Locum Tenens for Beginners: How to Get Started in 2026

Locum tenens — Latin for “to hold the place” — is temporary physician coverage that fills gaps at hospitals, clinics, and health systems across the country. For physicians, it means working as an independent contractor on an assignment-by-assignment basis, with control over schedule, location, and specialty focus that permanent employment rarely allows. The U.S. locum tenens market reached $9.6 billion in 2025 and continues to grow as physician shortages deepen across rural and underserved markets. If you are considering locum tenens for the first time, this guide covers everything you need to know to get started — from licensing and entity setup to agency selection and your first assignment.

1. What Locum Tenens Actually Is

Locum tenens physicians work as independent contractors rather than employees. An agency connects you with a facility that needs coverage, negotiates the contract terms, handles logistics like travel and housing, and pays you for the hours you work. The facility pays the agency a bill rate — the total cost per hour of your coverage — and the agency keeps a markup and passes the remainder to you as your hourly rate.

The independence is real. You choose which assignments to accept, when to work, and where to go. A locum physician can work full-time year-round across multiple states, or take a handful of shifts per month to supplement a permanent position. The structure accommodates both.

The tradeoffs are also real. No employer-paid benefits, no retirement matching, no paid time off. You are responsible for your own health insurance, retirement contributions, quarterly tax payments, and in some cases your own malpractice coverage. The gross hourly rate is higher than a comparable employed position — it has to be, to account for those costs. Understanding the economics before you start is essential to making locum work financially viable rather than just financially appealing on the surface.

For a detailed breakdown of how locum pay is structured and what the agency markup means for your negotiating position, see the LPG bill rate breakdown guide.

2. Is Locum Tenens Right for You?

Locum tenens is not the right structure for every physician. Before starting the process, be honest about a few practical questions.

Are you comfortable with uncertainty? Assignment availability fluctuates. Facilities cancel. A gap between assignments means a gap in income. Physicians who need income predictability may find the variability difficult to manage, particularly in the early months before a consistent assignment pipeline is established.

Are you willing to travel? The highest-demand, highest-paying locum markets are often rural, remote, or in states you would not otherwise consider. Physicians who are geographically flexible — willing to go where the shortage is — command better rates and have more assignment options than those restricted to a specific metro area.

Do you have a qualifying tax home? This is more important than most physicians realize when starting out. To receive agency travel stipends and housing reimbursements tax-free — a significant component of locum compensation — you must have a qualifying tax home: a permanent residence to which you return between assignments and where you maintain genuine living expenses. Physicians who give up their permanent residence and travel continuously may lose tax home status, which makes stipends taxable income and significantly changes the economics of locum work. See the LPG housing stipend guide for the full tax home framework.

Are you prepared for administrative complexity? Multi-state licensing, credentialing at each new facility, quarterly estimated tax payments, multi-state tax filing — locum tenens comes with more administrative overhead than permanent employment. Most of it is manageable, but it requires attention and organization that physicians coming from employed positions are not always prepared for.

3. Licensing — The First Practical Step

Before you can take a locum assignment, you need to be licensed in the state where the assignment is located. Licensing is the first practical bottleneck and the one that catches new locum physicians off guard most often — state medical licenses take weeks to months to obtain, and you cannot start an assignment until both the license and facility credentialing are complete.

The Interstate Medical Licensure Compact (IMLC): The compact is the most important tool for locum physicians managing multi-state licensing. As of May 2026, the IMLC includes 43 member jurisdictions — 41 states plus Washington D.C. and Guam — allowing physicians who meet qualifying criteria to obtain expedited practice privileges through the compact rather than going through each state’s full traditional licensing process. For a physician already licensed in one IMLC member state, adding additional compact states typically takes 2 to 6 weeks rather than the 8 to 12 weeks of a traditional application.

One notable 2026 development for Midwest physicians: Michigan’s continued IMLC participation was secured when HB 5455 was signed into law in March 2026, following concerns that the state might withdraw from the compact. Michigan remains a full member state.

To use the compact you need a State of Principal License — the state where you primarily practice, reside, or have your federal tax home. Your SPL is the anchor of your compact participation. Once established, you can add practice privileges in other member states through the compact’s expedited pathway.

For states not in the compact, or for physicians who need a traditional license in a specific state, plan for 8 to 12 weeks minimum. Build this timeline into your planning — do not accept an assignment with a start date that does not allow sufficient time for licensing and credentialing to complete.

See the LPG multi-state licensing guide for a full breakdown of the IMLC process and state-specific notes.

DEA registration: If your assignments involve controlled substance prescribing, you need a DEA registration tied to a practice address in each state where you will prescribe. DEA registration is federal but state-specific by practice location — plan for this as a separate step from state licensure.

4. Business Structure and Entity Setup

Most physicians starting locum tenens do so as sole proprietors — the default structure if you take no action. As a sole proprietor, all locum income flows directly to your personal tax return via Schedule C. This is the simplest structure and is appropriate for physicians doing occasional locum work or those in the early months of building a locum practice.

As income grows, the S-Corp election becomes worth analyzing. An S-Corp allows you to pay yourself a reasonable W-2 salary and take remaining net income as a K-1 distribution — the distribution portion avoids self-employment tax, which at 15.3% represents meaningful savings at higher income levels. At approximately $150,000 to $200,000 or more in annual net locum income, the SE tax savings from an S-Corp typically exceed the administrative costs of operating the entity.

The S-Corp is not automatic and is not right for everyone. It requires payroll, a separate business tax return, additional administrative overhead, and correct handling of benefits like health insurance and retirement contributions. Run the numbers with a CPA experienced in physician taxation before making the election. See the LPG S-Corp guide for the full break-even analysis.

What not to do: Do not form a C-Corp for locum tenens. The double-taxation structure — corporate tax on earnings, then personal tax on distributions — produces worse outcomes than sole proprietor or S-Corp treatment for most physician income levels. An LLC is useful for non-clinical side businesses and real estate, but adds no malpractice protection for clinical work and no automatic tax benefit without an S-Corp election on top of it.

5. Malpractice Coverage

Most locum agencies provide malpractice coverage for physicians working their assignments. Before accepting any assignment, confirm three things in writing: the coverage type (occurrence or claims-made), the coverage limits, and — if claims-made — who pays for tail coverage when the assignment ends.

Occurrence vs. claims-made: Occurrence coverage protects you for any incident that occurred during the coverage period, regardless of when a claim is filed. Claims-made coverage only covers claims filed while the policy is active — when the policy ends, so does coverage for future claims arising from that period, unless tail coverage is purchased. Occurrence is simpler and more protective for locum physicians who move between assignments frequently. Claims-made is more common in the locum market but requires explicit tail coverage planning.

Tail coverage cost: If your agency provides claims-made coverage and you are responsible for tail, understand the cost before signing. Tail premiums typically run 150-200% of the annual claims-made premium — a significant out-of-pocket expense that should factor into your rate negotiation if you bear that cost.

Some agencies self-insure malpractice rather than purchasing coverage from a third-party carrier. This creates a conflict of interest in claim defense — the party making defense decisions has a direct financial interest in the outcome. Confirm whether your agency’s coverage is self-insured or placed with a rated third-party carrier before accepting an assignment. See the LPG malpractice guide for the full framework.

6. Choosing an Agency

Most physicians starting locum tenens work with one or two agencies initially and expand from there. Agency selection matters — your recruiter is the primary interface between you and available assignments, and the agency’s facility network determines what you can access.

What to look for in an agency: Specialty depth in your field. Geographic coverage in your target markets. Recruiter responsiveness and knowledge — a recruiter who understands your specialty’s rate dynamics and can advocate for your rate is worth more than one who simply forwards job listings. Logistics support for travel, housing, and credentialing. Malpractice coverage structure — confirmed in writing before accepting any assignment.

The parallel agency strategy: The most effective locum physicians run two or three agency relationships simultaneously rather than committing exclusively to one. Parallel agency relationships create competitive rate pressure — agencies that know you have alternatives are more motivated to find better assignments and negotiate harder on your behalf. Exclusivity with a single agency reduces your leverage and limits your access to the full market.

What agencies to avoid: Any agency that pressures you to sign an exclusive agreement. Any agency that is vague about malpractice coverage structure when asked directly. Any agency whose recruiter cannot answer basic questions about your specialty’s rate range in your target market.

See the LPG agency evaluation guide for a full framework on selecting and managing agency relationships. For independent reviews of the major agencies, see the CompHealth review, Weatherby review, and AMN Healthcare review.

7. Understanding Your Pay Package

Locum pay is quoted as an hourly rate, but the total compensation package includes several components that materially affect the real value of any offer. Evaluating offers correctly requires understanding all of them.

Hourly rate: The base rate for clinical hours worked. This is the primary negotiating lever and the figure most visible in recruiter conversations. Rates vary by specialty, geography, setting, and call burden. See the LPG specialty pay guide for current rate benchmarks by specialty.

Housing and travel stipends: Agencies typically provide either a cash housing stipend or agency-arranged housing, plus travel reimbursement for flights, rental cars, and mileage. For physicians with a qualifying tax home, these stipends are tax-free — which makes them a significant component of total compensation. A cash stipend of $150-$200 per day is roughly equivalent to $5,000-$6,000 per month in tax-free income. Evaluate offers on total package value, not hourly rate alone.

Call pay: Many assignments include call coverage. How call is structured — frequency, response requirements, compensation — varies significantly and should be negotiated explicitly before accepting any offer. Call bundled into a flat hourly rate without discrete pricing is a red flag. Establish the base rate first, then price call separately.

Malpractice: Agency-provided malpractice has real dollar value. If you would otherwise need to purchase your own coverage, the agency-provided policy is part of your total compensation. Factor it in when comparing offers across agencies.

See the LPG pay structure guide for a complete breakdown of how locum compensation packages are structured.

8. Reading and Negotiating Your Contract

Every locum assignment involves a contract. Read it in full before signing — the clauses that create the most financial and career risk are often buried in boilerplate that looks routine. The areas that warrant the most scrutiny for new locum physicians:

Indemnification language that extends beyond your own acts and omissions — any clause that makes you responsible for the facility’s or agency’s negligence creates financial exposure that your malpractice policy does not cover. Tail coverage responsibility — confirm in writing before signing, not after. Cancellation provisions — asymmetric terms that let the facility cancel immediately while requiring you to provide 30 or 60 days’ notice put all the cancellation risk on you. Non-compete and non-solicitation clauses — review the scope, duration, and geographic reach before signing; enforceability is state-specific and actively changing. Utah enacted a near-complete ban on healthcare non-competes under HB270, effective May 6, 2026 — physicians taking Utah assignments under new contracts signed on or after that date cannot be bound by non-compete restrictions.

A physician contract attorney who specializes in locum agreements typically charges $300-$500 for a flat-fee contract review. At locum income levels, that cost is trivial relative to the exposure a single problematic clause can create. See the LPG contract red flags guide for a full breakdown of the clauses that cost physicians the most.

9. Taxes and Financial Planning

The financial administration of locum tenens is more complex than employed medicine and requires proactive planning from the start — not catch-up work at tax time.

Quarterly estimated taxes: As a 1099 independent contractor, no employer withholds taxes on your behalf. You are responsible for making quarterly estimated tax payments to the IRS and to each state where you earn income. Missing quarterly payments triggers underpayment penalties. Set aside 25-35% of gross locum income for taxes from the first payment — the exact percentage depends on your income level, filing status, and state tax obligations.

Multi-state tax filing: Working in multiple states means filing income tax returns in each state where you earn income above that state’s filing threshold. Some states have reciprocity agreements; most do not. A CPA experienced in multi-state physician taxation is not optional at meaningful locum income levels. See the LPG multi-state tax filing guide for the full framework.

Retirement accounts: The Solo 401(k) and SEP-IRA are the primary retirement vehicles for 1099 locum physicians. The Solo 401(k) combined limit for 2026 is $72,000 — significantly higher than what W-2 employees can contribute through employer plans alone. Maximizing retirement contributions is one of the most effective tax reduction strategies available to locum physicians. See the LPG retirement accounts guide for a full breakdown.

Business deductions: Locum physicians can deduct a broad range of business expenses — malpractice premiums, licensing fees, CME, professional dues, business travel, home office, and more. Capturing these deductions correctly requires documentation from day one, not reconstruction at tax time. See the LPG tax deductions guide for the full list.

10. What to Expect on Your First Assignment

The first locum assignment is almost always more administratively complex than subsequent ones. Credentialing at a new facility takes time and requires document collection that becomes easier with repetition. EMR orientation at an unfamiliar system has a learning curve. The logistics of travel, housing, and a new clinical environment all compete for attention simultaneously.

A few practical expectations for the first assignment:

Credentialing will take longer than you expect — build extra lead time into your timeline and follow up proactively with the facility’s credentialing department. Do not assume silence means progress. Confirm your DEA registration, state license, and PDMP registration (where required) are all active and tied to the correct practice address before your start date. Clarify EMR access, on-call expectations, and facility-specific protocols before arrival — not on your first clinical day. Keep meticulous records of travel, housing, and business expenses from day one. The documentation habits you build on the first assignment will serve you for every assignment after.

The first assignment is also when the financial structure becomes real. Your first 1099 payment will arrive without tax withholding — set aside the appropriate percentage immediately rather than treating the full amount as available income. Set up quarterly estimated tax payments before the first payment deadline after your start date.

After the first assignment, the administrative complexity drops significantly. The licensing framework is in place, credentialing documents are organized, the tax structure is established, and the agency relationship is defined. Most physicians find that the second and third assignments are dramatically smoother than the first.