" are defined in subsection 259(1).
Pursuant to subsection 259(1) an "ancillary supply" means
(a) an exempt supply of a service of organizing or coordinating the making of facility supplies or home medical supplies in respect of which supply an amount, other than a nominal amount, is paid or payable to the supplier as medical funding, or
(b) the portion of an exempt supply (other than a facility supply, a home medical supply or a prescribed supply) of property or a service (other than a financial service) that represents the extent to which the property or service is, or is reasonably expected to be, consumed or used for making a facility supply and in respect of which portion an amount, other than a nominal amount, is paid or payable to the supplier as medical funding.
Subsection 259(1) defines a "home medical supply" to mean an exempt supply (other than a facility supply or a prescribed supply) of property or a service
(a) that is made
(i) as part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative health care, and
(ii) after a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances, has identified or confirmed that it is appropriate for the process to take place at the individual's place of residence or lodging (other than a public hospital or a qualifying facility),
(b) in respect of which the property or service supplied is made available or rendered to the individual at the individual's place of residence or lodging (other than a public hospital or a qualifying facility), on the authorization of a person who is responsible for coordinating the process and under circumstances in which it is reasonable to expect that the person will carry out that responsibility in consultation with, or with ongoing reference to instructions for the process given by, a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances,
(c) all or substantially all of which is of property or a service other than meals, accommodation, domestic services of an ordinary household nature, assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of the individual, and
(d) in respect of which an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.
There is no indication in the facts presented above that [the Operator] is making facility supplies through another supplier's facility, or ancillary supplies or home medical supplies; therefore, we have not considered its eligibility for an 83% PSB rebate in respect of these supplies.
In summary, with respect to its operation of the Home, [the Operator] is not operating a public hospital or operating a qualifying facility for use in making facility supplies. Accordingly, [the Operator] does not qualify for an 83% PSB rebate for non-creditable tax charged in respect of its operation of the Home.
However, as a public institution, [the Operator] is entitled to claim the 50% rebate of the GST and the federal part of the HST and, effective July 1, 2010, [the Operator], as a public institution resident in Ontario, may also be entitled to an 82% PSB rebate of the provincial part of the HST with respect to its operation of the Home, subject to the rules for that particular rebate.
If you require clarification with respect to any of the issues discussed in this memorandum, please call me at 613-954-4289.
Yours truly,
Brian Olsen, CGA
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
i 1 The Nursing Homes Act was repealed, effective July 1, 2010, by the Statutes of Ontario, 2007, chapter 8, ss. 194, 232(2). Long-term care homes now fall under the authority of the Long-Term Care Homes Act, 2007.
ii 2 As of July 1, 2010, in addition to an 83% PSB Rebate of the GST and the federal part of the HST, a hospital authority resident in Ontario is also eligible to claim an 87% PSB rebate of the provincial part of the HST for non-creditable tax charged in respect of property or services to the extent that the property or services are for consumption, use or supply in activities engaged in by the person in the course of operating a public hospital, operating a qualifying facility for use in making facility supplies, or of making facility supplies, ancillary supplies or home medical supplies. Any reference herein to an "83% PSB Rebate" includes a reference to an 87% PSB rebate of the provincial part of the HST, where applicable.
iii 3 [The Firm's] Technical Analysis dated [mm/dd/yyyy]. Page 20.
iv 4 The Construction of Statutes, E.A. Driedger, Butterworths, 1974. Page 67.
v 5 Canada Trustco Mortgage Co. v. Canada [2005] 2 S.C.R. 601, 2005 SCC 54
vi 6 Placer Dome Canada Ltd. v. Ontario (Minister of Finance), [2006] 1 S.C.R. 715, 2006 SCC 20
vii 7 Lipson v. Canada, 2009 SCC 1, [2009] 1 S.C.R. 3
viii 8 Sullivan on the Construction of Statutes, Fifth Edition, Ruth Sullivan, LexisNexis, 2008. Page 210.
ix 9 [The Firm's] Technical Analysis dated [mm/dd/yyyy]. Page 21.
x 10 Ibid. Page 19.
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