Is Locum Tenens Worth it for Physicians?

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I’ve got friends that have done locums for a variety of reasons. We’ll talk about and you know, your current career goals are probably different than they were five years ago, and you probably have questions about how to go about achieving them. So it might be burnout. It might be the fact that you want a different schedule or the ability to travel.

And when that happens, many doctors turn to locum tenens as a possible solution. So we have partnered with locum story and they are an educational platform that gives you information, everything you need to know and want to know to learn about the benefits of locums and how it can work for you. on the locum story podcast, you can find expert interviews with physicians who’ve worked locum tenens firsthand and share what their experience was like with locum tenens.

Advice for others looking to do the same you can tune in at the locum story podcast on spotify apple wherever you listen to Your podcast or you can go to money meets medicine. com slash locums to learn more so Justin [00:03:00] I Want to start us with a story. I’ve got a friend who Had a w 2 gig had a non competing his contract Didn’t want to move his partner was also a physician.

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And so I What this doctor decided to do was to go do locums for a couple of years until the non compete was no longer a thing and The way that they did that was essentially doing locums work for that 24 month period And I can’t remember if they ended up negotiating it down to a year, but for whatever Length of time it was decided to do locums work and travels and for a week a month does enough to keep their skills up and to make some money while also having that non compete being dealt with.

And so, I’ve heard doctors do it for a lot of different reasons, but this happened recently. A friend of mine told me this story, and so this is what kind of prompted the idea in my mind. Have you seen a lot of docs that you work with do locums or consider it?

Justin Harvey CFP: It’s been interesting. [00:04:00] Anesthesia is obviously one of those desperately needed specialties. And, I do a lot of work with anesthesiologists. It’s also interesting to observe the increasing rates of anesthesia locums pay on the,the subspecialty fellowship selections where they’ve had like all time lows with some of the other, like no one wants to do fellowship anymore, because why would I, cause I can get out and just start making good money.

And as we have discussed in the past, the opportunity costs. Jimmy of taking one additional year to make PGY five money instead of attending anesthesia money. It’s a seven figure number if you multiply that out over the course of your life. So it’s actually a quite rational decision, but it has been interesting to observe the, you know, the impact in the healthcare ecosystem.

Jimmy Turner MD: Yeah, it’s actually, it’s interesting. So we have three regional anesthesia fellowship spots at Wake Forest. I’d say that we’re a top 10 clinical program in the country. we may not keep up with you in terms of the research side of things, but clinicians like you’re gonna be hard pressed to find a better anesthesiologist than one at Wake Forest.

And that said, we’ve actually had [00:05:00] trouble filling all three spots. and this year, in fact, we have two. And the reason why I reached out to other programs like, Hey, like, Is there something we need to be doing do we need our name out there in a different spot? Is this because of the new san francisco match thing that’s going on?

They’re like nope It’s just the market’s so hot people aren’t doing fellowship. I was like that is Fascinating so I say that to say if you are a Chief, or P G Y 4 C A 3 anesthesia resident listening to this show, and you want to do a regional fellowship with me, you can come hang out at Wake Forest. we likely have a spot for you.

but all kidding, I’m not kidding actually, I was about to say kidding aside, but I’m not kidding. so yeah, but people are foregoing fellowship for that reason, because the market is hot. And actually, I was interested, I was, every time I get 5, 000 text messages a day, I’m like, okay. About various jobs and opportunities and I always ask them like hey, what’s the pay?

I’m always curious what the structure is because hey, who knows maybe I decide to leave wake and i’ve got to non compete and I need to go like my friend I mentioned a second ago. Maybe I want some more [00:06:00] flexibility i’ve had a prior coaching client that was a vascular surgeon that goes and does surgery for a week every month tons of flexibility in their schedule to accommodate that.

Maybe your kids are gone. Maybe You want to travel more, and for some, it’s like, look, I’m just so burned out in medicine, I just need to make a change, and it needs to be less than what I’m doing right now, and Locum Tenens is either the solution or the bridge to that. but there’s a lot of reasons to consider Locum’s work.

Justin Harvey CFP: Absolutely. And I have observed, it’s a, there’s a huge. Psychological barrier there for doctors who in many cases, like ever since they were in 11th grade, like the next 14 years has been mapped out for them or however long, and there’s this real, like, it’s a moment of, oh my gosh, the guardrails are gone.

What if I just go careening over the cliff? but I have seen that whenever doctors get a little bit more comfortable and then if they can bring themselves to take the plunge, it’s like you take the red pill, [00:07:00] man. you, all of a sudden you learn something new and foundational about yourself and about the world.

And you are, living life a little bit more on your own terms.

Jimmy Turner MD: Yeah, and I think that what that will show you too, and maybe this is a little bit what you’re alluding to, is just how valuable you are. When you finally step outside that one job that you’ve always had, You realize, oh wow, like I am worth a lot more than what I’ve been paid or how I felt valued. And when somebody really needs you and needs your skill set and your specialty to help their hospital, all of a sudden you’re like, wow, like I’m actually extremely valuable, but you get these offers.

And one of the big mistakes that I see Justin, when people get these offers is that they try to compare their W 2 or even their private practice partner pay. They’ve got a sense of how much money that is. And they compare it to a locum’s offer or a 1099 offer not recognizing that the taxes are different and I’ll tell two funny stories one is and i’ve shared this on the show before but my first year out of fellowship My paycheck [00:08:00] was coming every month and then one month all of a sudden went up by a thousand dollars And I thought I made a mistake.

I thought something was wrong. I didn’t know what was going on And it turned out that I’d finally reached the social security wage base, and above which you no longer owe certain taxes, and so my paycheck went up 1, 000. I mention that because this brings me to the second point, which is that most people don’t realize that a 1099 offer and a W 2 offer, even if the numbers are the same, aren’t the same because of taxes.

Because as a W 2, you are taxed. Therefore a employee you’re an employee and as an employee you just play employee taxes your FICA taxes what they’re called So social security that wage base I mentioned medicare tax. There’s an additional tax if you make over a couple hundred thousand dollars If you are self employed at 1099 you are both the employee and the employer So guess what you get to basically pay that twice and so there’s an additional let’s just call it seven and a half percent That you have to pay if you have 1099 Money, right?

So when you’re [00:09:00] considering these compensation structures in 1099 work and locum’s work typically falls into that or often falls into that, that’s just something to be aware of. But I don’t think people understand the tax game here very well.

Justin Harvey CFP: Yeah. I’ve seen cases and I actually had this conversation with a client like a month ago who said that she was having this, Let’s talk about my career and where we’re going. and she’s, the, her employer said, it’s going great. We’re happy with you. You’re making what you’re making. Like, are you, do you want to keep doing it 10 89 or would rather have it W2?

And I pointed out to her, there’s actually a significant difference. You’re getting essentially like a 7. 6, 5%. Pay bump. That’s not precisely right because of break points and taxes and things. But, when you are W2, because your employer is paying that employer half of social security, whereas if you’re 1099 and you’re paying both halves, your tax bill is higher.

In addition, there’s other benefits to being W2. If there’s an employer plan, they have to include you eventually, you know, like a 401k or health benefits or those kinds of things. There’s other perks that may be yours on [00:10:00] the other side. Obviously 1099, you can, you’re running a business, you have expenses, you can deduct mileage, et cetera.

When you buy that laptop or when you, pay for CME, that’s all deductible. But I mean, usually if you’re W2, they’re going to pay for your CME anyway. So it’s not as easy as, Oh, I could take 400 grand. 1099 or 400 grand W2. It’s the same. It’s actually not the same.

Jimmy Turner MD: Yeah. And it’s a huge difference, right? You’re talking about 30, 000, that you may be leaving on the table because you don’t know. Yeah. And that kind of brings me to some other things, too, just,and truth and transparency, I haven’t done a locum’s gig, so Justin, you’ve got more experience with clients of yours that have done stuff like this, but, there, there are different ways, and I often wonder what this looks like in reality, where, like, hey, the hourly rate is X, it’s like, great, so what if surgeries cancel, what if things happen, and we go from, what was going to be a 10 hour day to an 8 hour day, but my availability was still there, do I lose?

600 if it’s 300 an hour, or do you get paid for the day like a daily rate? And [00:11:00] so, so for me, like when you start looking at these things, I really want to understand what are you incentivizing me to do? What am I getting paid and how does that pay structure work? Am I guaranteed a certain rate? If you don’t have enough to fill up my schedule, how have you seen that play out on your end

Justin Harvey CFP: Yeah. Having a guaranteed minimum is really important. Especially if you’re like, you got one week of vacation and you’re going to go to that far flung place. And you’re going to, you want to like, if you’re economically motivated, you’re trying to pay off student debt or you’re saving for a specific goal and you want to just go, go, go during that one week off, you don’t want to be like.

You know, punching out early and not maximizing or getting sent home on the call shifts or whatever you want to make sure that it’s clearly articulated with guaranteed minimums. or else you’re, yeah, you will have done all that for not.

And one additional thing to note is that if you’re working with a placement company, a locum’s company, they’re taking a cut. If I’m a hospital, I need to hire a doctor. I’m going to hire that doctor and I’m going to pay them 300 an hour. I’m going to pay whatever, 75 per [00:12:00] hour that that doctor works to the locum’s company who placed them with my hospital.

So one thing to be aware of, you can negotiate with the hospital. You can negotiate with the locum’s company and you can also. Negotiate by yourself with the hospital. You don’t need to use a placement company. In which case there’s often, you know, on an apples to apples basis, if the hospital can hire Dr.

A through the locums company or Dr. B, that is sort of representing themselves. There’s some additional margin in there that you may. As Dr. B be able to capture just by being aware of the

Jimmy Turner MD: Yeah, so this is hitting really close to home at the moment. So I got a text today about a gig from a recruiter that is for a job that our hospital just acquired. And so like, they’re trying to fill this shift and like, little do they know, I work in the anesthesia department that’s going to be filling that job very soon.

And so in fact, if I wanted to work that shift, I could do that through my employer. And [00:13:00] likely negotiate, as you’re saying, a higher rate than the locum’s company because they’re going to get a cut so I could save my employer money. Let’s say that they’re going to offer me 300 an hour through the locum’s company, but I know that 100, additional to that is going to the locum’s company.

I’d say like, Hey, I’ll do for 375. You’re saving 25 bucks every hour. And now I’m making 75 more per hour. Now, this brings up a point. That locums companies often have non competes in their contracts And this is part of the reason why is because once they have established that there’s a job that is interested in you What they don’t want you doing is signing up for a stint with them And then going back to the hospital directly after the fact And working at the place that they placed you and you can understand from a business perspective why that would be But if you’re signing a contract You need to understand what that means because let’s say that you travel somewhere and you’re like, Hey, I’m gonna check this job out.

I want to see this area and you love it and you love the job. It’s a perfect fit for you where you are in your stage of life and you want to stay. That brings in some added complexity. Now, given the non compete in your [00:14:00] contract. So there are opportunities to negotiate for things yourself. But the locals companies being paid a to recruit you and be to facilitate the process.

Make it easy, whether that be credentialing or paperwork or, moving whatever happens to be to help you facilitate that change more quickly and more efficiently in a better way. So they’re getting paid for services they provide in addition to the recruitment. But there’s wiggle room there.

And you can also negotiate, as you said, with the locals company. Maybe they normally take a 50 percent cut, but. You’re gonna give him 30%, right? So, so just be a business person and know your worth.

Justin Harvey CFP: Also realizing that the hospital, if you do move to, take a couple of locum shifts there and you love it and you want to be there and you want to work for the hospital, the hospital has to buy out your locums contract. And usually that will be a fee. that’s like a normal permanent placement fee.

That’s like, 15 to. 40 percent of the annual expected income of what they’re going to pay you. The hospital has to pay to the locum’s [00:15:00] company if you decide to take that job. So there are times at which that can change the, you know, it’s just another exchange of economic capital to be aware of in the sort of multifactorial consideration

Jimmy Turner MD: which,the surgeon that I mentioned earlier was talking to me about capital, cash flow, and one of the things he said is, Jimmy, I didn’t realize, it just didn’t dawn on me, it’s logical once you think about it, but, if you’ve had a consistent W 2 paycheck for years, and all of a sudden you go to a, Locums model where you’re working one week a month, you’re going to get a bolus cash flow for your week of working and then nothing for the next three to four weeks.

And so from a budget standpoint, you need to account for those boluses and cash flow, potentially estimated taxes you need to be paying and that it doesn’t look the same as a biweekly or monthly paycheck.

Justin Harvey CFP: Yeah. Bolus is one of those words I was introduced to when I met my wife and Cash bolus is my favorite kind of bolus, but, certainly having a little bit of margin, a little bit of wiggle [00:16:00] room in your, checking and savings accounts is warranted if you start getting more irregular pay cycle than what you’re,

Jimmy Turner MD: Yeah, so I think some important things to consider when you were considering locum tenants is the difference in 1099 versus W2 income, the difference in taxes. Difference in compensation structures. The fact that there is some wiggle room, that 30 to 50 percent that a lot of locums companies take, you might negotiate that with the hospital directly.

You might negotiate that with the locums company. and then of course, do your research, in, in looking into this myself a few times when I’ve considered this opportunity, I mean, there are places to go and look, like, hey, is it good to work with Glocum’s company XYZ? And there are going to be people online that give you their opinion on that experience.

and just know that, like, different companies handle things differently. who pays for your credentialing? Who does the malpractice policy? What’s the malpractice policy for the company you work with? Are there any benefits for going through that company? Do they have a non compete structure in place?

is it one that you’d be okay with, doesn’t need to be, you know, are you going to be working with the hospital after the fact, and is that [00:17:00] possible? Just sort through all those things on the front end, as you consider this, but I do think it’s worth mentioning that this is an opportunity that a lot of doctors consider.

Justin Harvey CFP: Yeah. And I want to encourage everybody to like, if it does feel that like the uncrossable chasm of, from the safe little nest of W2 employment to the wild west of working for myself via locums, like just try it once, take one week of vacation or one long weekend and do one call shift and just see.

Just see how it feels because you might find that that one experience opens up some doors for you and shows you potentially and I’ve Jimmy, you probably know these people too. I’ve seen people that like you build a whole way of life around this and you can actually, you know, work way less, make pretty good money if you’re willing to travel.

If you’re flexible, if. You could do two weeks on, two weeks off, one week a month. If you’re one of those coast fire people, you’re like, I can work one week a month and make three quarters of an anesthesiologist salary for the next, I mean, well, until [00:18:00] locums continues to, or until it ceases to be in demand.

But frankly, with all the macro trends in anesthesia in particular, and this is true with healthcare broadly, like you’re going to continue to be desperately needed for as long as any of us are

Jimmy Turner MD: Yeah, and I think it’s great to point out because there are a lot of people who say, hey, Jimmy, I’m, I’m a surgeon, or hey, I’m an XYZ specialty. I can’t go part time. And I like, well, there are other opportunities between staying at your employer and trying to go part time. You can go part time in other ways and locums is one of those ways.

So if you’re in a spot where you’re wanting to go part time, it’s just not shaken out and you’re considering other opportunities. It might be one too. So just think of as you’re going through that process. All right, everybody. Thanks so much for tuning in for this week’s show and make sure that you head over to moneymeetsmedicine.

com where you can snag a free copy of the Physician Philosopher’s Guide to Personal Finance and also check out Locum’s story. you can learn more at moneymeetsmedicine. com slash locums or check out their podcast as well. Justin and I will see you next week. [00:19:00] Cheers.