5 January 2004 GST/HST Interpretation 43031 - Health Care Services Supplied by Medical Practitioners (Physicians)

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

Dear XXXXX:

Thank you for your letters XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to health care services supplied by medical practitioners; i.e., physicians.

Please note that as I had indicated to you in our telephone conversation XXXXX we require third party authorization from your client in order to issue a GST/HST ruling on the specific services undertaken by your client that you identified in your letter. In addition, we require copies of the contracts between your client and the insurance companies and pharmaceutical companies in order to determine whether the services your client supplies under those contracts fall within the scope of the exemption in the Excise Tax Act (the "ETA") that applies to medical practitioners. Since you have not been able to provide this information, we can issue a GST/HST interpretation.

Interpretation Requested

Based on the information provided in your letter, we understand that you would like our interpretation of section 5 of Part II of Schedule V to the ETA.

Interpretation Given

Section 5 of Part II of Schedule V to the ETA provides an exemption from the GST/HST of supplies made by medical practitioners of consultative, diagnostic, treatment or other health care services rendered to individuals, other than surgical or dental services performed for cosmetic purposes and not for medical or reconstructive purposes. The ETA defines the term "medical practitioner" as a person who is entitled under the laws of a province to practice the profession of medicine or dentistry.

Accordingly, when a physician supplies a health care service that is not an insured service covered by a provincial health insurance plan, the service will fall within the exemption in section 5 where the criteria described above are met. Services such as physical examinations supplied by physicians within the scope of their medical professions to address a medical symptom or condition of their patients would generally meet the criteria of section 5 of Part II of Schedule V to the Act. Whether a party other than the individual who was examined requests the examination is not a factor for purposes of the ETA.

Generally, research services, such as studies on the efficacy of drugs, supplied by medical practitioners to pharmaceutical companies do not fall within the scope of the exemption because they are not health care services rendered to an individual. You expressed concern that because a physician's medical license and degree of expertise are factors for purposes of pharmaceutical companies, the physician's supply of research services to pharmaceutical companies should be exempt. However, while medical expertise may be necessary to meet the needs of the pharmaceutical companies, it will be a question of fact as to whether the supply is that of a health care service rendered to an individual or information provided to the pharmaceutical companies.

With respect to your comments regarding the decisions of the Federal Court of Appeal of Canada and the Tax Court of Canada concerning Riverfront Medical Evaluations Ltd. v. Canada ("Riverfront"), in our view these decisions did not hold all medical services to be regarded as exempt services nor did they decide that all independent medical evaluations (IMEs) are exempt for purposes of the ETA. That is, these decisions do not result in exempt status for all IMEs. Rather, the issue was whether a corporation's supplies of IME reports to insurance companies and lawyers were "institutional health care services" supplied by the operator of a health care facility and rendered to patients of the facility. Essentially, the Court found that an IME consisted of medical care because it involved a physical examination of an individual by a physician. In addition, the Court found that Riverfront was a "health care facility" for purposes of the ETA because the physical examinations were provided at Riverfront's facility.

The Court concluded that because Riverfront provided the examination rooms and other equipment necessary for the examinations and remunerated the physicians for the examinations and reports which were rendered at Riverfront's premises, the examinations rendered by the physicians fell within the exemption provided in section 2 of Part II of Schedule V to the ETA. This provision exempts a supply made by the operator of a health care facility of an institutional health care service rendered to a patient of the facility. Thus, for an IME to be an exempt supply, the activities that comprise the IME must fall in one of the exemptions in the ETA.

Please note that a discussion paper for public consultation purposes regarding the exemption for institutional health care services as well as health care services supplied by physicians will be available on our website in the near future. This discussion paper is based on the decision rendered by the Court with respect to Riverfront.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the ETA, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613) 952-6761.

Yours truly,

Susan Eastman
Municipalities and Healthcare Services Unit
Public Service Bodies and Governments Division