Hospitalist Locum Rates. How much is fair in 2016?

It is not a secret that a large number of physicians have tried working as locums (temporary independent contractors) at some point in their career. This is especially true for the hospitalists, who are notoriously mobile and can jump the ship and go to a different hospital at a drop of a hat. Many hospitalists choose a permanent locum lifestyle due to its obvious benefits and flexibility that it provides. They are not only able to get higher rates while traveling to interesting destination, but also importantly able to take advantage of tax benefits available for independent contractors and business owners.

In my career as a hospitalist leader and consultant I have been asked many time about how to determine a fair compensation (per hour rate) for travel hospitalists. I will go out on a limb and assume here that a contracting hospital is interested in value proposition rather than simply getting "any warm body" to fill the empty slots in the schedule. On the other hand, many young physicians have no idea how much they should charge and simply assume that getting few bucks over the usual rate that they see every two weeks printed on their paystub, is good enough.

Let me start by saying that free market is usually the determining factor here. Having said that, I must point out that the things are really looking rosy for the hospitalists here. The demand continues to surge as well as the hospitalists salaries with no end in sight, according to the recent State of Hospital Medicine Report. As stated by Dr. Nelson, co-founder of SHM: "For hospitalists caring for adults, the median amount of compensation rose to $278,746, up from $253.000 in 2014...". This represent roughly a 10% increase in compensation (considered as base plus bonus or incentive) in just 2 years since the previous report was published. It is reasonable to expect same or even more robust growth in in the locum market as well.

So, how much is fair in 2016?

First of all, anyone who is doing or thinking about doing independent contractor work, needs to start thinking as one. This means you have to run your practice as a business. I will go ahead and assume here that the reader know something about the differences between the S and C corporations. Most of you out there will have a structure similar to S corp, which means that all the income that finally drops down to the bottom line in January will be reported on your annual personal tax return. Before trying to determine the rate or a starting point in the negotiation you need to have a "ballpark" idea of where you would like end up compared to the rest of the crowd. If you are a recent graduate and willing to travel you should probably see compensation on par with 50th% MGMA. If you are a more seasoned and skilled practitioner with 10 or more years of experience you may want to shoot for at least 90th% MGMA.

If we try to do a sample calculation for a physician looking to be at 50th% based on the most recent information, provided by SHM report the numbers may look as follows:

  1. Total compensation $278K per FTE per year (average total comp across all regions)
  2. The hospitalist FTE is traditionally 168 shift/12 hour
  3. We will add 20% for benefits like health and disability insurance, personal and travel insurance, retirement contributions etc (excluding malpractice). This percentage will fluctuate greatly based on your personal insurance and tax situation and the assignment that your are considering.
  4. The resulting $165/h rate can be considered fair in 2016.

Please realise that the calculation presented above is by no means a rule that anyone in this business has to follow and this includes hospitals, locum agencies as well as providers. There are many other factors that can push the rate up or down with most obvious being urgency of coverage, location and workload etc.