Interested in locum tenens? Beware of fees.

Eighty-five percent of health care facilities used locum tenens temporary doctors in 2019 to address their staffing shortages or gaps in coverage.

Physicians are turning to locum tenens work to allow them more flexibility, extra income, the ability to travel, and exposure to new and evolving patient care environments. But what they are likely not aware of is the price tag on their heads if or when they decide to consider a permanent position.

You see, in the locum tenens industry, agencies contract with the health care facilities to provide this valuable service, but they not only charge a fee for locums work, but they also include a permanent recruitment fee.

On the surface, it seems fair enough. If in the event that a facility that has been introduced to a physician by the agency then decides they want to offer the physician a permanent position, they should have to “buy them out of the contract,” right?

Some agencies refer to this as a permanent recruitment fee or a conversion fee. It’s essentially in place to cover lost revenue when the locums fees end and a viable locums resource is lost. It’s meant to be a deterrent in most cases, and these fees can be $10,000 to $40,000 or more depending on the specialty and other factors. Without this “deterrent,” hiring a locums provider might even prove less expensive than paying the locums fees.

But locums agencies invest a considerable amount of money to be successful in providing this service and the procurement of viable candidates for their clients. However, as a locum physician or provider, do you even know what your “perm price” is?

It’s not something that agencies share with their locum providers because it is in the client contract as it is a client responsibility. And while we are talking about that contract, it’s interesting to note when and how that fee is often applied.

Most standard locums agreements state that the fee is not only applicable when the physician accepts a permanent position with the client facility, but it extends to any affiliated facilities as well. Some contracts even go so far as to say that it also extends to non-affiliated facilities, often within a certain mile radius from the worksite.

It’s not clear if that loose contract verbiage is successfully pursuable in a court of law, but it exists. And this fee is typically applicable for one to two years either after the day that the candidate was shared or presented to the client (even if the provider didn’t go to work there) or the last day of the assignment worked.

As a locum, that is a lot of money and a lot of time to carry a price tag on your head that likely extends to hundreds of facilities. It’s estimated that over 52,000 physicians worked as locum tenens in 2019. How many of these physicians knew what monetary limits were being put on them in being considered for a permanent option in the future?

What effect does this have on a health care facility as it pertains to their recruitment plan? With the prevalence of locum tenens usage, many internal recruitment departments have had to build a careful process and protocol around these contractual requirements.

Processes have to be put in place to make sure they can easily recall which physicians and providers are essentially “agency-owned,” for how long, and what price tag comes with hiring someone that was previously provided for work or even just presented or name cleared by a locums agency.

Many larger systems have looked to MSP or VMS support as part of this solution because it is so intensive to keep up with internally. When you are recruiting from a limited pool of candidates, the availability of candidates that are without an agency payout becomes less and less.

It becomes difficult and more expensive to reach candidates, and it can affect your placements unless you’re willing to pay. That expense then has to be factored into the overall recruitment expense, and the compensation budget takes a hit, making it even more difficult to procure candidates.

Some can argue that the conversion rate in the locums industry where a locums becomes a permanent staff member makes this a non-issue.

Most agencies report that it is a small margin of less than 5% of locums that convert to permanent. However, many locums firms have touted their ability to provide a temp-to-perm offering, sighting the “try it before you buy it” mentality for both the client and physician. This resonates with both parties as a creative recruitment solution, but health care facilities could argue that it’s cost-prohibitive with some of the high rates that are associated.

In any event, a physician that is interested in providing this very necessary and valuable service as a locum tenens should be aware of the fees and policies and know the right questions to ask when making decisions on what agencies can represent them in this growing and competitive market.

Suzi Richards is president and founder, Best Locum Tenens, LLC.

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