The Logistics of Locum Tenens

With the ongoing outflux of physicians across the nation, the role for locum tenens, or temporary, providers is expanding exponentially. Locums was originally a way to help staff rural and underserved communities, but in recent decades has expanded into all locations and practice types. Still, only 6% of practicing physicians are locums providers. Some of this may be due to the mystery behind locums, so I hope to unveil and clarify some of that with the below Q’s & A’s.

Are there any contract issues in the locum tenens contracts that should be scrutinized?

Any physician contract should be reviewed in order to be fully understood by the signing physician. Locums contracts are typically straight forward, but should be reviewed for at least two key points: malpractice insurance and termination. In regards to malpractice, you should confirm you are covered under their malpractice policy and understand their policy limits and terms. Also confirm what their plan is if the company dissolved. In regards to termination, it is important to determine your termination notice and the hospital’s (typically 30 days for both parties), and what impact that may have on you. Often if either party cancels >30 days from the assignment there is no penalty, but termination <30 days requires payment for the services that were not completed.

Are there any contract issues in the physician’s full-time contract that might interfere with locum tenens work?

Yes, absolutely. Most employed contracts restrict outside work. Typically, you are required to have outside work approved by your employer, and additionally your earnings may be the property of your employer. If this clause is in your contract, we generally discuss this during our review process and encourage physicians to understand the approval process for their current employer. If you know you plan to participate in a locums position, we recommend negotiating a pre-approval into your contract.

How common are restrictive covenants in locum tenens contracts?

Restrictive covenants are often seen in employed or independent contractor deals, not usually in locums agreements.  There are many state differences and this is constantly changing. Keep in mind there is a sort of non-compete in locums contracts. In the locums world, this generally means that if one company presents you to a hospital, you cannot be presented to that hospital by another company nor can you seek a job there on your own without the original locums company receiving a kickback, which may be due by you or the hospital. This restriction typically expires after 24 months.

Is it necessary to have a lawyer (or contract specialist) review a locum tenens contract? Have you consulted on locum tenens contracts? 

We have reviewed many locums contracts in the past. They are fairly simple documents but still should be reviewed by someone that understands the market. Often times an attorney is not the best or only stop for this. Locums agreements are generally ‘legal’ and the provider is mostly looking for an explanation of the terms: how they can leave or accept assignments, how to negotiate them with the locums company, etc. Someone (like us at Contract Diagnostics!) familiar with the unique locums market is a great place for this.

How do you terminate a locum tenens contract?

It all depends on the terms of the agreement. This should be clearly defined in your contract. Most have a 30 day termination provision. Generally this is equal for both parties. Please be on the lookout for unequal provisions (ex. The provider has to give 60-days’ notice while the facility gives only 30-days’ notice) and consider how that may impact you.

Any points that late-career physicians should be aware of when considering locum tenens? 

We think locums is a great way for providers to continue to do what they love doing on their own terms and schedule. We know the population of providers is aging and there will be many retiring soon, so we will need physicians to care for our ever-growing population. The locums market is poised for robust growth over the next 5 years and should any physician wish to participate in it we think he/she will be rewarded well. 

Can I do Locum Tenens as a new graduate?

Yes, absolutely. This can be a great way for a new graduate to become familiar with a particular location, practice setting, patient population, you name it! We know more than half of physicians will leave their first practice within 2-3 years, which can come with a hefty price tag and a good deal of stress. Locums allows physicians to have a planned shorter term if multiple experiences are desired, and there are also temporary to permanent positions available that allow the young physician to start as a locums provider then stay on as an employee with the practice if desired. This is a great way to interview a practice (and for them to interview you) before signing the more binding employed contract. Be aware that there is typically a buyout fee for you to become a permanent physician and is often $20-40k, so this may impact you, for example in the form of a decreased (or eliminated) signing bonus.

What do I do about my benefits, such as retirement and health insurance?

You will notice those are likely not included in your contract, so these can be arranged on your own. For providers who have a significant other employed in a full-time position, you may be able to sign onto a family insurance plan. For others, you can look at private insurance or on healthcare.gov for Marketplace coverage. Retirement options are available such as SEP IRA or Solo 401(k) plans and options pertinent to you can often be best explored with your financial advisor. Disability insurance and life insurance are available for purchase as private plans. We do have some affiliate companies at Contract Diagnostics who we have vetted for these products and we would be happy to put you in touch with a resource when needed.

Am I employed or an independent contractor?

When working with a Locum Tenens agency, you are working as an independent contractor. This means you receive your gross pre-tax income on each paycheck and will receive a 1099 at the end of the year instead of your usual W-2 form as received from an employer. As a result, please keep in mind the fact that you will still need to pay state and federal taxes out of that gross income. These should typically be paid in quarterly estimates to the IRS and individual states, and then final numbers can be determined when you submit your year-end taxes. There are several complexities and nuances associated with a 1099 relative to a W-2 that are best reviewed with your accountant.

Should I set up an LLC or an S-corp?

While many physicians do create S-Corps or other formal entities, everyone has his or her own individual needs when it comes to tax structure, risk, etc. We encourage you to hire a qualified tax attorney or CPA to evaluate your personal situation and goals and advise accordingly.

Are all locums contracts the same?

No! A contract for one locums company is not the same as for another, so please do your due diligence to review and note the subtle differences. They may look very similar, but all it takes is a few key words to entirely change the risk within a clause. Our team at Contract Diagnostics is happy to help with this review.

Do you have data on how much I should make as a locums? Is the rate they offer me negotiable?

We have our internal data from Locum Tenens contract reviews that we can share. Although we have MGMA data, unfortunately they do not include Locum Tenens positions. The rates you are offered are definitely negotiable and we are happy to help you determine what an appropriate rate for your position would be.

What are the advantages and disadvantages of being a locums through an agency versus directly through the hospital/employer?

This question touches on locums independent contractor work (1099) versus employed per-diem or prn or internal locums work (W-2). From a contract perspective, your contract will likely look very different, so please make sure to have that reviewed. With a direct-employed internal locums/per diem you will be on a W-2 contract and you may be eligible for benefits through the company. Additionally, you should be able to negotiate a higher rate than if you were hired through an agency, as the hospital is saving themselves that third party fee. As an employee, state and federal taxes will be withheld and your social security tax will be paid by the employer. We always like to be sure that an employed locums position still has the same basic and important benefits as a locums contract would, such as appropriate malpractice coverage, licensing fees fully reimbursed, travel and lodging included, and a clear and fair termination policy.

If you would like to know more details about what to expect as a locum tenens provider, please do not hesitate to contact Dr. Kathryn Sarnoski, who has held multiple OBGYN locums positions, at [email protected]. If you have a contract you would like to review, please reach out to us here at Contract Diagnostics. We hope you have found this educational and look forward to working with you!