Locum Tenens Financial Planning for Orthopedic Surgeons

Why orthopedic surgeons go locums

Locum tenens is more common in orthopedic surgery than most people realize. The main scenarios:

• Between positions. Left a private group or was laid off in a hospital system consolidation. Locums covers income while negotiating the next contract — often 3–12 months.
• Supplementing employed income. A hospital-employed ortho surgeon working one or two weekends per month for a regional system that needs surgical coverage. Adds $150K–$400K to W2 income.
• Testing a market before relocating. Considering a move to a new city? A locums contract at a hospital there is a paid trial period.
• Semi-retirement. Senior surgeon reducing volume — fewer call nights, no partnership overhead — while preserving meaningful income as they wind down.
• Niche coverage shortage. Spine, trauma, and joint replacement surgeons are among the most requested locums specialties. Hourly/daily rates are correspondingly high.

1099 vs. W-2: how locums income is structured

Most locums agencies default to 1099 independent contractor arrangements. Some offer W-2 employment, especially for longer-term contracts. The financial difference is substantial.

The short version: 1099 costs you ~7.65% more in FICA on the first $184,500 of locums income (because you pay both halves of FICA yourself), but the Schedule C deductions, self-employment retirement account opportunities, and health insurance deduction can more than offset that cost for high-earning surgeons. The deduction for half of self-employment tax also reduces your AGI directly.

For a surgeon earning $300K in 1099 locums income, the SE tax hit on the first $184,500 is approximately $26,600 at the full 15.3% rate, plus 2.9% Medicare on the remaining $115,500 = $3,350. But the above-the-line deduction for half of SE tax (~$15,000) reduces your taxable income, and you can contribute up to $72,000 into a solo 401(k) from that same income — sheltering far more than the SE tax cost.

The retirement savings opportunity most surgeons miss

This is where locums income creates disproportionate value — especially for employed orthopedic surgeons doing supplemental locums work.

If you're employed and doing locums on the side

Your hospital employer already has a 401(k) plan. You max your employee deferral there — $24,500 in 2026, or $32,500 at age 50+ ($35,750 if you're 60–63 under SECURE 2.0 super catch-up).²

Can you open a solo 401(k) for your locums 1099 income and do another $24,500 employee deferral? No. The employee deferral limit is per person, not per plan. If you've maxed your employer plan's employee deferral, your solo 401(k) gets zero additional employee contributions.

But here's what you can do: make employer / profit-sharing contributions to your solo 401(k) from your locums self-employment income. These are separate from the employee deferral limit. The math:

• Employer contribution = up to 20% of net self-employment income (after deducting half of SE tax)
• Combined limit (all plans, all employers): $72,000 in 2026²
• If your employer already contributed $24,500 in employee deferrals to your hospital 401(k), you have $47,500 of headroom in the solo 401(k) — subject to the 20% SE income cap

If locums is your primary or only income

You can use a solo 401(k) or SEP-IRA to shelter up to $72,000 per year in 2026 (subject to the 20% or 25% net SE income formula). For a surgeon earning $400K in locums income, the maximum shelter is $72,000 — well within the 20% cap.

2026 catch-up note: Starting in 2026, catch-up contributions for individuals who earned $150,000 or more in the prior year must be made on a Roth (after-tax) basis.² This applies to the additional $8,000 catch-up (age 50+) and $11,250 super catch-up (ages 60-63). For surgeons in this income bracket — virtually all locums ortho surgeons — plan your Roth catch-up contributions accordingly. SEP-IRA contributions are not affected (SEP-IRAs have no catch-up contributions).

Schedule C deductions for orthopedic locums surgeons

Running your locums practice as self-employment allows you to deduct legitimate business expenses on Schedule C, reducing your net SE income (which also reduces your SE tax base).

• State medical licensing fees. Locums often requires licenses in multiple states. At $200–$600 per state plus renewal fees, a surgeon covering three states can deduct $1,500–$3,000 annually.
• Travel. Airfare, mileage, lodging, and meals (50% deductible) when traveling to locums assignments. If the assignment requires you to be away from your tax home, these are deductible. Assignments near your primary residence may not qualify — this is an area worth confirming with your CPA.
• Professional dues and subscriptions. AAOS, subspecialty society dues, UpToDate, specialty journal subscriptions.
• CME. Registration, travel, materials for continuing medical education required to maintain licensure in locums states.
• Malpractice insurance. If you carry supplemental coverage beyond what the agency provides (see below), it's deductible.
• Professional services. CPA fees for preparing Schedule C, legal fees for contract review. A good locums contract attorney pays for themselves quickly — hospitals and agencies negotiate hundreds of these per year and have standard boilerplate that favors them.
• Home office. If you use a dedicated space for administrative work — credentialing, CME, chart completion — a portion of that space may be deductible. Requires the space be used regularly and exclusively for business.

Malpractice coverage: why locums is actually safer than you think

A common concern orthopedic surgeons raise about locums: what happens if there's a claim? The good news is that established locums agencies carry occurrence-based coverage — not claims-made — which fundamentally changes the risk equation.

• Occurrence-based policy. If a claim arises from a case you performed at a locums assignment, the agency's policy covers it regardless of when the claim is filed — even if you stopped working for that agency years earlier. No tail coverage required.
• No tail cost on exit. Leaving a private group with a claims-made policy can cost $50–$150K in tail coverage. Finishing a locums assignment costs nothing in malpractice tail. This is a meaningful financial advantage for surgeons in transition.
• Coverage limits matter. Confirm the per-occurrence and aggregate limits with each agency. For orthopedic surgery — particularly spine — request a copy of the declarations page. Some agencies carry lower limits than private practice standards ($1M/$3M vs. $2M/$5M or higher). If the limits are inadequate, you may need supplemental coverage.
• Your existing individual policy. If you carry a personal claims-made policy from private practice, coordinate coverage carefully. Don't assume the agency policy makes your personal policy redundant — gaps can exist.

For a surgeon leaving a private group and going full-time locums, the absence of a tail insurance bill is often the first month's locums income in the pocket. See malpractice tail coverage planning for a detailed analysis of the private-practice departure scenario.

PSLF: the critical interaction most employed surgeons ignore

If you're hospital-employed and pursuing Public Service Loan Forgiveness, locums work can jeopardize your progress — depending on how you structure it.

PSLF requires:

1. Employment at a qualifying 501(c)(3) or government employer
2. Full-time employment (30 hours/week or your employer's definition)
3. Payments made under an income-driven repayment plan while employed at that qualifying employer

If you're full-time at a qualifying nonprofit hospital and do locums on the side as a 1099 contractor, your PSLF eligibility for the employed position is likely unaffected — you're still a full-time employee of the qualifying employer, and the side 1099 income doesn't disqualify you (though it does raise your IDR payment, since 1099 income gets counted in AGI).

However, if you leave hospital employment to do locums exclusively — even temporarily — your PSLF payment clock stops. Locums agencies are not qualifying employers for PSLF. Payments made during a gap period do not count toward the 120 qualifying payments. A 6-month locums bridge between hospital jobs means 6 months of non-qualifying payments and 6 months of delayed forgiveness.

See student loan repayment strategy for orthopedic surgeons for the full PSLF vs. refinancing decision framework.

Health insurance while doing locums

Losing employer-sponsored health insurance is a real friction point for surgeons going full-time locums. Options:

• COBRA. Continue your former employer's plan for up to 18 months. You pay the full premium (employee + employer share). Expensive but identical coverage with no gap. For a family, this typically runs $1,800–$2,800/month for a surgeon's plan.
• ACA marketplace. At orthopedic surgeon income levels, there are no premium subsidies (income too high). But ACA plans exist at various coverage levels. Self-employed health insurance premiums are 100% deductible above-the-line if you're not eligible for an employer plan — reducing AGI directly. This deduction is often worth $10,000–$25,000/year in tax savings for surgeons.
• Spouse's plan. If your spouse has employer coverage, a qualifying life event (job loss) allows mid-year enrollment. Often the most cost-effective option if available.
• Short-term health insurance. Not recommended for physicians — coverage limitations, no ACA protections, claims can be denied for pre-existing conditions.

State licensing: the hidden time tax on locums

Orthopedic surgery locums often requires working in multiple states. State medical licensing takes 3–6 months per state through normal channels. Planning implications:

• Interstate Medical Licensure Compact (IMLC). 40+ states participate. Surgeons with a "State of Principal License" who meet compact requirements can obtain licenses in participating states significantly faster — often 4–8 weeks. Worth checking if your home state is a compact member.
• DEA registration. Federal DEA is portable across states (one registration, valid nationwide for controlled substance prescription). However, some states require a separate state controlled substance registration. Factor this into your credentialing timeline.
• Hospital credentialing. Even with a valid state license, each hospital must credential you separately. This process takes 60–120 days. Most experienced locums agencies track this for you, but assume you cannot work at a new facility immediately upon license issuance.
• Cost basis for tax deductions. Keep records of all licensing application fees, fingerprinting, primary source verifications, and renewal costs. All are deductible as business expenses on Schedule C.

Locums agencies for orthopedic surgeons

The major national locums agencies that place orthopedic surgeons include CompHealth, Weatherby Healthcare (a division of CHG Healthcare), Staff Care (AMN Healthcare), and Medstaff. A few practical notes:

• Agencies typically take 15–25% of what the client hospital pays — your rate is the net after that margin.
• Larger agencies have better national coverage and housing/travel logistics. Smaller boutique agencies sometimes negotiate higher net rates for subspecialists in short supply (spine, trauma).
• You can work with multiple agencies simultaneously. Non-exclusive arrangements are standard. Each agency presents different opportunities; being on multiple rosters increases assignment options.
• Review the malpractice coverage details with each agency before your first assignment. Ask specifically for the declarations page, not just a verbal assurance that coverage exists.
• The agency contract governs exclusivity clauses, geographic restrictions, and assignment minimums. Have a healthcare attorney review it before signing.

The "locums sprint" strategy for accelerating financial independence

Some orthopedic surgeons use a deliberate locums sprint — 12–24 months of high-intensity locums work at peak earning rates — to rapidly build capital before transitioning to a less demanding practice model.

The math can work in your favor. An experienced spine or trauma surgeon doing locums full-time can earn $600K–$1.2M annually depending on specialty and market. With disciplined tax sheltering (solo 401k maxed at $72,000, SEP contributions, aggressive Schedule C deductions), a surgeon earning $900K in locums income might have:

• $72,000 into retirement accounts
• $30,000–$50,000 in Schedule C deductions (licensing, travel, professional fees)
• Effective federal AGI closer to $780,000 than $900,000
• Net cash available after taxes and living expenses: $350K–$500K+ per year

Two years of that, added to an existing net worth base, can meaningfully change a surgeon's financial independence timeline. The key discipline: the sprint ends. Define the exit criteria (target net worth, practice opportunity, or date) before you start. Locums as a permanent lifestyle is viable, but it lacks the ASC ownership and partnership equity upside that private practice ownership provides.

Quarterly tax management for locums income

On 1099 locums income, you are responsible for paying estimated taxes quarterly. Missing or under-paying these results in IRS underpayment penalties — a friction cost that good planning eliminates.

• Safe harbor rule. Pay at least 100% of prior year's tax liability (or 110% if prior year AGI exceeded $150,000). This is almost always the simpler target for high-income surgeons — avoids having to estimate this year's actual income.
• Payment dates. Q1 (April 15), Q2 (June 15), Q3 (September 15), Q4 (January 15 of following year).
• Withhold from W-2 income instead. If you're also employed with W-2 income, you can increase W-2 withholding to cover estimated taxes on your locums income. Eliminates the quarterly payment paperwork. Ask your HR department to adjust W-4 withholding.
• State taxes. States where you perform locums work may require income tax filing and potentially estimated tax payments in that state, even if you're not a resident. Regulations vary — get guidance from a CPA experienced with multi-state physician income.

Talk to an advisor who works with locums orthopedic surgeons

The tax planning, retirement account structuring, and practice transition planning for locums work is genuinely different from standard employed-physician advice. An advisor who has never seen a Schedule C with surgical licensing fees, multi-state travel deductions, and a solo 401(k) alongside a hospital 403(b) will miss the specific optimizations that matter at your income level.

We match orthopedic surgeons with fee-only advisors who know these mechanics. No commissions — they're paid by you, not by products. Describe your situation below and we'll connect you with someone appropriate.