Locum tenens agreements can be useful to physicians in many circumstances. In addition to serving as a way to supplement your income during vacations, physicians often enter locum tenens agreements between jobs, to provide income while waiting for interviews or for credentialing to be completed at a new position.
In many ways, reviewing a locum tenens agreement is similar to reviewing a physician employment agreement, but there are unique aspects to locum tenens agreements that physicians should be cognizant of. As the most obvious example, a physician employment agreement clearly creates an employer-employee relationship. However, the physician’s status can be either an employee or an independent contractor in locum tenens agreements.
The implications of being taxed as an independent contractor rather than being taxed as an employee can be material to the bottom-line impact of the relationship to the physician. Employment taxes are significantly different for employees and independent contractors. As an employee, the physician will have 50 percent of his or her Social Security taxes paid by the employer, while an independent contractor will be responsible for 100 percent of these taxes (6.2 percent of income up to $160,000 in 2023 for an employed physician, as opposed to 12.4 percent of that amount for an independent contractor physician – a difference of up to $9,920). Additionally, independent contractors can deduct expenses related to the engagement (such as transportation to the location and housing away from home). Independent contractors may also be able to deduct expenses related to licensure, CME, DEA registration, board certification and recertification, and other expenses required of physicians. None of these deductions are available for employed physicians.
Unfortunately, very few locum tenens agreements, even those which create an employer-employee relationship, have significant physician benefits. One critical exception to this rule is the provision of malpractice insurance. Every locum tenens agreement should provide malpractice insurance. Although generally “tail coverage” is provided, this obviously should be specifically addressed in the agreement.
As is the case with a physician employment agreement, the locum tenens agreement should have clear provisions concerning the patient contact hour requirements. There should be specific limitations on the number of consecutive days or nights the physician is required to work, for example. Also, as should be provided in physician employment agreements, the locum tenens agreement should provide that the locum tenens company will bear the cost of medical staff credentialing.
One common issue in locum tenens agreement seems to be overreaching indemnification provisions. I have seen locum tenens agreements requiring unlimited indemnification from the physician against any malpractice claims. Any indemnification should be strictly limited to the amount of insurance coverage.
Beware of covenants not to compete in locum tenens agreements. If the locum tenens company is supplying physicians to a hospital, it is reasonable to require that the physician not apply for privileges at that hospital for some period of time (e.g., one year), but the agreement should not prohibit working for other locum tenens companies, hospitals, or private practices.
It’s helpful to know what other locum tenens agreements provide. It is usually possible to get reimbursement or direct payment for travel expenses to and from the assignment, lodging expenses if the assignment is more than a reasonable distance (e.g., 50 miles) away from home, reimbursement for a rental car, and a meal allowance. Sometimes it is possible to be reimbursed for the expenses for traveling home during the assignment. Reimbursement for lodging and the rental car should cover the day before and the day after the assignment.
Valuing your services as a locum tenens physician can be challenging, and most benchmarks only provide information for employed physicians. Nevertheless, benchmarks can be useful in establishing a floor for reasonable compensation. Determining what employed physicians (with health insurance, retirement plans, disability insurance, etc., provided as part of their employment) are being paid can be used as a compelling argument for increasing compensation for a physician who is not getting any of these benefits.
Dennis Hursh is a veteran attorney with over 40 years of experience in health law. He is founder, Physician Agreements Health Law, which offers a fixed fee review of physician employment agreements to protect physicians in one of the biggest transactions of their careers. He can also be reached on Facebook and LinkedIn.
