How Much Do Locum Tenens Agencies Mark Up Your Rate?

Locum tenens agencies bill the facility one rate (the bill rate) and pay you a lower rate (the pay rate); the gap is the agency's margin or markup, typically 15-60% of the bill rate, most commonly about 30-50%. On a typical hospitalist or emergency-medicine placement that works out to roughly $50-90+ per hour kept by the agency.

The cleanest worked example: a $300/hr bill rate maps to about a $210/hr pay rate, leaving an ~$90 spread — a ~30% margin. That spread is not pure profit. It legitimately funds malpractice coverage, housing and travel, credentialing and licensing, recruiter commission, billing and collections risk, and the agency's profit. After third-party fees, the agency's *net* margin is often closer to ~15%.

The practical takeaway for physicians, CRNAs, and AAs: the markup percentage is a negotiating starting point, not a fixed number. Margins flex with specialty, assignment length, and how badly the facility needs coverage. If you ever learn the agency is keeping $100+ per hour on you on a routine assignment, treat that as a signal you are underpriced and worth a renegotiation.

The bill rate is what the agency charges the facility per hour (or per day or per shift) for your services. The pay rate is what the agency pays you per hour. The spread, margin, or markup is the bill rate minus the pay rate, usually expressed as a percentage of the bill rate.

One nuance trips clinicians up: agencies do not take a stated percentage *of your pay*. They negotiate a separate rate with the client and pay you out of it, so 'markup' here means the margin on the bill rate, not a deduction from your paycheck. Your pay rate is a number in its own right — it is not reduced after the fact by the agency's cut.

That distinction matters when you negotiate. Because the two rates are set separately, raising your pay rate does not automatically require the facility to pay more; sometimes there is simply room in an existing margin. Asking 'Is there any room on the bill rate?' targets exactly the lever that determines how much the agency keeps versus how much reaches you.

A fair margin usually lands around $50-80 per hour (roughly 15-30%) on a hospitalist or EM clinician — that is squarely within the standard range. The full observed range runs 15-60%, with the 30-50% band the most commonly reported across the industry. Margins vary by specialty and by how urgently the facility needs coverage.

The key benchmark: if an agency is regularly keeping $100+ per hour on you, you are likely underpriced and should renegotiate. At the transparent end, boutique or low-overhead agencies operate on 15-22% rather than 40-50% — proof that a smaller spread is structurally viable.

A published, itemized invoice from one transparent agency illustrates how 'big gross, smaller net' actually works: a 7-on hospital-medicine week at a $265/hr bill rate ($3,180 per 12-hour shift) and a $210/hr pay rate ($2,520 per shift) produced a weekly bill of $22,260 and physician comp of $17,640 (79.2%). Gross markup was $4,620 (20.8%), but ~$835/week ($119/shift, 3.75%) went to a VMS/credentialing fee and ~$434/week ($62/shift, 1.95%) to a factoring/payroll fee — both to third parties — leaving a net margin of ~$3,353 (15.1%). Malpractice was bundled into the bill rate, with no separate line. So a 20-30% gross spread does not mean the agency pockets 20-30% profit.

The markup is not pure profit — a real chunk of it pays for things you would otherwise have to buy yourself. The spread typically covers seven categories:

1. Malpractice insurance — the agency usually carries it during the assignment, with common limits of $1M per claim / $3M aggregate. These policies are usually claims-made, so coverage for a later-filed claim depends on the policy staying in force or on a tail (extended-reporting endorsement); some agencies provide occurrence coverage or lifetime tail instead. Get the policy type, the tail, and who pays for it in writing: claims-made coverage can require a tail, while occurrence coverage does not. 2. Housing and travel — flights, rental car, and hotel or extended-stay lodging, often booked by the agency on short notice. 3. Credentialing, licensing, and privileging — the agency fronts and administers these, frequently paid upfront. 4. Recruiter commission and account management — sales and relationship overhead. 5. Business overhead — contracting with the facility, advertising, and back-office operations. 6. Financial risk and cash flow — the agency pays you weekly or biweekly but waits on the facility, absorbing factoring costs, non-payment risk, and last-minute cancellations. 7. Profit margin — whatever is left.

Because categories 1-6 are real costs, framing the entire 30-50% gross spread as 'greed' is inaccurate; the transparent-invoice example above netted ~15% after third-party fees. The useful question is not 'why is there a spread?' but 'is this spread reasonable for what the agency is actually providing on my assignment?'

Agencies are not required to disclose the bill rate or their margin to you, and the reason is structural — it sits in the NALTO Code of Ethics. The Code binds member agencies to *'preserve all confidences concerning a client[']s business, unless disclosure is expressly permitted by such client in writing.'* The bill rate is the client's (the facility's) business — so a member agency is ethically positioned *not* to reveal it to you.

The same Code says a member *'shall not knowingly make a false or misleading statement to a client or a potential client'* and *'shall at all times represent a candidate's work history and qualifications as accurately as possible.'* Read carefully, the duty of candor runs toward the client, and there is no affirmative obligation to disclose the bill rate or margin to the clinician. That asymmetry — confidentiality protecting the facility's rate, candor owed to the client rather than to you — is why no traditional agency publishes its markup.

This is precisely the gap locu.ms exists to close: showing the pay rate plus margin in writing before you sign. The fact that transparent agencies can run profitably on 15-22% rather than 40-50% demonstrates that disclosure does not break the model — it just removes the information asymmetry that lets undisclosed spreads drift higher.

Yes — your quoted rate is a starting point built around someone else's profit margin, and it is negotiable. Several tactics reliably work for physicians, CRNAs, and AAs:

- Ask 'Is there any room on the bill rate?' and ask what the facility is paying. You may not get a number, but the question signals you understand the structure. - Use walk-away leverage. The 'best' number an agency quotes often magically increases once you state that you are prepared to walk away. - Trade margin for assignment length. Negotiate a structure where the agency takes a larger upfront commission but your rate steps up after a set number of hours worked. - Negotiate the non-rate terms that also have dollar value: housing type, travel, license reimbursement, completion bonuses, and weekend, holiday, or overnight premiums. - Consider going direct. Contracting straight with a facility removes the markup entirely — you earn more and the hospital saves — but you take on all credentialing, malpractice, and logistics yourself. Most clinicians do not, because of the time involved and the lack of a facility network. Whether going direct is even practical (and any non-compete or restrictive-covenant language) varies by state.

One caveat on restrictive covenants: there is no federal categorical ban on non-competes. The FTC voted to accede to vacatur of its Non-Compete Clause Rule on September 5, 2025, and now pursues enforcement case by case, so enforceability is governed by the state where you work (it varies widely — some states bar most non-competes, others enforce reasonable ones). If a locum contract includes a geographic restriction, have it reviewed against that state's law.

Not dollar-for-dollar — a higher locum bill or pay rate is partly offset because most locums are 1099 independent contractors, and the tax treatment differs meaningfully from a W-2 salary. As a 1099 contractor you pay the full 15.3% self-employment tax (12.4% Social Security up to the wage base, plus 2.9% Medicare), where a W-2 employee splits that with an employer. You can deduct the employer-equivalent half (one-half of SE tax) above the line, which softens the blow, and high earners owe an additional 0.9% Medicare tax above $200,000 single / $250,000 MFJ.

For the 2026 tax year, the Social Security wage base is $184,500 (up from $176,100 in 2025) — earnings above that are not subject to the 12.4% Social Security portion, though the 2.9% Medicare portion (plus the 0.9% surtax) has no cap. The practical rule: a 1099 rate has to be meaningfully higher than a comparable W-2 rate to break even, not just 5-10% higher.

A note on a common misconception: physicians, CRNAs, and AAs in clinical practice are a specified service trade or business (SSTB), so the §199A / QBI deduction is not a reliable locum tax lever. Under OBBBA (2025) the deduction is permanent, but for an SSTB it fully phases out above ~$276,750 single / $553,500 MFJ (2026) — so most full-time locums get $0 QBI. Entity choice (PLLC, S-corp) and multi-state filing are fact-specific and vary by state; confirm your situation with a CPA before relying on any of these.