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Locum tenens glossary

Plain-English, answer-first definitions of the terms that decide what a locum assignment actually pays and protects — bill rate, agency markup, malpractice tail, and the tax vocabulary behind 1099 work. Written for physicians, CRNAs, and AAs.

1099-NEC

Form 1099-NEC is the IRS information return a payer issues to report at least $600 of nonemployee compensation paid to an independent contractor during the year.

"NEC" stands for nonemployee compensation, and a locum clinician working as an independent contractor will typically receive a 1099-NEC from each agency or facility that paid them. Unlike a W-2, it reflects no withholding — the clinician is responsible for their own income and self-employment taxes, usually via quarterly estimated payments. The income reported on 1099-NEC flows to Schedule C (or to an entity return) and is subject to self-employment tax.

Accountable plan

An accountable plan is an IRS-sanctioned arrangement under which a business reimburses an owner or employee for legitimate business expenses without those reimbursements counting as taxable income.

To qualify, the expenses must have a business connection, be substantiated with records within a reasonable time, and any excess advance must be returned. For a locum clinician operating through an S-corporation, an accountable plan is the proper mechanism to reimburse home-office, mileage, and travel costs tax-free rather than running them through personal funds. Reimbursements made outside an accountable plan are treated as taxable wages.

Agency markup (margin)

Agency markup, or margin, is the difference between the bill rate an agency charges the facility and the pay rate it gives the clinician, expressed in dollars or as a percentage of the bill rate.

Markup compensates the agency for sourcing the assignment, credentialing the clinician, providing malpractice coverage, arranging travel and lodging, and running payroll and billing. In locum tenens it commonly runs in the range of roughly 25–40% of the bill rate, though it varies widely by specialty, region, and agency. Because the bill rate is usually confidential, clinicians often cannot see their own markup — making it the single most consequential unknown in a locum contract.

Bill rate

The bill rate is the hourly or daily amount a locum tenens agency charges the facility for a clinician's services — the gross price before the agency takes its margin.

The bill rate is the top line of every locum assignment: it is what the hospital actually pays the agency per hour or per day. Out of that bill rate the agency funds the clinician's pay rate, malpractice premiums, travel and lodging, recruiter and back-office costs, and its own profit. Because the bill rate is rarely disclosed to the clinician, the gap between it and the pay rate (the agency markup) is the central transparency problem locum tenens marketplaces try to solve.

Claims-made policy

A claims-made malpractice policy covers a claim only if both the incident and the reporting of the claim happen while the policy is active, leaving later-reported incidents uncovered unless tail or nose coverage is added.

Claims-made is the more common — and usually cheaper — form of medical malpractice insurance, but its coverage is contingent on the policy still being in force when a claim is reported. Because malpractice claims can surface years after the underlying care, ending a claims-made policy without tail coverage creates exposure for past work. Locum clinicians should confirm in writing whether their coverage is claims-made and, if so, who buys the tail.

CME (Continuing Medical Education)

Continuing Medical Education (CME) is the accredited ongoing training clinicians must complete to maintain licensure and board certification, and its costs are generally deductible business expenses for a 1099 locum.

State medical and nursing boards and certifying bodies require a recurring number of CME credit hours, and AAs and CRNAs have analogous continuing-education obligations. For an independent-contractor locum, CME tuition, required materials, and the associated travel are ordinary and necessary business expenses that can be deducted. Some locum contracts also include a CME stipend or allowance as a negotiated benefit.

Credentialing

Credentialing is the formal process by which a facility verifies a clinician's education, training, licensure, board certification, work history, and malpractice record before allowing them to work there.

Credentialing confirms that a clinician is who and what they claim to be, and it is a prerequisite to being granted privileges at a hospital or practice. For locum assignments it is often the longest lead-time item, sometimes taking weeks to months, and agencies typically manage it on the clinician's behalf. It relies heavily on primary source verification — checking credentials directly with the issuing institutions rather than trusting copies.

DEA registration

A DEA registration is the federal Drug Enforcement Administration authorization that allows a clinician to prescribe or handle controlled substances, generally required for each state in which they practice.

DEA registration is tied to a physical practice location, so a locum clinician working in multiple states has historically needed a separate registration for each — a recurring cost and lead-time item for multi-state assignments. The registration must align with the clinician's state license and prescribing authority. As an ordinary cost of doing business, DEA fees are deductible for a 1099 locum.

EIN (Employer Identification Number)

An Employer Identification Number (EIN) is a nine-digit federal tax ID issued free by the IRS to identify a business entity, used on tax filings and to open business bank accounts.

A locum clinician can obtain an EIN even as a sole proprietor, and doing so lets them give agencies the EIN instead of their Social Security number on Form W-9, reducing exposure of personal data. An EIN is required once a clinician forms an LLC or PLLC, makes an S-corporation election, or hires employees. It is issued immediately and at no cost through the IRS online application.

IMLC (Interstate Medical Licensure Compact)

The Interstate Medical Licensure Compact (IMLC) is an agreement among participating US states that provides a streamlined pathway for eligible physicians (MD/DO) to obtain full medical licenses in multiple member states.

The IMLC does not create a single national license; it accelerates the issuance of separate state licenses through a shared application and verification process administered from the physician's state of principal license. It is open to MDs and DOs who meet eligibility criteria, and it is especially useful for locum physicians who practice across state lines. CRNAs and AAs are not covered by the IMLC, though some nursing roles have a separate Nurse Licensure Compact.

Locum tenens

Locum tenens is the practice of a physician, CRNA, or AA temporarily filling a staffing gap at a hospital or practice — usually as an independent contractor paid by the day or hour rather than as a permanent employee.

The phrase is Latin for "holding the place," and it describes short-term clinical coverage that fills vacancies, leaves of absence, or seasonal demand. Locum clinicians typically work through a staffing agency that handles the facility contract, credentialing, travel, and malpractice, and they are most often paid on a 1099 basis as independent contractors. The arrangement trades the stability and benefits of a permanent W-2 job for higher hourly pay, schedule control, and geographic flexibility.

Nose coverage

Nose coverage, or prior-acts coverage, is a malpractice endorsement on a new claims-made policy that covers incidents occurring before that policy began, serving as an alternative to buying tail on the old policy.

Where tail coverage extends the reporting window of a departing policy, nose coverage reaches backward from a new policy to pick up incidents from the prior coverage period. It is typically obtained when a clinician moves to a new insurer or employer that is willing to assume prior acts, and it can be cheaper than purchasing tail. Either tail or nose is needed to avoid an uncovered gap when switching between claims-made policies.

NPI (National Provider Identifier)

A National Provider Identifier (NPI) is a unique 10-digit number assigned by the federal government to identify a healthcare provider in standardized billing and administrative transactions.

Every US clinician who bills payers — including physicians, CRNAs, and AAs — has an NPI, which stays with them for their career regardless of where they work. It is public, looked up through the national NPI registry, and used for credentialing, claims, and provider directories. Because the NPI ties a real, verifiable identity to a clinician, locu.ms uses it to confirm that a submitted pay rate comes from an actual provider.

Occurrence policy

An occurrence malpractice policy covers any incident that took place while the policy was active, regardless of when the resulting claim is reported — so it never requires tail coverage.

Occurrence-based coverage locks in protection at the moment care is delivered, meaning a claim filed years after the policy lapses is still covered as long as the incident fell within the active period. It is generally more expensive than claims-made but eliminates the tail-coverage question entirely. When an agency or facility provides occurrence coverage, it is usually the cleaner option for a locum clinician because there is no future gap to insure against.

Pay rate

The pay rate is the hourly or daily amount the locum tenens clinician actually receives — the portion of the agency's bill rate left after the agency's markup and pass-through costs.

The pay rate is the number that appears on a clinician's offer and 1099. It is derived from the bill rate minus the agency's margin and any costs the agency covers directly (malpractice, travel, housing). Two clinicians doing identical work can have very different pay rates depending on how much of the bill rate each agency keeps, which is why comparing pay rates across agencies — and against the bill rate when it can be learned — is the core of effective negotiation.

Per diem

In locum tenens, per diem refers to a fixed daily allowance an agency or facility pays toward a traveling clinician's meals and incidental expenses while working away from home.

The term is Latin for "per day," and the IRS publishes standard per diem rates that employers and contractors can use to reimburse travel costs without itemizing every receipt. For locum clinicians, a properly documented per diem tied to overnight travel away from a tax home can be reimbursed or deducted, but the rules around what qualifies as a tax home are strict. Note that "per diem" is also used loosely in healthcare staffing to mean day-by-day shift work, a different sense of the phrase.

PLLC (Professional Limited Liability Company)

A PLLC is a limited liability company variant required in many states for licensed professionals such as physicians, offering liability protection for business obligations while preserving personal responsibility for one's own clinical malpractice.

Several states do not permit licensed clinicians to form a standard LLC and instead require a PLLC (or a professional corporation), often with state licensing-board approval of the formation. A PLLC shields the owner from the entity's general business liabilities but does not shield a clinician from personal liability for their own professional negligence — that is what malpractice insurance is for. By itself a single-member PLLC is a disregarded entity for federal tax and produces no tax savings until paired with an S-corporation election.

Primary source verification

Primary source verification (PSV) is the practice of confirming a clinician's credentials directly with the original issuing body — the medical school, licensing board, or certifying organization — rather than relying on copies the clinician provides.

PSV is the evidentiary backbone of credentialing: it ensures a license, degree, or board certification is genuine and current by checking it at its source. Accreditation standards generally require it for licensure, education, and certification, and it is what makes credentialing slow but trustworthy. Locum agencies and facility medical staff offices perform PSV as part of onboarding every clinician.

Privileging

Privileging is a facility's authorization of a specific clinician to perform defined procedures and provide specified services, granted after credentialing based on that clinician's documented competence.

Where credentialing verifies background and qualifications, privileging decides exactly what a clinician is permitted to do at that facility — which procedures, which patient populations, which settings. Privileges are facility-specific and scope-specific, so a clinician credentialed at a hospital may still be privileged for only part of what they are trained to do. For locum work, the granted privileges must match the assignment's clinical requirements.

QBI / §199A deduction

The Qualified Business Income (QBI) deduction under Internal Revenue Code §199A lets eligible pass-through business owners deduct up to 20% of their qualified business income, but it phases out for high earners in specified service fields like medicine.

QBI applies to income from sole proprietorships, partnerships, and S-corporations, not to W-2 wages. Because physicians, CRNAs, and AAs operate a Specified Service Trade or Business (SSTB), their §199A deduction shrinks across an income phase-out range and disappears entirely once taxable income exceeds the upper threshold. The exact dollar thresholds are indexed annually, so locum clinicians should check the current figures in the tax guide rather than relying on older numbers.

Reasonable salary

Reasonable salary is the IRS requirement that an S-corporation owner-employee pay themselves W-2 wages comparable to what their work would command in the market before taking the rest of the profit as distributions.

The reasonable-salary rule exists to stop S-corp owners from zeroing out payroll taxes by labeling all income as distributions. For a locum clinician, the salary must reflect the fair market value of the clinical services performed, supported by factors like specialty pay surveys, hours worked, and duties. Setting it too low invites IRS reclassification of distributions as wages plus penalties, which is why this figure should be documented and defensible.

S-corporation election

An S-corporation election is a federal tax choice (made on IRS Form 2553) that lets an LLC or corporation pass its income through to the owner while splitting earnings into a reasonable salary and distributions, reducing self-employment tax exposure.

The S-corp is a tax classification, not a separate legal entity — a locum clinician's existing LLC, PLLC, or PC elects it. The tax benefit comes from paying the owner a reasonable W-2 salary (subject to payroll taxes) and taking remaining profit as distributions (not subject to self-employment tax). That benefit only outweighs the added payroll, bookkeeping, and Form 1120-S compliance costs once net 1099 income is high enough, so the election is fact-specific rather than automatically worthwhile.

Self-employment tax

Self-employment tax is the 15.3% federal tax on net self-employment earnings that funds Social Security and Medicare, covering both the employer and employee shares that a W-2 worker would otherwise split with an employer.

The 15.3% comprises 12.4% for Social Security (applied up to an annual wage-base cap) plus 2.9% for Medicare (with no cap), and an additional Medicare surtax applies above certain income thresholds. Because a 1099 locum clinician is both employer and employee, they owe the full amount, though they can deduct half of it when computing income tax. Reducing exposure to this tax is the primary reason high-earning locums consider an S-corporation election.

Specified service trade or business (SSTB)

A specified service trade or business (SSTB) is a category under IRC §199A — including the field of health — whose owners lose the Qualified Business Income deduction once taxable income rises above an upper phase-out threshold.

The SSTB designation covers professions where the principal asset is the reputation or skill of the people providing the service, and the field of health expressly includes physicians, CRNAs, and AAs. For these clinicians the QBI deduction is fully available only below a lower income threshold, phases out across a range, and is eliminated above the upper threshold. This is why forming an entity rarely creates a §199A benefit for a high-earning locum clinician — their SSTB status caps it out.

State of principal license (SPL)

The state of principal license (SPL) is the single state a physician designates as their home base for the Interstate Medical Licensure Compact, where eligibility is verified before licenses are issued in other member states.

Under the IMLC a physician must qualify through one SPL, generally defined as the state where they hold a full unrestricted license and meet at least one anchoring condition — such as primary residence, at least 25% of practice, or employer location. The SPL's medical board performs the primary source verification and credential check that the other member states then rely on. Choosing and qualifying for an SPL is the first procedural step for a physician using the Compact.

Stipend

In locum tenens, a stipend is a fixed sum an agency or facility pays toward a specific cost — such as housing, travel, meals, or CME — separate from the clinician's hourly or daily pay rate.

Stipends commonly cover lodging and travel for clinicians working away from home, and their tax treatment depends on whether they are reimbursements of substantiated, away-from-tax-home expenses or simply additional taxable income. A housing or travel stipend tied to legitimate business travel may be excludable, while a flat stipend with no substantiation can be taxable. Clinicians should clarify in the contract what each stipend covers and how it is reported.

Tail coverage (ERP)

Tail coverage, formally an Extended Reporting Period (ERP) endorsement, is malpractice insurance that covers claims filed after a claims-made policy ends but arising from incidents that occurred while it was active.

A claims-made malpractice policy only pays for claims that are both made and reported while the policy is in force, so when that policy terminates a gap opens for incidents that have not yet surfaced as lawsuits. Tail coverage closes that gap by extending the reporting window after the policy ends. Tail can be expensive — often one to two times the annual premium — so a key locum contract question is whether the agency or facility provides occurrence-based coverage (which needs no tail) or claims-made coverage and, if the latter, who pays for the tail.

W-2 vs 1099

W-2 vs 1099 describes the two ways a locum clinician can be engaged: as a W-2 employee, with taxes withheld and benefits provided, or as a 1099 independent contractor, who receives higher gross pay but bears self-employment tax and provides their own benefits.

Most locum tenens work is structured as 1099 independent-contractor engagements, which means no tax withholding, no employer benefits, and responsibility for the full 15.3% self-employment tax — offset by the ability to deduct business expenses and the higher headline rate. A W-2 locum arrangement shifts payroll taxes and often benefits to the employer but typically pays less per hour and offers fewer deductions. Which is better is a math problem specific to the clinician's expenses, income level, and whether an entity is in play.