25 September 2006 GST/HST Interpretation 47585 - Independent Medical Examinations and Other Independent Assessments

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

XXXXX

This is in reply to your letter XXXXX and the letter XXXXX from XXXXX, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supplies made by your client XXXXX.

First, however, further to our telephone conversation XXXXX, the Canada Revenue Agency ("CRA") has just released Policy Statement P-248, The application of the GST/HST to the supply of an independent medical examination ("IME") and to other independent assessments. This policy statement can be found under the GST/HST Policy Statements link at (http://www.cra-arc.gc.ca/menu/GTPP_200-e.html) on the CRA Web site. The policy represents a change in the CRA's position with respect to the application of the GST/HST to sections 5 and 7 of Part II of Schedule V to the Excise Tax Act (the "ETA") and it describes the circumstances under which IMEs and other independent assessments will be exempt from the GST/HST under these provisions as well as section 2 of that Part.

The effective date of the policy is June 8, 2001, which is the date the Tax Court of Canada issued its decision regarding Riverfront Medical Evaluations Ltd. v. Canada ("Riverfront"). The policy is based on careful consideration of the Tax Court of Canada and Federal Court of Appeal decisions in Riverfront, the exemptions in the ETA that apply to supplies made by medical practitioners and practitioners, as well as the information provided by stakeholders on the issue.

In situations where the CRA has issued specific interpretations that differ from this policy, the policy should be applied to the affected person(s) on the earlier of the day the CRA has made the public aware of this policy or informs the person(s) in writing of the application of the tax to their transaction(s). However, the CRA may apply the policy retroactively, where this would be beneficial to a person and the person asks that the policy be applied retroactively.

Effective July 1, 2006, the rate of the GST has been reduced from 7% to 6% and the rate of the HST from 15% to 14%. The new rates apply to supplies for which the GST/HST is paid on or after July 1, 2006, without having become payable before that date. Specific transitional rules apply to certain supplies, for example, real property. You may refer to Reduction in the Rate of the GST/HST - Questions and Answers at (http://www.cra-arc.gc.ca/agency/budget/2006/gstrateqa-e.html) for more information on the transitional rules for the reduction of the GST/HST rate.

Now that the policy has been released, we are pleased to provide the rulings you requested. On the basis of your submission, our understanding of the facts of the supply in question is set out below.

All legislative references are to the ETA and the regulations therein, unless otherwise specified.

Statement of Facts

Our understanding of the facts is based on the above-noted letters and copies of the following documents:

•   XXXXX.

Facts

1. XXXXX is a registrant for GST/HST purposes XXXXX.

2. XXXXX business activity is to supply written reports and expert opinions about insurance claimants to its clients. Claimants are described as persons making a legal claim against an insurance company. Claimants are also referred to as "plaintiffs", which are described as persons advancing a lawsuit against another individual or insurance company. XXXXX clients are insurance adjusters, insurance examiners, and lawyers who refer cases to XXXXX for review or to make appointments for insurance claimants and plaintiffs.

3. XXXXX categorizes the reports as independent medical examination ("IME") reports, independent dental examination ("IDE") reports, functional capacity evaluation ("FCE") reports, independent psychological assessment ("IPA") reports, and independent chart review ("ICR") reports.

4. To supply these reports to its clients, XXXXX subcontracts with physiotherapists, kinesiologists, and occupational therapists for FCE reports; physicians such as orthopaedic surgeons, physiatrists, psychiatrists, rheumatologists, cardiologists, ophthalmologists, and laryngologists for IME reports; and dentists for IDE reports.

5. The subcontractors are collectively referred to by XXXXX as "service providers". You advised that the service providers are independent contractors, not employees of XXXXX. XXXXX maintains a roster of service providers to contact for these reports. The service providers advise XXXXX of the dates and times they are available to provide assessments and reports.

6. Upon receiving a request from a client for an assessment and report of a claimant, XXXXX administrative personnel or its medical director reviews the documentation available and, based on the request, recommends to the client a particular service provider. XXXXX then consults the availability schedule received from the various service providers on its roster, arranges for the claimant's assessment to occur at a particular time, then sends confirmation letters to both the claimant and the service provider setting out the date and time.

7. XXXXX also provides a letter of direction and all documentation to the service provider. The service providers used XXXXX are free to perform assessments for whomever they choose.

8. Where required, XXXXX administrative staff will make travel arrangements for the claimant or insurance company, and schedule interpreters for the assessments.

9. XXXXX maintains an administrative office. In addition, it maintains premises in XXXXX and in XXXXX, consisting of interview rooms, examining rooms, a reception desk, and a waiting room. The examining rooms contain the necessary equipment and paraphernalia to enable the examinations to be made, such as examination tables and blood pressure monitors.

10. The service providers have the choice of using XXXXX premises to conduct their assessments of claimants. Alternatively, the service providers may conduct the assessments in their own premises. The service providers make the decision as to whether they will use XXXXX premises or any other premises to assess claimants, review documentation and prepare their reports. XXXXX will also subcontract with licensed specialists in the various communities where the client requests an assessment be performed.

11. As an example, an IME report may involve a service provider reviewing the claimant's records, such as x-rays and laboratory data, and interviewing the claimant to obtain a history of the accident in question, the sequence of events and complaints following the accident, and the treatment received by the claimant to date. A physical examination thereafter often ensues and if the service provider considers it necessary, the service provider may also request additional tests from separate suppliers. For instance, a service provider may require the claimant to attend another facility for diagnostic tests such as an x-ray or Magnetic Resonance Imaging. Where the diagnostic test is to be provided in another building, the service provider sends a request to XXXXX to schedule the diagnostic test. XXXXX contacts the diagnostic supplier, schedules the test and confirms this with the claimant. The results from the diagnostic test are sent to XXXXX, who in turn provides the results to the service provider for analysis and inclusion in the service provider's report.

12. Prior to the commencement of the interview and assessment, the claimant is advised that the interview and assessment for the IME, IDE, FCE or IPA report falls outside the confidential "doctor/patient" relationship and that the claimant must sign an authorization form releasing the service provider from such confidentiality obligations and allowing the service provider to provide the written report to XXXXX and its client. The same "Release" form is used for all categories of service providers. It sets out the relationship between XXXXX, the service provider, the client and the claimant. A copy of the "Release" form was provided for our information, which we have reproduced in part as follows:

Authorization to Release Information

I recognize that Dr. XXXXX is performing an independent assessment of me at the request of XXXXX as arranged through XXXXX.

I have been informed that Dr. XXXXX is not employed by the Requesting Party. He has been asked to give an independent report on my condition following history taking, examination and obtaining any tests or investigations he deems necessary.

I hereby release Dr. XXXXX to disclose any findings to the Requesting Party and I understand that only the Requesting Party can release a copy of the report to me.

I acknowledge that Dr. XXXXX is not my physician, I have not been under his care and am not his patient.

13. Following a review of the claimant's records, interview and examination, the service provider drafts a report, which usually includes information regarding the diagnosis, cause, prognosis, treatment recommendations, requirement for additional investigations and the degree of disability, if any, of the claimant. The service provider does not discuss the report or explain the treatment recommendations to the claimant.

14. The service provider usually prepares the report at his or her premises; however, the service provider has the option of using transcription services provided by XXXXX at its administrative location. That is, service providers may send dictation work to be transcribed by XXXXX, or they may have it done elsewhere.

15. The staff at XXXXX vets the report for quality control and to ensure that all the questions asked by the client were answered. The service provider reviews the report to authorize any corrections or changes recommended by XXXXX. Then, XXXXX delivers the report to the client. XXXXX maintains control over the time frames in which the reports are prepared and provided by XXXXX to the client. All reports are sent by XXXXX to the client.

16. A copy of an IME report was provided for our information. The report is on XXXXX letterhead. The physician who assessed the claimant is identified as a specialist in rheumatology and internal medicine. The IME included a physical examination as well as a review of documents and x-rays. The report notes that the physician advised the claimant that the IME is not the traditional patient/physician relationship and that the physician would not be discussing his or her findings or conclusions with the claimant. The claimant was made aware that the report will be forwarded to the requesting third party and that the claimant will have to request a copy of the report from the third party. The report summarizes the claimant's history leading to the IME, which involved a motor vehicle accident approximately two months prior to the assessment, and the treatment provided at the hospital and by XXXXX family physician at that time. The report describes the present symptoms identified by the claimant, as well as XXXXX functional status and past medical history that may have contributed to the current symptoms. The report details the findings of the physical examination and provides a conclusion and summary of the claimant's current condition as well as recommendations for relieving the symptoms.

17. XXXXX pays the service providers on a case-by-case basis at a fee that is determined by the service provider and agreed to by XXXXX. These fees involve a set amount for certain cases and an hourly rate for other cases, such as IMEs and ICRs. In addition, XXXXX will book and pay for the service provider's transportation (e.g., to the XXXXX premises), food and accommodation, handle the coordination of appointments with claimants, proofread the service provider's reports and then forward the report to the service provider for sign-off. In addition, XXXXX may, at the service provider's request, provide transcription tapes and transcribe the service provider's tapes.

18. In sample transaction #3, the service provider's invoice to XXXXX details the activities of the service provider for a report as follows:

19. XXXXX often provides reports that are prepared by a number of service providers with respect to one claimant. In these circumstances, XXXXX identifies the number of service providers required and books the appointments. Where multiple disciplines are involved, XXXXX receives a report from each service provider, and each is provided to the client. That is, the reports provided by the service providers are not contained in an all-inclusive report, but rather are provided to XXXXX and subsequently to the client, separately. Each service provider is retained separately, paid separately, and provides a report separately from all others.

20. A particular client might request an assessment based only upon a review of a claimant's file; i.e., an ICR report. In these circumstances, the service provider reviews the file at either his or her premises or at the premises of XXXXX.

21. Other business activities of XXXXX include providing document reviews, file audits, expert witness testimony and court attendance, medical-legal consulting services, and out-of-province and out-of-country services to be performed by various service providers.

22. XXXXX currently charges the GST on the single consideration shown on its invoices for the reports.

Rulings Requested

You would like to know whether:

1. The IMEs, IDEs, and FCEs supplied by XXXXX are exempt supplies within the meaning of section 2 of Part II of Schedule V.

2. The IMEs, IDEs, and FCEs supplied by XXXXX are exempt supplies within the meaning of section 5 of Part II of Schedule V.

3. The IMEs, IDEs, and FCEs supplied by XXXXX are exempt supplies within the meaning of section 7 of Part II of Schedule V.

Rulings Given

1. An IME supplied by XXXXX that is made in the circumstances described in the Explanation below is an exempt supply for purposes of section 2 of Part II of Schedule V; i.e., where this supply consists of a service rendered to an individual by a physician on XXXXX premises and XXXXX remunerates the physician for this service. The supply made by XXXXX of an IME that does not consist of a service rendered by a physician in a facility operated by XXXXX and the supply of IDEs and FCEs are taxable. These supplies are taxable irrespective of whether they involve services rendered to an individual and whether the physician or other health professional was remunerated by XXXXX.

2. The IMEs, IDEs, and FCEs supplied by XXXXX are not exempt supplies within the meaning of section 5 of Part II of Schedule V. Other than the IMEs supplied in the circumstances identified in Ruling 1, these supplies made by XXXXX are taxable.

3. The IMEs, IDEs, and FCEs supplied by XXXXX are not exempt supplies within the meaning of section 7 of Part II of Schedule V. Other than the IMEs supplied in the circumstances identified in Ruling 1, these supplies made by XXXXX are taxable.

In addition, although you did not request a GST/HST ruling on the supplies made by XXXXX identified in the Facts as IPAs and ICRs, please note that these are also taxable supplies.

These rulings are subject to the qualifications in GST/HST Memorandum 1.4, Goods and Services Tax Rulings. We are bound by these rulings provided that none of the above issues is currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

We understand that this GST/HST ruling request was prompted by the aforementioned decisions in Riverfront. The request was made to determine whether the facts of XXXXX are sufficiently similar to those described in Riverfront.

The decisions in Riverfront did not decide that all IMEs as well as assessments performed by other practitioners are exempt supplies. Rather, these decisions apply only to supplies that are made within the same fact situation as identified in the Tax Court. Whether the operations of XXXXX and the circumstances in which each IME and other assessment are supplied are comparable to Riverfront will be a question of fact. Please note the fact situation identified in Riverfront was as follows:

1. The supplier is a corporation that makes supplies of IME reports to insurance companies and lawyers. The supply of IME reports was the corporation's only source of income.

2. At the premises operated by the corporation, a physician examines a patient, and reviews the patient's records, history, x-rays and laboratory data, renders a diagnosis and prognosis and an assessment of the degree of impairment of the patient. The physician normally recommends treatment and usually discusses treatment with the individual. The result of the examination is the completion of an IME report of the physician's findings.

3. The physicians are independent contractors who supply IME reports to the corporation.

4. The corporation provides consultation rooms, examination rooms, and all necessary equipment and paraphernalia required to enable the examinations to be made at its premises.

5. The IME reports are typed by the corporation's transcriptionists from the physicians' notes.

Section 2 of Part II of Schedule V

Section 2 of Part II of Schedule V exempts a supply of an "institutional health care service" rendered to a patient or resident of a "health care facility" where the operator of that facility supplies these services to them within its facility.

A "health care facility" is defined in paragraph 1(a) of Part II of Schedule V as a facility, or part thereof, operated for the purpose of providing medical or hospital care. The CRA considers medical care to mean care rendered by physicians; i.e., care provided to patients by medical practitioners entitled under the laws of a province to practise the profession of medicine, and would consider the following factors to determine the purpose for which a facility is operated:

•   The operator contracts with physicians to provide medical care to patients of the facility;

•   Physicians provide medical care in the operator's facility; and

•   The facility has consultation and examination rooms and equipment and supplies to support the provision of medical care.

In a multi-disciplinary facility, only the part of that facility's operations where medical care is provided to patients or care that is related to, or in support of, medical care falls within the definition of "health care facility". Services provided by other practitioners, such as dentists, physiotherapists, chiropodists, chiropractors, occupational therapists, and psychologists, are not included within the meaning of medical care. Thus, the part of a multi-disciplinary facility operated to provide care by other practitioners is not a health care facility for ETA purposes.

The definition of "institutional health care service" describes services rendered by a person that are provided in a health care facility where the operator of the facility remunerates the person for these services. The definite article "the" in paragraph (h) of this definition links the location where the person's services are rendered to the operator's facility. Thus, services rendered by a person remunerated by the operator of a health care facility fall within the definition only when the person's services are provided in the operator's facility. Accordingly, the location of the examination component of an IME has an effect on the application of the GST/HST to this supply.

When the operator of the health care facility supplies an institutional health care service, this supply will fall within the exemption in section 2 of Part II of Schedule V if the service is rendered to a patient of the operator's facility. On the basis of the definition of "institutional health care service", this exempting provision does not apply to services rendered outside the supplier's health care facility nor does it apply to supplies that are not medical care, as such supplies do not fall within the meaning of "institutional health care service" since these services are not provided in a "health care facility"; i.e., that part of the supplier's facility is not a "health care facility" as defined in paragraph 1(a) of Part II of Schedule V.

Activities of XXXXX

The part of the facility operated by XXXXX where physicians provide medical care falls within the meaning of "health care facility" as defined in the ETA and as such, XXXXX supplies of services rendered by physicians to patients of XXXXX facility are exempt institutional health care services as described in section 2 of Part II of Schedule V.

The remainder of XXXXX activities do not fall within the definition of "health care facility". XXXXX activities of providing IMEs consisting of services rendered by physicians outside its facility and the assessments identified as IDEs, FCEs, IPAs, and ICRs, are not demonstrative of XXXXX operating a facility for the purpose of providing medical care. Thus, the supply of institutional health care services is not XXXXX only source of income and XXXXX activities involve the provision of both exempt and taxable supplies for ETA purposes.

XXXXX contracts with service providers do not automatically characterize XXXXX as the operator of a facility for the purpose of providing medical care. Rather, all the factors pertaining to XXXXX operations must be considered. According to the facts provided, XXXXX operations are not limited to contracting with physicians and not all of XXXXX supplies consist of services rendered by physicians at a facility operated by XXXXX. Further, XXXXX business operations are not dependent on XXXXX operating a facility for the purpose of providing medical care to patients. XXXXX can function as a business without any service providers working from its premises. The service providers' activities are not integrated into the business operations of XXXXX such that the service providers' activities and the provision of the reports are intertwined and interdependent on the use of XXXXX premises.

Although the reports prepared by the service providers are done for XXXXX, its business operations are set up in such a way that XXXXX can offer and provide reports without the service providers performing any services at its premises. The service providers decide whether they will attend XXXXX premises to fulfill their contracts with XXXXX. This fact demonstrates that the nature of XXXXX activities does not require that the service providers' services, the reports, and XXXXX premises be provided together and in fact XXXXX premises are not always used by the service providers.

Thus, XXXXX can fulfill its contractual responsibilities to its clients irrespective of whether the service provider's activities take place at XXXXX premises or elsewhere. XXXXX objective in having a premises and staff is limited to quality control of the service providers' reports. Making available space for the use of the service providers that it subcontracts with is not indicative of XXXXX engaged in a regular, ongoing activity of providing medical care to "patients".

We also understand that the control that XXXXX exercises over the service providers is limited to arranging the appointments between the service provider and the claimant and controlling the time frames for submitting the reports. XXXXX controls the payments to the service providers and XXXXX staff books the appointments with the service providers and the claimants, but the service providers control the hours that they assess claimants and where they assess claimants. That is, on the basis of the facts provided, the service providers work on their own and are free to accept or refuse a case referred to them by XXXXX. Each service provider decides what cases he or she wants to accept and, although XXXXX makes available premises and equipment, the service providers' activities are not dependent on the use of XXXXX premises. In terms of the claimants, we note that XXXXX responsibility is to ensure that a claimant is treated with courtesy and respect but it does not operate a facility for the purpose of providing medical care to "patients". Other than booking an appointment, there may be no other interaction between XXXXX and a claimant.

In summary, the totality of the facts of XXXXX operations, its contractual responsibilities to its clients, and its relationships with the service providers demonstrate that only a portion of XXXXX activities involves operating a facility for the purpose of providing medical care and that XXXXX does not operate a facility for the purpose of engaging physicians to be available on its premises on a regular, daily basis to provide medical care. The result is that only part of the facility operated by XXXXX falls with the meaning of "health care facility" as defined in the ETA and that not all XXXXX supplies are exempt institutional health care services. The activities of XXXXX that do not involve services rendered in a "health care facility" operated by XXXXX do not fall within the meaning of "institutional health care service".

Sections 5 and 7 of Part II of Schedule V

Sections 5 and 7 of Part II of Schedule V exempt from GST/HST certain supplies made by a "medical practitioner" or a "practitioner", as those suppliers are defined in section 1 of that Part. In particular, section 5 exempts a supply made by a medical practitioner of a consultative, diagnostic, treatment or other health care service rendered to an individual. These exempting provisions do not apply to services supplied by persons such as governments, institutions, corporations or other organizations as these persons do not meet the legislative criteria of being a supplier as defined for purposes of these provisions.

Please note that where a corporation hires medical practitioners, either as employees or independent contractors, in the course of carrying out its activities, the services supplied by the corporation in the course of these activities are not exempt under sections 5 or 7 of Part II of Schedule V, notwithstanding the qualifications of the employees or contractors. The fact that an employee may be a medical practitioner does not confer any benefit to the employer such that the employer would also qualify as a medical practitioner for purposes of the ETA. The employer is a legal entity and its status as a "medical practitioner" is evaluated separately from its employees. We note that because XXXXX is not a "medical practitioner" or "practitioner" as defined in the ETA, its supplies cannot fall within these exempting provisions.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at (613) 952-6761.

Yours truly,

Susan Eastman
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2006/08/31 — RITS 51877 — [XXXXX Grass Supplied as a Forage Crop]