Let’s get one thing straight about locums companies; they are for-profit entities. They may make you believe they are in it for patient care, but in reality, they are a middleman seeking to make money off your services. The relationship, in some ways, is financially symbiotic. Practitioners make good money while the locums companies do as well. One could debate if this relationship benefits the patients, facilities, practitioners, and/or locums companies. The locums industry lacks transparency, leading practitioners to question the business practices of these organizations they work through. Thus, the more we discuss with our colleagues and facilities about the locums companies’ inner workings, the more educated we will become about the industry to benefit ourselves.
In this article, we review some of the costs and expenses for the locums companies. We take a superficial dive into how locums companies take care of their business, what they say to practitioners, and where the truth rest. This article does not cover all topics relevant to the locums industry, but hopefully opens the eyes to newbie and experienced locums practitioners.
Recruitment Fees. Locums companies will suggest that their overhead to recruit practitioners and broker deals with facilities is expensive, so they are worth the money. Are they? A traditional headhunter or recruiter gets an average $30-50,000 commission for landing a full-time clinician. Why is it that a locums recruiter is worth any more than this? Wouldn’t it make more sense that locums recruiters get a one-time finders fee rather than get paid based on a percentage of the practitioner’s hourly or daily rate? Instead, locums companies’ profit margins get larger as the practitioners work more hours and stay at a facility longer. If the locums company makes $1,000 off your daily services, then after 30 days, they have $30,000. Does your locums company need more?
Credentialing and Licensing. Many locum recruiters say credentialing practitioners at a facility and getting them a new state medical license is expensive. Yes, much paperwork is involved, but how much do those services truly cost the locums companies? Did you know that many locums companies use 3rd party vendors to complete the credentialing and licensing process instead of in-house staff? The reality is that these services are not expensive. You can hire a specialist to complete the credentialing process at a facility for around $250. Those same specialists will charge about $500 to help practitioners get a new state medical license. If you add it up, that is $750 to pay someone else to do the work that practitioners could do themselves. In most instances, a locums company will make at least $750 on your first day of working for them.
Malpractice Insurance. One of the beauties of locums companies is that they can provide immediate malpractice insurance in most states for most specialties. The locums recruiters like to say that malpractice insurance costs really cut into their profit margins. Does it? Most locums companies have malpractice policies where they pay, on average, $20-200 per day per practitioner. That does not sound that bad, considering the locums companies can make that money back very quickly if they charge the facilities $50-200 per hour more than they are paying the practitioners. Of note, some locums companies list malpractice as a separate item that facilities must pay for on their itemized bills beyond what they are already paying for the practitioner’s services.
DEA and Medical License Fees. In most instances, the fees for state medical licenses are paid for by the locums company and not reimbursed by the facilities. They can get a bit expensive for the locums companies as the fee for a new medical license and all the additional stuff practitioners must complete may cost $750-1500 in most states. Many locums companies are resistant to paying for a new DEA. You might be able to negotiate for the locums company to pay for ½ or it in total if you agree to a certain number of shifts. With the locums industry booming, we might soon discover that the facilities will have to reimburse the agencies for these items.
Travel Arrangements. Many locums recruiters will tell practitioners that a significant advantage of working with them is that they pay for the cost of having a travel agent arrange your travel. By no means should you ever think that this is a high cost to the locums companies. Did you know that many locums companies use 3rd party travel agents rather than have their in-house staff deal with it? Travel agents are available for $25-35 to book roundtrip travel, including flights, hotels, and rental cars. Agencies can also use online travel software that can book travel arrangements without the need for human interaction for only $5-15 per roundtrip. Arranging travel is not an expensive endeavor for the locums companies considering a practitioner could do this themselves if they wanted to. The cost of a travel agent may not be reimbursed by the facility unless the locums company sneaks it into their travel bill.
Travel Expenses. Don’t ever believe a locums recruiter if they tell you they pay for your travel expenses such as flights, hotel, rental car, mileage, or gas. Although it may appear that the locums company is reimbursing for these things, in reality, the facility is paying for it. Don’t make the mistake of thinking that the locums company is paying for your travel.
Additional Compensation. There might come a time when a practitioner asks for a higher hourly or daily rate. The locums recruiters will likely resist this idea as it may cut their profit margins. The recruiters might say that the hospitals are unwilling to pay you more. Don’t fall for this! Sometimes, the facility may pay more to make you and the locums company happy. In most cases, the locums recruiter must be willing to take lower margins to pay you more. So, if you are asking for a higher compensation rate, consider whether the hospital is paying more for your services or the recruiter decided to take less of a cut.
Noncompete and buy-out fees. When signing a Professional Services Agreement with a locums company, most practitioners become aware of the non-compete clause. Recruiters will tell you that the non-compete clause is standard and usually lasts two years. You might consider having this clause edited, but it may not matter as the non-compete the locums company has with the facility will take precedence in any argument. The recruiters do not speak of the buy-out fee if the facility were to directly contract with you while the non-compete clause is in place. This buyout fee can be anywhere from $10,000 to 25% of the average salary in your specialty. That is crazy money!
This, by no means, is an all-encompassing list. There are many more items that could be discussed. This article aims to educate and provide more transparency in the locums industry. If you ever want to move away from locums companies, consider contracting directly for locums-type work. When negotiating with facilities, you can ask them to reimburse for malpractice insurance, travel, medical license, DEA, and meals. Hopefully, this article got you thinking about the truths in the locums industry, the cost of some of these items, and who is paying for what.