Introduction

Ontario physicians who bill the Ontario Health Insurance Plan (OHIP) for insured services receive payment from the Ministry of Health under the terms of the Physician Services Agreement (PSA) — the negotiated framework between the Ontario Medical Association and the province. Understanding how OHIP billings are characterised for income tax purposes, and how the professional corporation structure interacts with that characterisation, is foundational for any incorporated Ontario physician.

OHIP Billing: Income to the Corporation or Personally?

When a physician operates through a medical professional corporation (MPC), it is the corporation that provides medical services — not the physician personally. The physician is an officer or employee of the MPC. Accordingly, OHIP payments for insured services are generally income of the professional corporation, not personal income of the physician directly.

This is the cornerstone of the tax deferral benefit of incorporation: OHIP revenue flows to the corporation at the corporate tax rate rather than the personal marginal rate. The physician draws salary or dividends from the corporation subsequently, with personal tax arising at the point of distribution rather than the point of billing.

The OHIP billing number in Ontario is issued to the physician individually. The Ministry of Health pays the individual physician's OHIP account number. For an incorporated physician, it is important that the billing arrangement is properly structured so that OHIP payments are correctly directed to and recorded as income of the professional corporation.

The Assignment Arrangement

An incorporated physician typically enters into an assignment arrangement with their MPC under which the physician assigns the right to receive OHIP payments to the corporation. The corporation receives the OHIP payments and records them as corporate revenue. In exchange, the corporation pays the physician salary or dividends.

This assignment is not a taxable event — it is a structural arrangement that channels revenue to the appropriate entity. The CRA is familiar with this arrangement and accepts it as standard practice for incorporated physicians.

The documentation of the assignment should be part of the corporation's organisational records — typically a services agreement between the physician and the MPC specifying that the physician provides services through the corporation and that billings are for the account of the corporation.

The PSB Risk for Physicians

As discussed in Article 55, the personal services business (PSB) rules apply when a corporation essentially functions as the conduit for one individual's personal services to a single payer. For incorporated physicians billing OHIP, the PSB question occasionally arises.

The CRA has generally accepted that a physician billing OHIP through a professional corporation is not operating a PSB — partly because the physician is providing services to patients (not to the Ministry), and partly because the regulatory framework and corporate law requirements of medical professional corporations distinguish them from the typical incorporated employee scenario.

However, physicians who provide services exclusively under very narrow arrangements — for example, a physician working only as a medical director for a single institution, with no patient billing — may have a different risk profile. The PSB analysis is fact-specific.

Non-Insured Revenue and HST

OHIP-insured services are exempt from HST — as discussed in Rotaru CPA's article on HST for medical clinics. However, a physician's practice may also generate non-insured revenue: third-party assessments (independent medical examinations, insurance reports, employer forms, cosmetic procedures). This non-insured revenue may be subject to HST, depending on its nature.

Where a physician's professional corporation earns both OHIP-insured (exempt) and non-insured (taxable) revenue, HST registration and appropriate ITC apportionment are required. The HST treatment of specific non-insured physician services is a nuanced area.

When to Speak With a CPA

For newly incorporated physicians, ensuring the OHIP assignment arrangement is properly documented and that the corporate revenue structure is correctly established from the first billing cycle is worth a specific conversation with a CPA. Getting this right at the outset prevents classification issues later.

Rotaru CPA works with Ontario physicians on professional corporation structure and OHIP billing compliance. Book a consultation to set up your corporate structure correctly.