# How can a Doctor employed at a Hospital be considered an Independent Contractor?



## denish (Aug 3, 2017)

I was debating this with a few Doctors and one Account...

There's been a lot of controversy with Independent Contractors who aren't really 'independent' but use this as a way to deduct expenses like driving to work. Yet a friend of mine works for a Hospital and yet is able to Incorporate and deduct "expenses". He does not have his own practice (i.e. "business"). He works full-time for the Hospital. Is this legitimate under Canada's tax rules or are Doctors getting special treatment?

I looked at the criteria here www canada.ca/en/employment-social-development/programs/laws-regulations/labour/interpretations-policies/employer-employee.html#appa and then divided the criteria under Employee or Independent Contractor.

*Employee*
Reports to payer's workplace on regular basis
Works exclusively for the payer (technically the Doctor is allowed to work elsewhere, but only outside of the full-time hours determined by the Hospital)
Payer provides tools
Payer sets working hours/approves vacation time
Worker must perform services (may not hire/subcontract)
Payer pays expenses
Worker can not reject work

*Independent contractor*
Worker decides how the task is completed
Not allowed to participate in payers benefit plans/No Vacation Pay
Worker is paid by the job on predetermined basis
Submits invoice to Payer for payment

And here are a few other ones that are common for Employees:
Indefinite/ongoing relationship
Integrated as other Employees are
No risk of loss (outside of malpractice suits)


So although there is a case for a Doctor who is employed Full-Time at a Hospital to be an Independent Contractor. To me it seems a stronger case that he/she is an employee. So what if anything, am I missing?


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## atrp2biz (Sep 22, 2010)

You have to go to the (Health Professions) Act of the various provinces. The name of the legislation may be different between the provinces. In Alberta, the *Health Professions Act* prevails and Section 104 (page 79) is the relevant section.

_104 A regulated member
(a) of the College of Physicians and Surgeons of Alberta who
is a physician, surgeon or osteopath,
(b) of the Alberta Dental Association and College, 
(c) of the Alberta College and Association of Chiropractors,
or
(d) of the Alberta College of Optometrists

*may provide professional services on behalf of a corporation* only if
it is a professional corporation that holds an annual permit under
this Act, and that professional corporation may only provide the
professional services of a regulated member

(e) of the College of Physicians and Surgeons of Alberta who
is a physician, surgeon or osteopath,
(f) of the Alberta Dental Association and College,
(g) of the Alberta College and Association of Chiropractors,
or
(h) of the Alberta College of Optometrists. _


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## Jimmy (May 19, 2017)

It is usually interpreted by the CRA rules and in the courts. I think the big issue is DR's usually have to maintain an office usually to keep their records, see patients etc and absorb its related costs for staff and overhead on their own regardless of just working mainly at one hospital. Sometimes the hospital provides this but they still have to pay their staff.

"The worker supplies his or her own workspace, is responsible for the costs to maintain it, and does substantial work from that site."

https://www.canada.ca/en/revenue-ag...yee-self-employed/employee-self-employed.html


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## atrp2biz (Sep 22, 2010)

Another nuance is that revenue received by a physician or by the hospital (as a flow through) are through the physician's billing number. The hospital cannot be paid without this.


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## heyjude (May 16, 2009)

Doctors who are in private practice (which includes most attending physicians) are not employed at a hospital. They are independent contractors who apply for privileges at the hospital. They are not paid by the hospital, but bill the Ministry of Health for the patient care that they deliver. Physicians pay for their own professional licence, professional insurance (which can be tens of thousands of dollars) and if they are academic physicians, they pay a tithe or clawback from their clinical income to support the university department. When I was an academic physician, I usually paid about $50,000 per year in expenses out of my clinical income. My shifts were decided in collaboration with my colleagues. While I was never sued, if there was a lawsuit, I would not be defended by the hospital, but had to have my own insurance. I also worked outside of an academic setting. It was the same deal, except that there was no office support whatsoever. Throughout my career, I never received any pension benefits, or any other benefits, from a hospital or health system. The hospital HR system does not hire or fire physicians or conduct performance reviews. That is a matter for their department head and the council of the medical staff. 

No, it's not employment, unless you are a Hospitalist. 

Interesting article by Andre Picard in the Globe and Mail yesterday re: the proposed corporate tax changes as they relate to doctors.

https://beta.theglobeandmail.com/op.../+Media&utm_campaign=Shared+Web+Article+Links


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## OhGreatGuru (May 24, 2009)

denish said:


> ...Is this legitimate under Canada's tax rules or are Doctors getting special treatment?
> ...


The answer to both questions is yes. In Ontario the question of tax treatment for doctor's "corporations" is recently in the news because the provincial government wants to end the income splitting that such corporations can do by paying dividends to doctor's family members. For most wage-earners this practice seems unfair. But the doctors have fired back at the government saying "you encouraged us to incorporate as a tax-saving measure, in order to keep our provincially-prescribed fees down. Now you say it's unfair!"

Doctors have long resisted being made hospital/government employees, and our medical system has accommodated this. It's fair for the rest of us to question it (after all our taxes are paying for everything.) But the doctors can point to countries where that was done and it didn't work out so well.

At the moment my view is that it is not unreasonable for doctors to incorporate. Many/most of them have staff to pay, offices to rent, etc., like any small business. But there are some legitimate issues regarding the tax benefits of such corporations. Changing them affects more then doctors though.

The secondary question is: is there anything fundamentally wrong/unfair with the tax provisions? Or is it a matter of them being too easy to abuse?


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## sags (May 15, 2010)

It sounds like the CRA was seeing so much abuse they couldn't ignore it anymore.


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## Koogie (Dec 15, 2014)

The idea itself has very little to do with the CRA. It was one of the T2 talking points during the election.

Purely a political decision. It has even been calculated that it will draw in very little revenue in comparison to the numbers of people affected.


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## Mike-RetireEarly (Feb 28, 2016)

If he wasn't a doctor then I'd say that he is most likely has a Personal Services Business (PSB) and he would not be eligible for the small business deduction and most other business deductions. I'm not sure how the provincial and federal taxation laws work for doctors. I know that the provinces regulate the doctors and have rules about medical corporations, but does the federal government have special tax rules for these companies? 

See http://www.taxtips.ca/glossary/personalservicesbusiness.htm or http://www.thebluntbeancounter.com/2012/01/is-your-corporation-personal-service.html 

There are a lot of independent contractors who are incorporated and do not declare themselves a PSB. If the CRA ever audits them, then they might end up with a large tax bill.


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## heyjude (May 16, 2009)

Mike-RetireEarly said:


> If he wasn't a doctor then I'd say that he is most likely has a Personal Services Business (PSB) and he would not be eligible for the small business deduction and most other business deductions. I'm not sure how the provincial and federal taxation laws work for doctors. I know that the provinces regulate the doctors and have rules about medical corporations, but does the federal government have special tax rules for these companies?
> 
> See http://www.taxtips.ca/glossary/personalservicesbusiness.htm or http://www.thebluntbeancounter.com/2012/01/is-your-corporation-personal-service.html
> 
> There are a lot of independent contractors who are incorporated and do not declare themselves a PSB. If the CRA ever audits them, then they might end up with a large tax bill.


Incorporated physicians are not considered personal services businesses because they bill on behalf of their clients (patients) and they see more than five patients per year. If they only saw five or fewer patients, it wouldn't be with the cost of incorporation.


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## tdiddy (Jan 7, 2015)

denish said:


> I was debating this with a few Doctors and one Account...
> 
> There's been a lot of controversy with Independent Contractors who aren't really 'independent' but use this as a way to deduct expenses like driving to work. Yet a friend of mine works for a Hospital and yet is able to Incorporate and deduct "expenses". He does not have his own practice (i.e. "business"). He works full-time for the Hospital. Is this legitimate under Canada's tax rules or are Doctors getting special treatment?
> 
> ...


Little late the this but so much misinformation out there about physicians I can't resist. 

Of course it is "legitimate" as it is clearly outlined in health professions act. But specifically as it applies to CRA definition for other purposes: 

1. Doctor is not paid by the hospital, they are paid by the province (ministry of health) if the patient is enrolled, otherwise MD has to charge independently or via travel insurance etc or write off expense. Although these are both ultimately publicly funded they are two different silos of funding, hosp admin, finance etc has no input on physician pay
2. Doctor can worker elsewhere whenever he/she pleases (ie multiple hospitals, health authorities, private work for workers compensation etc) unless they are on a call contract to be in house which is not common outside certain specialties
3. Payer provides tools. This is the trickiest one as far as ICU/operating room equipment etc goes; this rule is meant to be applied to things like PCs, cleaning supplies etc, this is clearly a special circumstance that fits neither contractor or employee relationship, hence the concept of "hospital privileges". 
4. Payer sets working hours/vacation time -- physicians set their own hours/vacation time and split call requirements among themselves, not dictated by dept of health or hospital 
5. Worker must perform services-- physicians are free to obtain a locum (ie subcontract) to provide their services. In fact hospital privileges typically specially have language that says health authority cannot unduly withhold this. 
6. Payer pays expenses -- Drs often pay overhead for hospital activities. They pay their own licensing/malpractice/CME
7. Worker cannot reject work -- they can if it is medically inappropriate
8. Indefinite relationship -- hospital privileges must be renewed annually
9. Risk of loss if overhead exceeds income there is a loss. Not typically the case certainly pay fluctuates significantly depending on volume of referrals etc. 


Of course this is for physicians who are primarily hospital based. The only exception would be hospitalists who are specifically employees of the hospital with clear contracts as such. For community based physicians owning the own office practice I assume you can clearly see they are not employees? 

Hope that clarifies a few things for you.


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## treva84 (Dec 9, 2014)

If physicians are indeed employees, and not contractors, then if the taxation changes are made they should then be entitled to employee benefits and an employee pension, like the majority of other employees in Canada.


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## heyjude (May 16, 2009)

treva84 said:


> If physicians are indeed employees, and not contractors, then if the taxation changes are made they should then be entitled to employee benefits and an employee pension, like the majority of other employees in Canada.


Well, as has been explained by tdiddy and myself, the great majority of physicians are not employees of hospitals, and they do not receive benefits or pensions. Making them employees would be a huge endeavour.


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## denish (Aug 3, 2017)

Thanks! Interesting answers, everyone.


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## denish (Aug 3, 2017)

tdiddy said:


> ...
> 
> 8. Indefinite relationship -- hospital privileges must be renewed annually
> ...


A series of 1-year contracts (just renewing privileges would be a weaker example ) doesn't necessarily show one is not an employee, here's an example:

torontoemploymentlawyer website case michela-v-st-thomas-of-villanova-catholic-school


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## cheech10 (Dec 31, 2010)

Right, no one aspect is enough to make the determination of employee vs contractor, but tdiddy provided 9 points to counter the criteria CRA uses.

Personally, I think the strongest criterion is that doctors are not paid by hospitals, so they can't be considered employees of the hospital. The government pays them via OHIP, and since the government considers them independent contractors, that seems to be enough for CRA. Note also that doctors are specifically exempt from many of the employment benefits that employees receive: no EI, no vacation pay, no parental leave, no overtime pay, no work hour limits, even no eating periods, as per the Ministry of Labour (ON).


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## denish (Aug 3, 2017)

True, they Invoice and they are not paid by the Hospital. But then again there are cases, such as with Employment Agencies, where someone works at one company and is paid by a 3rd party. They are not automatically considered independent contractors. 

... I'm not questioning why a Doctor, the moment they set foot in a Hospital, is not considered an Employee. For example those that have their own Clinic and spend some time at a Hospital, I'm not questioning those. Nor those that work at several Hospitals, as those who work in several places are more likely to be Independent Contractors. I'll admit I don't have all the details about my friend. But, he works predominately for one Hospital. Whether that's 70%, 80%, 90% of his time, 4 days a week, 5 days a week, I don't know exactly.


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## denish (Aug 3, 2017)

I'll admit there's a lot of information I don't know about. On the other hand, Physicians don't seem to be particularly objective on the topic.

There's countless employees who don't receive benefits.




tdiddy said:


> ...
> 2. Doctor can worker elsewhere whenever he/she pleases (ie multiple hospitals, health authorities, private work for workers compensation etc) unless they are on a call contract to be in house which is not common outside certain specialties


When the rest of us work 80-90% at one workplace, the 10-20% outside of that is often referred to as moonlighting. And if he said to the Hospital, from no on, I'm going to work 50% here and 50% at another Hospital, the Hospital may not accept that.



> 3. Payer provides tools. This is the trickiest one as far as ICU/operating room equipment etc goes; this rule is meant to be applied to things like PCs, cleaning supplies etc, this is clearly a special circumstance that fits neither contractor or employee relationship, hence the concept of "hospital privileges".


I don't see where this is tricky. My friend does not bring his tools nor purchases them nor pays for them. They are provided at his workplace.



> 5. Worker must perform services-- physicians are free to obtain a locum (ie subcontract) to provide their services. In fact hospital privileges typically specially have language that says health authority cannot unduly withhold this.


Interesting. I never knew about a Locum.



> 6. Payer pays expenses -- Drs often pay overhead for hospital activities. They pay their own licensing/malpractice/CME


This could be a tricky one. It's not common for Employees to pay these however many professionals in other fields have these or some of these expenses and are still employees. In my friend's case, everything from the Waiting Room Chairs to the heating to the Cleaning, Administration Staff, Office Supplies, Materials, are all provided for him. Here's an interesting article of how the workplace is making Physicians save costs: nationalpost .com/news/canada/showing-surgeons-massive-cost-of-disposable-supplies-leads-to-big-savings-for-hospitals



> 7. Worker cannot reject work -- they can if it is medically inappropriate


This one is definitely incorrect. ALL employees can reject work that is inappropriate. They are protected by law. An example of rejecting work is if my friend had his own practice and decided to cancel some appointments.


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## tdiddy (Jan 7, 2015)

denish said:


> I'll admit there's a lot of information I don't know about. On the other hand, Physicians don't seem to be particularly objective on the topic.
> 
> There's countless employees who don't receive benefits.
> 
> ...



Certainly I'm not feeling very objective at the moment I will concede that. 

All employees by law receive benefits (ie EI, vacation pay, severance etc). Obviously this is a bit pedantic because if you correctly argued your case then your friend would start receiving these. However, the general point as well is that most successful employees with 6 figure incomes do receive some type of benefit as there is a competitive marketplace for their services. 

With respect to tools. Would you be satisfied if you friend went and bought a $50 reflex hammer, stethoscope and a few tongue depressors and nice doctors bag and brought these with him/her to the hospital? Or do you expect him/her to own the hospital? There are lots of self employed contractors who work on equipment that they do not own. 

Does your friends staff do his/her own billing or does he/she do that himself? Does the hospital pay for his malpractice insurance (quite expensive) and license fees? Do they pay him/her to attend conferences and obtain CME? In the USA employed physicians would get all of this. 

re locums, in addition to what i said above, some senior mds actually make money off locums (ie charge a cut)

I don't think you have a good understanding of chain of command, with respect to hospital not accepting him/her working elsewhere, and rejecting work. Your friend very likely does not have a "boss" in the sense that a typical employee does. If a boss tells an employee, go work on project A, but employee with their judgement thinks project A is not the solution to the problem (even though it is not abusive, discriminatory etc), they cannot say (without repercussion) "no, I don't think that's what we need to do here, ask someone else". Your friend can do this. Your friend can also likely also cancel his patients on short notice if he/she chooses. Their duty is an ethical and professional one, not a chain of command answer to your boss duty. The department heads role is to oversee that patients are being managed safely, that's basically it, not the same as a "boss" . Unless your friend has a specific contract with the hospital, he/she can work 50% somewhere else and there isn't much the hospital can do about it as long as all inpatients are being safely managed. Their solution would be to bring in more physicians.


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## heyjude (May 16, 2009)

And another thing....

Let's say a cardiac surgeon is scheduled to be on call on a particular weekend. But his daughter is getting married. Whom does he call in order to walk her up the aisle? Does he call his employer? No. He calls a cardiac surgeon colleague who also has privileges at the hospital and they exchange call time on the schedule.


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## denish (Aug 3, 2017)

tdiddy said:


> Certainly I'm not feeling very objective at the moment I will concede that.


OK.





> With respect to tools. Would you be satisfied if you friend went and bought a $50 reflex hammer, stethoscope and a few tongue depressors and nice doctors bag and brought these with him/her to the hospital? Or do you expect him/her to own the hospital?


I'm not suggesting anything be done differently. However, the issue of whether or not tools (including the more expensive equipment) are provided are a fundamental characteristic distinguishing Employees from Independent Contractors. True, it's not a be-all-end-all.




> I don't think you have a good understanding of chain of command, with respect to hospital not accepting him/her working elsewhere, and rejecting work. Your friend very likely does not have a "boss" in the sense that a typical employee does. If a boss tells an employee, go work on project A, but employee with their judgement thinks project A is not the solution to the problem (even though it is not abusive, discriminatory etc), they cannot say (without repercussion) "no, I don't think that's what we need to do here, ask someone else".


Well actually... that happens all the time in reality. Some have an incomplete understanding of these types of relationships. I work in IT/Insurance and these things are often negotiated between the boss and the subordinate. The subordinate is often the expert. Not to mention the boss is an employee him/herself anyway. Not to mention that link I posted is in an example of how the Hospital instituted a procedure for Physicians to follow, which wouldn't be the case at a Physician's practice. And it made sense, a significant cost saving for the Hospital which ultimately is taxpayers money.



> Your friend can do this. Your friend can also likely also cancel his patients on short notice if he/she chooses. Their duty is an ethical and professional one, not a chain of command answer to your boss duty. The department heads role is to oversee that patients are being managed safely, that's basically it, not the same as a "boss" . Unless your friend has a specific contract with the hospital, he/she can work 50% somewhere else and there isn't much the hospital can do about it as long as all inpatients are being safely managed. Their solution would be to bring in more physicians.


Let me bring that up with him sometime and I'll ask him.


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## tdiddy (Jan 7, 2015)

denish said:


> I'm not suggesting anything be done differently. However, the issue of whether or not tools (including the more expensive equipment) are provided are a fundamental characteristic distinguishing Employees from Independent Contractors. True, it's not a be-all-end-all.
> 
> Well actually... that happens all the time in reality. Some have an incomplete understanding of these types of relationships. I work in IT/Insurance and these things are often negotiated between the boss and the subordinate. The subordinate is often the expert. Not to mention the boss is an employee him/herself anyway. Not to mention that link I posted is in an example of how the Hospital instituted a procedure for Physicians to follow, which wouldn't be the case at a Physician's practice. And it made sense, a significant cost saving for the Hospital which ultimately is taxpayers money.


As I said before tools and equipment aspect imho was never intended to be applied to a hospital/physician it is a unique work environment (ie in most provinces for most MDs owning a hospital would be close to illegal)... hence part of reason CRA and government has current stance

Some fields may have very casual work environments, minimizing the hierarchy in the day to day; but legally your friend almost certainly has far more autonomy than the vast majority of employees when push comes to shove

The link you posted is a policy whereby surgeons are shown the costs of the disposable equipment they are using. They can then chose to try and minimize it if they want or keep using the best tool for the job; not sure how that strengthens your argument from a chain of command perspective.


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## tdiddy (Jan 7, 2015)

While this has been an interesting debate, I think it should be pretty clear that on balance physicians are self-employed until/unless the government fundamentally changes how we are paid. 

I know many share sentiments that physicians are gaming the system with their expenses (probably what triggered your debate?) etc... yes there are probably MDs who are excessive with their expenses, just like their are probably contractors who offer "cash prices" waiters who don't declare all their tips, they are all subject to audit. As well, there are likely many employees who aren't working while they are at work. BUT its not like the government is itching to make MDs employees and we are getting a special favor of some sort, the potential for overtime pay, pensions, stronger/actual union, breaks, drop in efficiency etc make this a very dangerous proposition.


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