Locums Are Not Employment: Why Strategic Staffing Requires a Different Lens
August 19, 2025
Why Locums Cost More—And Why That’s Not a Problem
Transaction Advisory
Physician Compensation
When a physician steps away, the impact on patient care and operations is immediate. Locum tenens can feel like lifelines, filling the gap quickly and reliably. But when leadership begins comparing locums to employed physicians, one critical mistake emerges: assuming they’re financially equivalent.
Locums Are Built for Short-Term Stability
Health systems typically engage locum tenens providers to solve a short-term problem, such as temporary leave coverage, vacancy, or growth outpacing recruitment. These arrangements are designed for speed and flexibility. They often involve premium costs due to urgency, travel, and rapid credentialing. But you're paying for a bundled solution to an immediate problem, not just clinical time.
It’s Not Just About Hourly Rate
A common misconception is comparing a locum’s hourly rate directly to that of a full-time employed physician. This doesn’t reflect reality. Employed providers receive salaries plus benefits, and their costs are absorbed across a broader operational infrastructure. Locums, by contrast, have bundled rates that account for travel, lodging, recruitment, administrative overhead, malpractice, and the locum agency’s profit margin.
A Real-World Example
Let’s say an employed anesthesiologist earns $500,000 annually. That equates to about $250 per hour. Add benefits, malpractice coverage, and administrative costs, and the real cost climbs. Now, compare that to a locum anesthesiologist at $339 per hour. That’s a 35.7% premium, but it reflects the work's additional risk, overhead, and short-term nature.
Compliance Matters: Avoiding FMV Pitfalls
Using a locum rate to justify employed compensation is a fast track to compliance issues. Regulators view these as fundamentally different arrangements, and FMV must be established based on the specifics of the contract type. Organizations that blur the lines between locum and employed rates risk overpayment, audit scrutiny, and potential penalties.
Locum tenens are vital in operational continuity but should never be mistaken for a long-term staffing solution. If your team needs help understanding how to structure, price, or evaluate locums arrangements, our experts are here to help.
📅 Contact Coker to discuss locums FMV support tailored to your organization.
