How to Start a Locum Tenens Agency: The Complete Playbook

A locum tenens agency places physicians, and often advanced practice providers (NPs and PAs), into temporary coverage assignments: vacancies, leaves, seasonal surges, and the years-long gaps rural facilities live with. The agency earns the spread between the daily rate billed to the facility and the provider’s pay, and typically arranges travel, lodging, licensing support, and malpractice coverage as part of the package. This guide is the physician-side companion to our healthcare staffing guide and our full how to start a staffing agency playbook.

Step 1: Pick a Specialty Lane

Locums is specialty-driven: hospitalist medicine, emergency, anesthesia, psychiatry, primary care, and surgical specialties each have their own demand curves, rate bands, and recruiter networks. Pick one or two specialties you can credibly recruit in, learn their rate reality cold, and build a bench of providers who trust you with their schedules. In locums, providers work with recruiters they like, repeatedly, and that loyalty is the whole asset.

Step 2: Understand the 1099 Reality (and Its Limits)

Here is what makes locums unlike every other staffing vertical: locum physicians have traditionally worked as 1099 independent contractors, and often legitimately so: they control their methods, work for multiple agencies, carry their own credentials, and frequently operate through their own entities. But “traditionally 1099” is not “automatically 1099”: classification always follows the facts of the engagement, some arrangements belong on W-2, and states keep tightening the tests. Know exactly where the line sits (our W-2 vs 1099 vs C2C guide maps it), paper every 1099 engagement properly, and use an agent of record structure so contractor engagement, documentation, and payment run compliantly. Where an engagement genuinely belongs on W-2, physician employment has its own requirements, and you will need an employment setup built for it.

Step 3: Make Credentialing Your Moat

Nothing in locums happens until the provider is licensed in the state and credentialed and privileged at the facility, and that runway commonly runs 60 to 120 days for a new state and facility. The agencies that win treat that runway as the product: licensing support (including the Interstate Medical Licensure Compact where the physician qualifies), primary-source verification files kept current, and credentialing packets that arrive at the facility complete on the first pass. A provider you can deploy in three weeks because the file was ready is worth more than a cheaper provider who needs three months.

Step 4: Solve Malpractice Before Your First Placement

Malpractice is the defining insurance question of this vertical, and facilities will not credential a provider without proof of it. Agencies typically arrange coverage for their locums through specialty medical malpractice carriers, and the structural detail that separates professionals from amateurs is the policy form: claims-made policies require tail coverage when they end, and who pays for the tail (agency, provider, or built into the rate) must be decided in writing before the first shift. Malpractice comes from specialty medical carriers, not from back-office or payroll platforms, so budget for it as its own relationship. Alongside it sits your firm’s ordinary business insurance stack, covered in our insurance guide.

Step 5: Sell Coverage, Price the Day

Your buyers are medical staffing offices, CMOs, and practice administrators with a schedule gap and a revenue number attached to it. The pitch is speed-to-coverage and credential quality, not price. Locums pricing runs on daily rates that vary widely by specialty and market, with the agency’s margin as the spread over provider pay plus the costs the agency carries: travel, lodging, licensing support, and malpractice. Price each deal from the loaded cost up, and put cancellation terms in every confirmation, because facility-side cancellations are a fact of locums life.

Step 6: Fund the Longest Terms in Staffing

Hospital systems pay slowly: net 60 is common and net 90 happens, while your providers expect payment promptly after worked days and the travel costs land on your card before the assignment even starts. At locums day rates, one busy month can put six figures of receivables on the books. Funding is a launch decision here more than anywhere: the options from payroll funding to factoring to funded models are compared in our funding guide.

Step 7: Decide Who Carries the Back Office

Compliant 1099 engagement and payment with airtight documentation, invoicing hospital systems on their terms, multi-state administration, and floating net-60 receivables: that is the operational load behind every placement, and none of it is recruiting. BOSS runs that back office for locum firms: agent of record engagement and payment for your 1099 physicians, branded invoicing and collections, reporting, and funding where the receivables demand it. Two honest boundaries so you plan correctly: malpractice coverage comes from specialty medical carriers, not from BOSS, and BOSS does not employ physicians as W-2 workers, so engagements that genuinely require physician employment need an arrangement built for that. For the 1099 model that dominates this vertical, the platform carries the paperwork while you recruit physicians and cover schedules.

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