Locums: The Real Hourly Rate

The Brochure Math Overstates Your Pay by Six Figures

A staffing agency posts a hospitalist assignment at $1,600 per day. Multiply by 240 working days and you get $384,000 — roughly $120,000 more than a typical employed hospitalist earns. That arithmetic is the industry's most effective recruiting tool, and it is wrong in four separate places. The $1,600 is not a wage. It is gross revenue paid to a one-physician business — yours. Out of it, that business must pay both halves of Social Security and Medicare tax, buy the health, disability, and retirement benefits an employer would have provided, absorb the weeks when no assignment is booked, and cover whatever the agency does not reimburse. Run the honest conversion and the same $1,600 day rate frequently lands near a $254,000 W-2 equivalent — a good living, and possibly better than your alternative, but roughly $130,000 short of the brochure math. This module shows you the conversion, step by step, so you can compare a day rate to a salary offer without fooling yourself in either direction.

1099 independent contractor

A worker paid gross, untaxed compensation for services, responsible for both halves of employment taxes and for every benefit, insurance policy, and business expense an employer would otherwise carry.

The Internal Revenue Service does not see a physician earning $1,600 per day. It sees a sole proprietorship with $1,600 of daily gross revenue, and it taxes it accordingly. Five costs separate that revenue from a wage. First, self-employment tax: 15.3 percent — 12.4 percent Social Security plus 2.9 percent Medicare — on 92.35 percent of net profit, because you now pay the employer half no employer is paying. Second, benefits replacement: health coverage, own-occupation disability, life insurance, and the retirement contribution an employer would have made. Third, malpractice: agencies commonly carry coverage for the assignment, but the policy type and the tail obligation vary by contract. Fourth, gap risk: credentialing delays, canceled assignments — many contracts allow cancellation with 30 days of notice — and unbooked weeks between engagements produce revenue of zero. Fifth, unreimbursed costs: state licenses, DEA registrations, CME, accounting, and whatever travel the contract does not cover. None of these makes locums work a bad deal. They make it a business, and businesses are valued on net, not gross.

Why it matters: Every dollar of difference between a day rate and a salary must first survive five deductions: self-employment tax, benefits replacement, malpractice arrangements, unbooked weeks, and unreimbursed costs. Physicians who compare $1,600 per day against a $260,000 salary without pricing those five buckets systematically overvalue locums work — and physicians who assume 1099 work is always a trap systematically undervalue it. The conversion is arithmetic, not opinion.

$1,600 a Day Converts to About $254,000, Not $384,000

A hospitalist is offered $1,600 per day for 2026. She realistically expects 190 booked days — about 86 percent of a 220-day target, allowing for credentialing gaps and time off — and prices family health coverage at roughly $21,600, individual own-occupation disability at $3,500, and a forgone employer retirement contribution at $15,000.

Bottom line: At honest utilization, the $1,600 day rate buys the economics of roughly a $254,000 W-2 salary — about $130,000 below the $384,000 the brochure arithmetic implies.

The Tail Question Costs More Than the Rate Negotiation

Malpractice policies come in two structures, and the difference only matters on the day an assignment ends. An occurrence policy covers any incident that happened while the policy was active, no matter when the claim is filed — no tail needed. A claims-made policy covers only claims reported while the policy is in force; when it ends, coverage for late-arriving claims ends with it unless someone buys an extended reporting endorsement — the tail. Industry guides describe the common locums pattern: the staffing agency insures you under its claims-made policy for the duration of the assignment and arranges the tail afterward, at no cost to you. Common is not universal. The obligation lives in your assignment agreement, and practice varies by agency and contract — a direct contract with a hospital may leave the tail entirely to you, and a tail on a physician-purchased claims-made policy can cost roughly 1.5 to 2 times the annual premium. A claim filed three years after a two-week rural assignment is your problem if nobody owns the tail in writing.

How to avoid it: Before you sign, get three answers in writing: is the policy occurrence or claims-made; if claims-made, who purchases the tail when the assignment ends — in the contract itself, not a recruiter email; and what are the per-claim and aggregate limits. If you contract directly with a facility, price the tail into your rate or buy occurrence coverage. Keep a certificate of insurance from every assignment permanently.

The $1,700 Day Rate vs the $260,000 Salary

One Cap, Two Taxes

Compare Numbers, Not Slogans

• A posted day rate is business revenue, not a wage; conversion, not multiplication, is the honest first step.
• In 2026, self-employment tax runs 15.3 percent on 92.35 percent of net profit, with the 12.4 percent Social Security portion capped at the $184,500 wage base and half of the tax deductible.
• Benefits replacement — health coverage, own-occupation disability, and the forgone employer retirement contribution — commonly costs $35,000 to $45,000 per year and must be priced, not waved away.
• Get the tail answer in writing before signing: occurrence needs no tail, claims-made does, and who pays it varies by agency and contract.
• Medicine is a specified service trade or business, so in 2026 the QBI deduction phases out entirely above $276,750 of taxable income for single filers ($553,500 married filing jointly).

Do this next: Take one real day rate you have been offered, run the six-step conversion from this module with your own booked-day estimate and benefits costs, and write the W-2-equivalent number next to the posted rate before your next conversation with a recruiter.