Having worked in locum tenens for almost 2 years now, I feel that I have a good grasp on ways to maximize the experience. This article will serve to give a honest appraisal of the pros and cons of locums practice, describe the financial/tax advantages of such, and give tips on how to make the setup work for you.
Is locum tenens right for me?
For most people, it’s a qualified yes. Overall, I think locums is a great way for new grads to learn the ropes of the profession, get exposure to different practice patterns, and pay down loans fast. Concurrently, it also works well for those nearing retirement who may not want to work a full schedule but do want to preserve flexibility in their schedule.
Generally, since locums by definition is a temporary assignment without guarantee that the placement will be based in your preferred area, it’s more appropriate for those without firm attachments to a particular place. Often times, family is the reason doctors drop out of locums. Either they get married and have a spouse who is from or has a job in a particular place, or kids come into the picture.
I’d say that locums is generally better for those who are less subspecialized, to maximize the number of opportunities around the country. Someone in primary care, hospital medicine, general surgery, radiology, and ER is much more suited to doing locums work, since shifts and warm bodies are largely interchangeable. In contrast, pathology, neurosurgery, and EP are more specialized and thus tend to only have openings in tertiary referral centers in large metropolitan areas. These are normally hot locations and with a surplus of providers, so there’s less drive for locums positions to open up.
That leads us to…
What are the pros and cons of locums?
- Higher hourly income than a full time job. Positions that are desperate to have shifts filled offer premium pay to attract a bunch of providers in a hurry.
- Benefits if you know how to use them. It’s a bit of a wash, as the benefits that normally come with a full time position are shifted into base pay and amenities attached with the assignment. We’ll learn later how to maximize them.
- No need to worry about billing or productivity. Since you’re paid by the hour, you’re a glorified salary worker with no benefit to seeing higher volume or worrying about maximal billing (though you still should, as we’ll see later).
- Taxation. Being paid on a 1099 rather than W-2 basis allows one to legally take all sorts of business deductions, if you play your cards right.
- Seeing the country and the world. Imagine being able to go to Maine in the summer, the Caribbean or Hawaii in the winter, and staying there at no cost. There are also international placements – many people go to New Zealand for example.
- No guarantee of work. Your position can be canned with a month’s notice if the position gets filled by full time hires. In other times, there just aren’t enough shifts to go around to meet your needs, either because of full timers, per diems, or competition from other locums at the site. Other times, the site just plain won’t like you and can terminate you at any time. This can be an endless source of stress if you don’t mitigate it.
- Lack of other benefits. Again, I’d put benefits under both pro and con because I think of it as a shift in type of benefit to other things that ultimately comes out to be a wash overall. Essentially, you lose health insurance, retirement benefits,
- Travel time. Having to fly back and forth to a remote location can be a real downer, taking up the bulk of a day.
- Taxation. Again both a pro and a con. The major con is having to file taxes in multiple states, being responsible for paying estimated quarterly taxes, and double taxation for payroll tax (Social Security and Medicare contributions)
How to maximize the locums payoff
Knowing the above, I’ll now get to how to maximize enjoyment/benefits and minimizing the downsides, based again on my 2 years of experience and background in investing/finance.
The first key is to take advantage of the benefits. Normally, contracts come with housing, flights, and a rental car all paid for by the client. My preference is to have long-term arrangements “living in” each community, with shipping or driving my car (reimbursed of course) to the site. The housing stipend (in my experience $2500-$3500) is generally enough to get a furnished apartment or a private Airbnb in the area close to the workplace. My preference is for Airbnb due to the flexibility of being able to cancel up to a month in advance if the client’s needs change. Living in the community will shorten the commute time and minimize flights back and forth. It will also let you save money by not having to maintain a home anywhere else. Yes, you’ll be a bit of an itinerant tramp, but with furniture provided for, you won’t have to bring much when you move from site to site. Living in the site will also endear you to the client. If there’s a last minute emergency shift that needs filling, you’re already on site and can take it. Also, no matter how many shifts in a month you do, the client won’t have to pay more for extra hotel days. Also, you won’t incur any flight costs for the client by virtue of relocating yourself to each new site. Finally, by shipping your car, you can reimburse the mileage driven from home to work, and again save the client money by avoiding a car rental.
If it’s unavoidable for whatever reason and you have to maintain a home elsewhere and commute back/forth, do the next best thing and take advantage of hotel and airline rewards programs. In my experience, Hyatt has the best rewards and you can accumulate free days very quickly without having to spend a lot of money. Hyatt Place is a great mid tier brand with a full free breakfast, but unfortunately is only located in major metro areas. The next best is Hilton, due to widespread availability, easy to earn status (Gold = free breakfast at HGI and Doubletree), and many free breakfast options (Embassy Suites, Hampton Inn) even without status. IHG is my third choice mainly due to availability, especially in rural areas. Holiday Inn Express, while not the best place to stay, works for a clean, comfortable, hassle-free experience with free breakfast to boot (comparable to Hampton in quality). You will accumulate points easily that can be redeemed for free nights at a fairly frequent basis, but higher rewards tiers don’t come with as good concessions (no free breakfast) compared to Hyatt or Hilton. Other locums have used Marriott or SPG, but my reading of their rewards programs is that they’re on the less generous side of things overall, and aren’t as widespread as either Hilton or IHG.
As for flights, my preference is Southwest plus another. When possible, Southwest is generally the cheapest point to point between major metro areas, and the two free bags is a lifesaver when moving homes. They also have many direct flights from the cities I care about (San Jose and Dallas), and their rewards program is quite fair in terms of availability and usability of points. The next tier in my book is Delta, mainly because their points don’t expire. They also fly to many remote locations and have hubs that I use frequently (Salt Lake, Minneapolis, Atlanta). Of course, in your situation things may be different, and United, Alaska, or American may be better options based on your home city. Sometimes they will be the cheapest and most direct flight, but my preference is not to use those if I have an equal option due to worse frequent flyer benefits (for United and American) or limited geographic reach (for Alaska, though they are improving).
After optimizing your travel/housing situation, you should turn your attention to the direct financial implications of being paid as an independent contractor. The main advantage to this is being able to expense certain things from your business. Although, with most housing and travel expenses paid for, the most rewarding deductions left over is meals while away from home (per diem accounting of this eases record keeping). However, you will be able to set up a SEP IRA or Solo 401k. The former is easier to set up and has fewer reporting requirements but you have to make more than roughly $280,000 per year to reach the maximum contribution limit of $55,000 for 2018. This is a great perk which we should definitely seek to maximize, as it’s a higher limit than standard employed 401k plans ($18,500 limit). The Solo 401k is more hassle but does let you reach the same $55,000 limit with lower income. In terms of investment options, both are the same. For me, I use a SEP IRA since I work a full time schedule and can easily clear that income hurdle.
Lastly, we’ll talk about mitigating the downsides of being an independent contractor. While there’s nothing we can do about double payroll tax, we can at least deduct the employer half from our gross business income. This leaves health insurance, which most people will either buy from the ACA marketplace or get for free from a spouse, the latter being the best option if you’re lucky enough.
Don’t forget to pay estimated quarterly federal and state taxes. Pay attention as they can be on different schedules! Normally for W-2 wage earners, your taxes owed are deducted from each paycheck. As a small business owner or contractor, you have to calculate taxes on your own. I find that the best way to navigate this is to pay enough to meet the safe harbour clause. For high wage earners (anyone over $150,000 filing as married), this means paying 110% of total federal tax from the previous year. As a simple calculation, if your total federal taxes for 2017 is $60,000, you should plan on paying $66,000 in quarterly installments in 2018 to fall under safe harbour. It doesn’t matter if you ultimately earn more than that. You’ll still have to pay what you owe, but by paying the safe harbour minimum, you won’t be charged fees and penalties for underpayment. As for how much to set aside from each paycheck, I’d go with 35% if you’re in a low tax state and 40% if you’re in a high tax state. While setting this aside it can be helpful to have the money earn interest in a money market account or short-term bond fund until you have to pay.
With the recent tax law overhaul, working professionals stand to benefit from lower rates. Yes, there’s a loophole where high-earning professionals can reduce their taxes substantially without having to incorporate as a pass through S-corp.
Of course, if this is too hard you can always find a tax accountant to do things for you.
I purposefully leave out life insurance as I feel that it’s a big waste of money. The main point is to leave something to your heirs, but if you’ve been doing everything correctly and investing on schedule, your estate should be big enough to more than outweigh any insurance payout.
How to pick assignments
Early on in your locums experience, you may be tempted to commit to one state license or one job. Don’t. Locums who fail to plan can end up with no work at a moment’s notice. Instead, get credentialed in multiple states where you think you can get work and see what’s available. I divide sites into two categories (this will be from a hospitalist perspective now). Tier one is a desirable primary site with low census, good EMR (I like Epic), low-no procedure requirements, closed ICU, and located in or close to a major metro area (to minimize flight time). Due to desirability, this site will require a long-term commitment usually on the order of 4-6 months minimum, with a minimum schedule each month (typically 7-14 shifts). Tier two is a higher census typically rural site that’s more desperate for providers and will take anything from anyone, even on a part time or ad hoc basis. It’s good having a site or two like this in one’s back pocket in the case of a dry spell. You can even have a tier three which is purely per diem arrangements with local hospitals.
This is also a rough guide to how to screen for assignments in general. Again, from the hospitalist perspective, I like bigger groups with more concurrent hospitalists. This means that any unexpected surges in workload is distributed more evenly (only 1-2 extra patients per provider) as opposed to the same volume spread over 4 hospitalists, which can overwhelm the system. No joke. I’ve heard of some hospitalists who start at a site and quit after a day due to the high workload. Average census is probably the next most important to screen for. It can be helpful to get a sense from people on the ground as opposed to just the medical director, who can be biased in trying to sell the position. My general goal is to shoot for 12 patient census for 10 hour shifts, 15 census for 12 hour shifts, and to also inquire if there are concurrent admissions. The most extreme workload that I’ve done is average census 15, 3-4 admissions, 12 hour shift, with no cap. That was brutal. The other end of the spectrum is a census of 9-13, 10 hour shift, no admissions, which usually led me to “finish” the day at 2 PM. I think it’s far better for health/sustainability and med-legal reasons to keep to the lower census sites as much as possible. Even from a financial perspective, it’s better to be able to work 21 shifts and still be fine mentally (and still be able to do stuff each day after work) rather than only 14 shifts and still feel burned out.
As an added bonus, some sites have policies in place that allow rounders to go home early when they’re done with work. These places are worth their weight in gold if you find them, and almost inevitably fill quickly. If I can work 7 AM – 4 PM, get home on time, take the remaining cross cover call from my gym, and get paid for a full 11 hour shift, sign me up to work 28 days straight here!
For me personally, EMR is an important screening criteria for sites. I grew up with Epic. It’s the only EMR I’ve used since starting medical school, barring short stretches at the VA and the local student-run free clinic which was on Allscripts. My comfort level with Epic is so high that I’m twice as efficient on there as compared to any other EMR. I can very easily navigate through all the tabs to get the relevant information on patients. As someone who prefer to type, use templates and add in smartphrases than dictate, I can type out a note in roughly 10 minutes from start to finish on Epic, as compared to closer to 30 minutes fumbling through a dictation and waiting for it to upload (full disclosure: I’ve never dictated before and don’t plan to start). This means I can tolerate sites with high workload if they’re on Epic, while a hospital using Meditech will need to tempt me with far better hours/pay to get my consideration.
As a general rule of thumb, I like to think of the US in terms of geographic areas. The Northeast is a wasteland for hospitalists. Census is generally on the upper end but the area is oversaturated due to the glut of academic programs pumping out providers who like to stay in the area. Even if you’re willing to work full time, good luck finding any position in NYC, Boston, or DC. If you do, it’s probably going to pay far less than $200k. In contrast, the South is what I like to call high workload, high pay. People who gravitate towards places like Florida, Tennessee, and Texas like the lack of state income tax (more take home pay!) and are willing to work hard for it. When I say work hard that means positions routinely advertise 20-25 average daily census, and 10-12 admissions for night/swing shifts. Moving on to the Midwest and Mountain West, I consider this to be my personal sweet spot. Perhaps due to the weather, there are far fewer providers here than anywhere else in the country. Thus, pay is high (for both locums and perm jobs) and census is generally very reasonable. My favourite is the Twin Cities, since I know the health systems well there and the fact that all the major systems are on Epic. The TC also have a great public transportation network, and it’s possible to go carless there including from the airport to all major hospitals. My second choice would be the West Coast (CA, OR, WA). Workload is in between the Midwest and the South, and pay is comparable to the Midwest. California is a great license to have, and there are generally tons of jobs, though not always in the most desirable areas. A big personal plus is that all the major health networks (Providence, Legacy, Kaiser, Sutter, Swedish) are on Epic.
How to be a good locums provider
While the previous section focused on what a site can do to be more appealing to locums, this section will be on how to be a good locums candidate and provider.
Put yourself in the shoes of a site. What they want is someone who has the fewest hang ups and is easy to deal with. An ideal candidate is willing to go anywhere, do anything, work at various hours of the day, learn the local system quickly, and not complain. This is why I’m so picky on which sites I screen for before applying. By carefully selecting just the best sites, I create an environment where I can get started on the first day and easily outperform full-time staff.
Aside from medical competence and efficiency, it’s also important to be attuned to the local political and dynamics within the group and between the group and the administration. Getting on the good side of admins, schedulers, care coordinators, and the chief is important. When the group evaluates whether to keep using locums and if there’s a crunch, which locums to cut, they’ll keep only those that they like and who perform well. Remember, you can stand to be picky when applying for jobs, but once you’re in the door, do your best to perform well. On site is not the best time to complain.
Finally, I want to emphasize how important it is to be cost-conscientious. Hospitals and groups don’t have unlimited budgets. If there’s any chance of waiving certain benefits such as rental car, or minimizing flights by living locally in long-term housing, do so. It will improve your standing in the client’s eyes and again make you more competitive to retain or to be asked back when they have options.
So there you have it – the nuts and bolts, inside scoop on the locums life from someone who’s been through it. Personally, I’ve loved locums overall. It might not suit everyone’s lifestyle or approach to things, but it fits what I want from my career at this time. Use the above tips. Structure things well and through careful maximization of benefits, sites, shifts, and tax treatment, you can earn as much as an orthopedic surgeon while working half as much.