Executive Summary: Key Legal and Evidentiary Issues

• Characterization of the HSARB proceeding as a hearing de novo, permitting the Board to make its own factual and legal findings rather than being confined to the Minister’s original Opinion Letters and record.
• Interpretation of the Independent Health Facilities Act documentation requirements, particularly whether records must expressly show “medical necessity” to support payment of facility fees for limited pelvic ultrasounds.
• Application of paragraph 6 of the General Preamble to the Schedule of Facility Fees and whether additional imaging must be specifically requested and documented by the referring physician or radiologist before being billed.
• Legality of relying on sonographers, acting under a medical directive, to decide when to perform limited pelvic ultrasounds and whether this satisfies the requirement that the additional study be “requested” by a radiologist.
• Alleged procedural unfairness in the HSARB allowing the Minister to rely on inadequate documentation and delegation issues said to go beyond the wording of the August 11, 2022 Opinion Letters.
• Sufficiency of the evidentiary record (audit sample, clinical notes, radiology reports and testimony) to justify recovery of roughly $295,000 in facility fees and the presumption of nil payment where documentation of medical necessity is missing.

Background and facts of the dispute

The case centres on Partap Law Medicine Professional Corporation, formerly Di-Med Services Limited, which operated several independent health facilities (IHFs) in Ontario licensed under the now-repealed Independent Health Facilities Act (IHFA). These facilities received Ministry of Health (MOH) payments of “facility fees” associated with insured OHIP services, specifically complete abdominal ultrasound studies (fee code J135) and limited pelvic ultrasound studies (fee code J163) performed on the same patient, on the same day, in the same facility. Over the review period of April 1, 2017 to July 31, 2019, the Ministry noticed that Di-Med’s IHFs were billing the limited pelvic ultrasound code together with the abdominal ultrasound code at a rate significantly above the provincial average. This statistical anomaly triggered a post-payment audit directed at the facility fees paid for J163 when billed with J135. The Ministry obtained a statistically significant, random sample of 93 medical records for patients who had both codes billed on the same date. In each case, the MOH auditors examined the physician referrals, the sonographers’ worksheets, the images, and the radiologists’ final interpretive reports to see whether the limited pelvic ultrasound had been properly requested and documented. The audit revealed several recurring features. In almost all sampled records, the referring physician had ordered only an abdominal ultrasound, not a pelvic study. There was no separate written request from a radiologist authorizing a limited pelvic ultrasound as an additional insured service. The records generally did not contain a clear statement explaining why the pelvic component was medically necessary, and the pelvic images were frequently described as “non-diagnostic” or showing only partial views such as “bladder only partially visualized” or comments like “no free fluid in pelvis”. These findings also suggested that patients had not been prepared in the way normally required for a formal pelvic ultrasound, for example by ensuring that the bladder was appropriately full. When the Ministry sought an explanation in November 2021, the IHFs replied that fee code J163 was being used to address the clinical concern underlying the referral and that adding a targeted pelvic component reflected the standard of care and best interests of patient management. The facilities described a workflow where sonographers performing abdominal ultrasounds routinely took a “targeted look” at the pelvis. If the sonographer perceived potential pathology or abnormality, they would add a limited pelvic ultrasound. The sonographers followed a Medical Directive authored by Di-Med’s radiologist, Dr. Peter Zia, and could on occasion telephone a radiologist for guidance, though such conversations were not documented. After the scans were completed, a radiologist would review the images and worksheets and prepare an interpretive report. Only at this stage, “after the fact,” would the radiologist decide whether to approve billing the additional J163 fee and instruct the billing clerk accordingly. In practice, there was often no explicit written note in the chart explaining why the pelvic view had been added.

The statutory and policy framework governing facility fees

At the heart of the dispute is the interaction between the IHFA’s statutory record-keeping and recovery regime and the Ministry’s Schedule of Facility Fees (SOFF) for Independent Health Facilities. Under section 24.1(1) of the IHFA, every licensee must keep records sufficient to establish whether a service for which a facility fee is charged has been provided. Section 24.1(3) goes further, requiring records necessary to show whether a service was “medically or therapeutically necessary,” and section 24.1(4) requires that these records be prepared promptly when the service is provided. The statute contains a powerful documentation presumption: section 24.1(5) provides that where records required by subsection (3) are absent, it is presumed that the service was provided but that the amount payable is nil. Section 24.3 of the IHFA gives the Minister authority to recover facility fees after payment. Under section 24.3(1), recovery may be triggered if the Minister is of the opinion that all or part of the service was not in fact rendered, was not rendered in accordance with a requirement of the Act, or if there is an absence of necessary records. Section 24.3(4) then allows the Minister to require reimbursement of amounts previously paid where such a circumstance is found to exist, including based on statistical extrapolation techniques set out in section 24.3(2). The SOFF, adopted by the Minister under section 4(2)(a) of the IHFA, sets out which imaging services are designated for facility-fee payment and on what terms. The general preamble to the SOFF includes a critical clause at paragraph 6, which deals with unrequested additional imaging. It states that where a referring physician orders a single-site imaging study, any additional imaging is not an insured service and must not be billed to the Ministry unless the extra study is medically necessary, requested by the radiologist or referring physician, and documented in the patient’s record. The appellant argued that a different SOFF preamble, paragraph 3 under the Diagnostic Radiology section, governed the situation. That provision allows a radiologist to add further views when initial studies yield abnormal or inadequate findings and to claim for the added images as long as the additions are “noted in the report.” On Di-Med’s reading, this clause meant that the radiologist’s final interpretive report needed only to record that further views had been taken; no separate written explanation of medical necessity was required. The HSARB and later the Divisional Court rejected that interpretation for two reasons. First, fee code J163 for a limited pelvic ultrasound appears in the Diagnostic Ultrasound portion of the SOFF, which has its own preamble, including paragraph 6. The Board therefore considered paragraph 6 to be the governing policy clause. Second, even if paragraph 3 had some relevance, it could be harmonized with paragraph 6: the radiologist may decide that the original views are insufficient according to patient needs and the referring physician’s requirements, but that decision must still be expressed as a documented request and the medical necessity must be recorded in the patient’s chart before the additional study can be billed as an insured facility fee.

The Minister’s Opinion Letters and the reimbursement decision

In August 2022, the Minister issued three substantially identical Opinion Letters to the Di-Med facilities under section 24.3. The letters stated that for 100 percent of the instances where J163 was billed on the same day as J135, there had been no request from the referring provider for a pelvic ultrasound, the pelvic images were non-diagnostic, and the interpretive reports did not meet the requirements for a limited pelvic ultrasound. As a result, the Minister opined that the J163 service was “not in fact rendered” within the meaning of section 24.3(1)(i). Applying statistical methods authorized by section 24.3(2), the Ministry estimated that the IHFs had received approximately $294,692.25 in facility fees for J163 during the review period that were not payable. The letters attached “Supplementary Information” reproducing the key policy text from the SOFF, including paragraph 6, and expressly noted that there was no documentation as to why the added pelvic ultrasounds were medically necessary. The Minister therefore required reimbursement of the nearly $300,000 in facility fees associated with the extra pelvic scans.

The HSARB hearing and its key findings

Di-Med appealed the reimbursement requirement to the Health Services Appeal and Review Board. The Board held a virtual oral hearing in November 2023, heard viva voce evidence from both sides, and received written closing submissions. On June 19, 2024, it dismissed the appeal and upheld the Minister’s recoveries. A central factual finding, based on the evidence of Dr. Zia and radiologist Dr. Yang, was that sonographers, rather than radiologists or referring physicians, were deciding at the point of care whether to add limited pelvic ultrasounds to an abdominal study. This decision was guided by Dr. Zia’s Medical Directive but was not accompanied by a contemporaneous documented request from a radiologist, nor was the clinical rationale consistently recorded. Radiologists came into the process only after the images and worksheets had been generated, at which point they would review the material, produce their interpretive report, and indicate whether the additional scan should be billed. The Board accepted that radiologists have clinical authority to order limited pelvic ultrasounds as an additional service. However, it held that paragraph 6 of the SOFF general preamble demands more than a general standing directive: if no request appears on the original referral, the added imaging must be medically necessary, specifically requested by the radiologist or referring physician, and that request must be documented in the patient’s record. In the Board’s view, paragraph 6 did not contemplate an arrangement where the sonographer effectively makes the decision, and the radiologist merely “signs off” after the scan has already occurred. It also found that the interpretive reports in the audit sample generally did not explain why the pelvic component had been added, and so could not cure the absence of a proper pre-scan request or contemporaneous documentation of medical necessity. Applying the IHFA documentation provisions and the SOFF, the HSARB concluded that the appellant had not met the statutory and policy-based documentation requirements for billing the limited pelvic ultrasounds and that the Minister was entitled to recover the impugned facility fees, even assuming the scans were actually done and clinically appropriate.

Issues on appeal to the Divisional Court

The appellant then appealed the HSARB decision to the Ontario Divisional Court under section 24.11 of the IHFA. Three principal issues were raised. First, Di-Med argued that the Board erred in law by treating the hearing as a hearing de novo. In its view, section 24.9(1) of the IHFA, which allows a licensee to request a hearing “to review a decision of the Minister,” meant the Board’s function was more akin to judicial review: it should have been confined to assessing the reasonableness of the Minister’s Opinion Letters based on the record before the Minister, with only limited scope for new evidence. The Board and the Minister, by contrast, maintained that the statutory language, combined with section 24.10(1), gave HSARB broad authority to hold a full evidentiary hearing, make its own findings of fact and law, and direct the Minister to take whatever action the Board considered appropriate under the Act. Second, the appellant alleged procedural unfairness. It contended that the Minister impermissibly expanded its case at the Board hearing beyond the sole ground stated in the Opinion Letters—namely that J163 had not been “in fact rendered” under section 24.3(1)(i)—by relying before HSARB on the absence of documentation of medical necessity and on improper delegation of the “request” to sonographers. Di-Med argued that if the Minister wished to invoke the documentation and delegation provisions under section 24.3(1)(iii) and section 24.1, it should have said so expressly in the Opinion Letters, rather than relying on cross-examination revelations that the letters may have been incomplete. Third, the appellant challenged the HSARB’s substantive interpretation of both the IHFA and the SOFF. It argued that the Act did not prescribe any specific form of documentation to prove medical necessity and that, as long as the record met the clinical standard of care when read holistically by an expert, that should suffice. It also submitted that paragraph 6’s use of the word “request” should be harmonized with the regulatory framework for delegating ultrasound performance via medical directives, such that a standing medical directive from a radiologist, applied by sonographers to particular patients meeting specified criteria, counted as a radiologist’s request for purposes of billing.

The Court’s analysis on de novo hearings and procedural fairness

The Divisional Court upheld the HSARB’s characterization of its proceeding as a hearing de novo. Reading sections 24.9 and 24.10 together and in light of the IHFA’s purpose, the Court held that the Board is empowered to appoint a hearing, receive fresh evidence, and then “direct the Minister to take such action as the Board considers the Minister should take” under the Act. That wording signals that HSARB does not review the Minister’s Opinion Letters on a deferential standard; instead, it may entirely substitute its own view of the facts and law. The Court noted that there is no requirement in the IHFA that the Board defer to the Minister’s reasons or confine itself to the Minister’s record. The ability to hear evidence and replace the Minister’s decision with its own supports treating the proceeding as de novo, consistent with other authorities on similar statutory schemes. On procedural fairness, the Court rejected the appellant’s complaint that the Minister improperly expanded its grounds. The Opinion Letters themselves expressly referred the reader to a Supplementary Information section detailing the Ministry’s review findings and setting out the relevant SOFF and IHFA provisions. That material expressly included paragraph 6 of the general preamble and a statement that the records did not document why the additional pelvic ultrasounds were medically necessary. In the Court’s view, the letters put Di-Med on notice that documentation of medical necessity and compliance with SOFF paragraph 6 were live issues. Because the Board hearing was de novo, HSARB could also consider fresh evidence from the appellant about the medical directive and delegation practices and then apply the statutory and policy framework to those facts. The Court concluded that Di-Med had a fair opportunity to respond—its own witnesses testified at length about the medical directive, sonographers’ role, and record-keeping practices, and its counsel advanced detailed legal submissions on these points. There was therefore no breach of procedural fairness.

Substantive findings on documentation, delegation and reimbursement

On the merits, the Divisional Court found no reviewable error in the Board’s conclusion that the fees for the limited pelvic ultrasounds were not reimbursable. Sections 24.1(3)–(5) and 24.3 of the IHFA, read with paragraph 6 of the SOFF preamble, clearly require that an IHF maintain records that both show medical necessity for the service and document that an additional imaging study was specifically requested by the referring physician or a radiologist before it is billed as an insured facility fee. The evidence before HSARB, which the Court treated as findings of mixed fact and law, showed that Di-Med’s records did not contain any such documented request from a radiologist in almost all of the sampled cases, nor did they consistently record why the pelvic scan was medically necessary beyond generic or non-diagnostic comments. The appellant’s theory that the medical directive and “after the fact” radiologist review transformed sonographer-initiated decisions into radiologist requests was rejected. The Court held that nothing in the legislative or regulatory scheme supported stretching the word “request” in paragraph 6 to include a sonographer’s discretionary application of a standing directive, later approved retrospectively by a radiologist. Likewise, while a medical directive may govern who is authorized to perform an ultrasound, it does not displace the IHFA’s separate, explicit documentation requirements for billing. Even if each limited pelvic ultrasound were in fact medically justified on clinical grounds, the statutory presumption in section 24.1(5) applied: in the absence of contemporaneous records showing medical or therapeutic necessity, the service is deemed to have been provided but the amount payable is nil. The HSARB therefore acted within its mandate in upholding the Minister’s reimbursement order.

Outcome, successful party, and monetary consequences

In the result, the Divisional Court dismissed the appeal in full, confirming the HSARB’s de novo decision and the validity of the Minister of Health’s recovery of facility fees for the limited pelvic ultrasounds. The Court also rejected the appellant’s attempt to overturn the earlier order granting HSARB leave to intervene on the de novo-hearing issue, holding that the motion judge’s exercise of discretion disclosed no error. As the successful party, the Ontario Minister of Health was awarded partial indemnity costs on the appeal in the all-inclusive amount of $15,000. When combined with the underlying reimbursement of approximately $294,692.25 in facility fees that Di-Med is required to repay, the outcome effectively favours the Minister to the extent of roughly $309,692.25 in total monetary consequences ordered or upheld in the Minister’s favour.