Locum Tenens Agreements

Things you should know before you sign a locum tenens agreement.
locum tenens agreements

Locum tenens agreements

Locum tenens agreements can be useful in many circumstances. Physicians frequently enter locum tenens agreements if they have been given notice of a for cause termination of a physician employment agreement or have been on the wrong side of without cause termination in physician employment contracts.

Reviewing locum tenens agreements is similar to any other kind of physician contract review, but there are unique aspects to locum tenens agreements that you should be aware of. For example, a physician employment agreement is just that – by its name it is clear that the physician will be an employee. However, your status as an employee or an independent contractor is not a given when dealing with locum tenens agreements.

The tax implications of being an independent contractor versus an employee are significant. First, there are the issues of employment taxes. An employed physician will have half of his or her Social Security taxes paid by the employer. An independent contractor will be responsible for all of these taxes (6.2% of income up to $160,000 in 2023, versus 12.4% of that amount if you are an independent contractor). In addition, independent contractors can deduct expenses related to the gig (transportation, housing away from home) and, perhaps, expenses related to licensure, CME, DEA registration, board certification and recertification, etc. None of these deductions are available if you are an employee.

Unfortunately, even as an employee, very few locum tenens agreements have significant physician benefits. The very important exception to this rule is malpractice insurance. Virtually every locum tenens agreement does provide malpractice insurance. Although the general rule is that “tail coverage” is provided, this is obviously a major point that needs to be confirmed. (If you are not sure of the significance of tail coverage, please see my full discussion of malpractice insurance in physician employment agreements.)

As with a physician employment agreement, there should be a good discussion of the patient contact hour requirements. This would include limitations on the number of consecutive days or nights you are required to work.

Also, as with physician employment agreements, the cost of medical staff credentialing should be borne by the locum tenens company. Beware of overreaching indemnification provisions. I have seen locum tenens agreements that require unlimited indemnification from the physician against any malpractice claims. Your indemnification should be limited to the amount of insurance coverage.

I am also very leery of covenants not to compete in locum tenens agreements. To the extent 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). Physician covenants not to compete are always a problem, but a locum tenens agreement should not prohibit working for other locum tenens companies.

As with any other agreement, it’s important to know what to ask for. I usually try to get reimbursement or direct payment for travel expenses to and from the assignment, lodging expenses if away from home, and a meal allowance. Sometimes I am able to get the expenses for traveling home during the gig paid or reimbursed as well.

Valuing your time as a locum tenens physician can be challenging. Medical Group Management Association (“MGMA”) benchmarks generally cover employed physicians. However, I believe that an MGMA compensation analysis can be useful in setting a floor of compensation. Finding what employed physicians (with health insurance, retirement plans, disability insurance, etc. provided) are making can be a strong argument for increasing compensation for a physician who is getting none of these benefits.

If you would like us to review a locum tenens agreement you can start your review here.

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Dennis Hursh

Dennis Hursh has been providing healthcare legal services in Pennsylvania since 1982. Since 1992, he has been a physician's lawyer serving as Managing Partner of Physician Agreements Health Law, the first law firm in the country to focus exclusively on physician employment agreements. Dennis has devoted his life to serving physicians and medical practices. He is the author of the definitive book on physician contracts "The Final Hurdle - a Physician's Guide to Negotiating a Fair Employment Agreement, and a frequent lecturer on physician employment agreements.

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Physician Prosperity Program

How It Works

After purchasing the physician contract review, you will receive an email asking you to transmit the agreement and any concerns you have to me. Many physicians do this by email, but I will be available by phone, too. In three business days from the time you purchase the Physician Prosperity Program® and transmit the draft physician employment agreement along with any concerns you have about the agreement and the information I will need to perform the MGMA analysis, you will receive a detailed physician contract review letter from me.

After you receive my physician contract review letter, you will have the opportunity to discuss it with me, to make sure all of your concerns were met, and to correct any factual inaccuracies, or to point out things that were verbally promised but didn’t make it into the physician employment agreement. These discussions, and revisions of the letter following these discussions, are included in the initial fixed fee.

Once you are completely comfortable with the physician contract review letter, you transmit the letter to your potential employer.