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Valuing On-Call Arrangements - Locums vs. Non-Locums Rates

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Valuing On-Call Arrangements - Locums vs. Non-Locums Rates

Portrait of confident happy group of doctors standing at the medical officePublished: 04/17/2018 | Author: Berta Narohna and Adam S. Polsky, MBA, CVA

The use of locum tenens physicians to fill gaps in emergency department call coverage schedules is prevalent at many hospitals.  When hospitals and their compliance teams are assessing the fair market value (“FMV”) of compensation for on-call coverage arrangements, additional prudence is necessary when comparing locums compensation values to per diem rates for medical staff physicians.

Currently, hospitals utilize locums to provide emergent call coverage for a variety of reasons, including a scarcity of providers in the hospital’s service area; difficulty securing specialty coverage; increased patient volumes; or a need for fill-in coverage while a medical staff physician is away.

When determining the FMV of compensation for regular medical staff physicians  compensation rates paid to locums for emergent call coverage should not be used as a ‘proxy.’  The factors that differentiate the two include:
  • Locums arrangements are not intended as permanent solutions. Similar to other temporary staffing arrangements in the market place, locums services are provided at a premium rate. Furthermore, medical staff physicians are typically obligated to provide some extent of on-call coverage as part of medical staff bylaws;
  • Unlike traditional on-call providers, locums providers are generally not entitled to bill and collect for their professional services. Therefore, locums rates are significantly higher to account for the lack of collection opportunities;
  • Locums providers are often utilized to provide “last minute” coverage, or coverage on weekends and holidays, which results in an additional premium in their rates;
  • Locums are typically required to provide a specific number of restricted (e., on-site) hours, which increases the burden (and thus the cost) of these physicians. In contrast, most traditional on-call arrangements provide for unrestricted (i.e., off-site) coverage which places less burden on the hospital staff physician; and
  • Similar to any other temporary staffing compensation arrangement, locums rates include the locums agencies’ operating cost and other expenses.

FMV Pitfall

In establishing FMV rates for on-call availability by medical staff physicians, there may be apparent logic in drawing comparisons to the higher rates that are paid for locums coverage.  However, the characteristics of locums coverage are not comparable to traditional medical staff coverage arrangements, and reliance on locums rates is typically not a defensible approach to establishing FMV.