Can hiring locum tenens providers actually be cheaper?

This is a question we get often– and for good reason. It can be difficult to staff physicians, especially if you are looking for someone for a particular holiday, overnight shift, or hard-to-find specialty. While hiring managers may have sticker shock for a particular shift, we encourage our clients to zoom out a bit. When you approach your healthcare staffing practices as more of an opportunity to optimize your mix rather than fill a singular shift, that is where the magic happens.

How does adjusting my staffing mix reduce overall costs?

Consider the following hypothetical scenario. A hospital currently has three full time physicians and two full time nurse practitioners on staff. For simplicity, let’s say these are the annual salaries you are paying these providers:

One of your staff physicians whose salary is $200,000 annually just notified you of their upcoming retirement. Instead of jumping to recruit a physician to replace them, here are a few scenarios that could help reduce overall costs.

Scenario #1: Replace the retiring physician with a locum tenens physician on a locum to perm basis.

In this scenario, a locum tenens physician is hired to work full time to replace the retiring physician’s shifts temporarily at a rate of $100/hr. While your immediate thought might be that this will increase your payroll, you also need to consider the savings on benefits you will incur by hiring an independent contractor. 

Locum tenens is almost always the fastest way to hire physicians and advanced practitioners. Scenario #1 is perfect for hospitals or healthcare facilities in the following scenarios:

  • Unexpected departure of staff providers
  • Provider illness
  • Increase in demand
  • Opening new facilities/locations and demand is unpredictable
  • Provider vacation or maternity leave

In any of these situations, you can expect to have a locum tenens provider ready to work within days or weeks, rather than the months it may take to recruit staff providers. 

In the COVID-19 era, we are seeing more and more facilities just add to their existing staff with a locum physician rather than replace, too. Facilities are preparing for a “wave” of illness in their area, meaning they need additional hands on deck for just a few weeks. A locum provider is a great way to account for that without burning out physicians or risking provider illness.

Scenario #2: Adjust the staffing mix.

In this scenario, the retiring doctor has been replaced by one Physician Assistant at $80/hour and one additional nurse practitioner at $55/hour. This allows the facility to increase their overall number of providers without increasing costs dramatically.

Because Physician Assistants and Nurse Practitioners typically expect a lower hourly rate, healthcare staffing managers may consider hiring more of these advanced practitioners in lieu of an additional physician off the bat. Remember, these providers are independent contractors and will not require you to pay their benefits. 

On average, benefits will cost you an additional 30% on top of an annual provider salary. In this hypothetical scenario using 30% as the estimated benefit cost, here is what your payroll might look like. This example assumes the locum providers are working 40 hours a week for 52 weeks.

BeforeAfter
Physician #1 Salary + Benefits$260,000$260,000
Physician #2 Salary + Benefits$260,000none
Physician #3 Salary + Benefits$325,000$325,000
Nurse Practitioner #1 Salary + Benefits$130,000$130,000
Nurse Practitioner #2 Salary + Benefits$130,000$130,000
Nurse Practitioner #3 Salary + Benefitsnone$114,400
Physician Assistant Salary + Benefitsnone$166,400
TOTAL$1,105,000$1,125,800

For an additional $20,800 annually, this facility will now have six full-time providers instead of five. Also consider that maybe you only would need one nurse practitioner 20 hours a week; this would mean you are actually saving $36,800 per year by replacing one full time physician with one additional nurse practitioner and one physician assistant.

This is a scenario we like to share with our clients because it demonstrates that most times, all locum tenens or all permanent staff is not the right solution. Each facility will have different needs depending on the type of care required, the patient profiles and cases, and the demand during different times of year.

While locum tenens providers typically do prefer to work 2-3 month contracts, another great perk of hiring in this way is that it isn’t permanent. Add a few locum providers to your staffing mix, and if it isn’t the right solution for you (financially or from a patient care perspective), you can always offer them a full time position or begin the search for a permanent physician as the locum provider accounts for the demand in the meantime. Many healthcare facilities choose to hire “locum to perm” in order to allow the healthcare provider, the existing team, and the facility to ensure it is the right fit before committing. In this sense, you are getting the best of both worlds.

If you’re ready to start discussing the right staffing mix for you, we’d love to start the discussion. Our healthcare staffing experts are ready to design the perfect combination of locum tenens and permanent placement physicians and advanced practitioners with you whenever you’re ready.

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