Key Takeaways
- Look beyond the overhead percentage. Understand exactly what your clinic fees cover, including staffing, billing, technology, supplies, and other shared expenses.
- Review the full agreement before signing. Lease obligations, administrative fees, billing arrangements, and exit terms can all affect your finances and flexibility.
- Consider the tax implications. Keep clear documentation of clinic expenses and understand how the arrangement fits into your tax structure, particularly if you practise through an Ontario professional corporation.
Joining an established medical clinic can give physicians access to office space, administrative support, equipment, staff, and existing practice infrastructure. But before signing an agreement, it is important to understand exactly what you will be paying for and what financial obligations you are accepting.
A clinic agreement can affect your take-home income, taxes, flexibility, and even your ability to leave the practice later.
Here are some of the financial details physicians should review before signing.
Understand How the Overhead Arrangement Works
One of the first questions to ask is how the clinic calculates overhead.
Depending on the clinic, you may pay a fixed monthly amount, a percentage of billings, a combination of both, or separate charges for specific services.
For example, if your monthly billings are $30,000 and the clinic charges 25% for overhead, your clinic overhead would be $7,500 for that month.
The percentage itself only tells part of the story. You need to understand what is included.
Does the overhead cover reception staff, billing support, office space, utilities, supplies, cleaning, software, and equipment? Or are some of these charged separately?
A higher overhead percentage that includes comprehensive support could potentially offer more value than a lower percentage with numerous additional fees.
Look Beyond the Headline Fee Split
A clinic may describe its arrangement as an 80/20 or 75/25 split, but the agreement itself matters more than the headline percentage.
Find out which sources of revenue are included in the calculation. Are uninsured services treated the same way as insured medical billings? How are billing corrections, rejected claims, or refunds handled?
These details can affect what you actually take home.
Identify Shared and Additional Expenses
Not every clinic expense is necessarily included in the standard overhead fee.
Physicians may be expected to contribute separately toward equipment, medical supplies, technology, administrative staff, maintenance, or other shared costs.
Ask for a clear breakdown of what is included and what can be charged separately.
If larger expenses are shared among physicians, the agreement should also explain how each physician’s portion is determined.
Know Your Lease Obligations
Paying clinic overhead does not necessarily mean you have no obligations related to the premises.
You could be asked to enter into a sublease, guarantee a lease, or assume responsibility for a portion of the clinic’s rent.
Review how long the commitment lasts, how rent increases are handled, what renewal terms apply, and what happens if you leave the clinic before the lease ends.
A lease commitment can potentially continue even after your relationship with the clinic has changed.
Watch for Administrative Fees
Administrative fees can make a meaningful difference to the total cost of joining a clinic.
There may be separate charges for billing support, reception, scheduling, EMR access, bookkeeping, payment processing, supplies, or other services.
Ask whether these fees are included in your overhead, charged separately, or subject to future increases.
When comparing clinics, focus on the total expected cost and services provided, rather than the advertised overhead percentage alone.
Understand Billing and Collections
Before joining, make sure you understand how money moves through the clinic.
Who submits claims? Who handles rejected claims? Where are payments deposited? How and when do you receive your share? Who collects payment for uninsured services?
You should also know what happens to outstanding billings if you eventually leave the clinic.
Clear billing arrangements can make cash flow easier to manage and help maintain accurate accounting and tax records.
Consider the Tax Implications
Clinic expenses should be reviewed from a Canadian tax perspective rather than assuming every payment made to a clinic is automatically deductible.
Generally, business expenses must meet applicable Canadian income tax requirements, including being incurred for the purpose of earning income and being reasonable in the circumstances.
Good documentation is important. Keep agreements, invoices, receipts, billing statements, and other records supporting clinic-related expenses.
GST/HST may also require consideration. While many qualifying healthcare services are exempt from GST/HST, not every transaction or service associated with operating a medical practice is necessarily treated the same way.
A Note for Incorporated Ontario Physicians
For physicians practising through an Ontario professional corporation, there is another layer to consider.
Your clinic agreement should align with how professional income and expenses flow through the corporation. It should be clear which party earns the income, which party is responsible for clinic costs, and how payments are documented.
Paying an expense through the professional corporation does not automatically make it tax-deductible.
Having the arrangement reviewed before signing can help identify potential accounting and tax issues early.
Understand What Happens If You Leave
It is easy to focus on joining a clinic and overlook the terms for leaving it.
Review the termination provisions carefully. How much notice is required? Are there financial penalties? What happens to outstanding billings or shared expenses? Do any lease obligations continue?
Patient records and continuity of care must also be handled in accordance with applicable professional and privacy requirements.
Understanding the exit terms now can prevent unexpected financial obligations later.
Look at the Complete Arrangement
The lowest overhead percentage is not necessarily the best deal.
Consider the space, staff, billing support, technology, equipment, administrative services, and other resources included in the arrangement. A well-supported clinic may allow you to spend more of your time practising medicine rather than managing administrative tasks.
The goal is to understand what you are paying, what you receive in return, and what obligations you are agreeing to.
Know What You’re Signing
Joining a clinic is both a professional and financial decision. Taking the time to review overhead, shared expenses, billing arrangements, lease commitments, and tax considerations can give you a clearer picture before you commit.
Considering joining a medical clinic? Visit MedTax.ca to book a free 30-minute consultation and explore the tax and financial considerations to understand before signing your agreement.
