A physician in a four-person group is pregnant. She would like to take twelve weeks.
Her partners can absorb some of it, at real cost to themselves. Beyond that, the group needs someone to cover, which means a locum agency. The agency will bill the practice somewhere around $540 to $600 an hour for a hospitalist. The covering physician will receive somewhere around $240 to $360.
Meanwhile, ninety miles away, a physician she trained with is working four days a week by choice and would be glad to pick up two weeks. He would do it for less than the agency bills and more than the agency pays. Both of them would be better off.
It will not happen, and the reason is not unwillingness. Neither of them can solve the four problems that stand in the way: he does not have privileges at her hospital, his malpractice coverage does not extend there, he may not hold a license in her state, and nobody has verified anything about anybody.
The agency is not primarily a staffing company. It is a trust-and-paperwork escrow, and it charges accordingly.
The market, and where the money goes
The US locum tenens market reached approximately $9.6 billion in 2025, with projections around $9.9 billion for 2026, according to Staffing Industry Analysts.
The margin structure is not secret, though it is rarely discussed openly between the parties. Industry sources report agencies retaining 30 to 50 percent of the bill rate, with a broader observed range of 15 to 60 percent. A hospitalist assignment billing $540 to $600 an hour typically pays the physician $240 to $360.
Physicians who look this up for the first time are frequently, in the words of one physician-run financial community, "shocked at how much higher the number is than the rate that they are receiving."
Now, agencies do real work for that margin, and this deserves to be stated fairly. They arrange malpractice coverage. They handle credentialing and privileging paperwork, which is genuinely burdensome. They manage travel and housing. They handle contracting and payment. Industry estimates put these hard costs at roughly 10 to 15 percentage points of the markup.
Which leaves, on typical assignments, something in the region of 20 points of pure brokerage: the fee for knowing who is available and being trusted by both sides.
Across a $9.6 billion market, intermediary retention is plausibly on the order of $3 billion a year, of which perhaps two thirds is payment for solving a matching and trust problem.
The detail that reveals what is really being sold
Here is the finding that reframes the entire market. From CHG's State of Locum Tenens research:
- 58 percent of locum physicians work in their own community.
- 67 percent of placements are gap-fills until a permanent hire arrives.
- 41 percent of physicians have worked locums at some point, up from 20 percent in 2016.
- Roughly 57,000 physicians, about 8 percent of the workforce, currently work locums.
- 26 percent report being very or extremely interested in locum work, described as a ten-year high.
Read the first number again. The majority of locum physicians are working in their own community.
They are not flown-in strangers filling exotic gaps in remote geographies. They are local physicians, frequently covering local shortages, and being introduced to each other by a national intermediary that takes a third of the money.
That is the signature of a market failure in matching, not a market for a genuinely scarce good. The supply and the demand are frequently in the same city, sometimes in the same hospital's referral region, and they are being connected through an agency in another state because there is no local mechanism.
The four locks
If physicians would happily cover for each other, why can they not?
Because covering requires four things to be simultaneously true, and each is controlled by a different institution.
One: a license in that state. Licensure is state-bound. The Interstate Medical Licensure Compact has made multistate licensure substantially faster for eligible physicians, which is genuine progress and reduces this barrier considerably for those who qualify.
Two: privileges at that facility. Privileges are institution-specific and non-portable. Temporary and emergency privileging pathways exist under medical staff bylaws and vary by hospital, and the process typically takes weeks even when expedited.
Three: malpractice coverage that applies. Most employed physicians are covered under their employer's policy, which does not extend to work performed elsewhere. Covering a colleague at another institution generally requires either a separate policy or the receiving institution's coverage, plus attention to tail coverage.
Four: verification that both sides trust. The receiving facility needs assurance that this physician is who they say they are, is in good standing, and is competent. That is credentialing, and it is the slowest part.
The locum agency exists because it is the only entity that holds all four at once.
Which tells you exactly what a peer exchange would have to do. It does not need to disrupt staffing. It needs to unbundle four pieces of paperwork and one trust problem, and the trust problem is the one that peers solve for free.
Who is harmed by this
The costs are unevenly distributed and land hardest on people with the least ability to absorb them.
Physicians who cannot take leave. Research indicates protected maternity leave appears in only 30 to 50 percent of female physicians' contracts. Fellows and residents face additional constraints, with studies citing the limited number of co-fellows as a direct barrier to taking leave. When coverage is unaffordable or unavailable, the leave does not happen.
Solo and small-group physicians. Roughly one in eight physicians practises solo, and a large share of the rest are in groups of ten or fewer. For a solo physician, every vacation, every illness, and every family emergency is a coverage crisis, and there is no partner to absorb it.
Rural facilities. When coverage cannot be found or afforded, the practical outcome is a cancelled clinic, a closed service line, or a rural emergency department running without a physician for a shift.
And the covering physician, who wants flexible work at a fair rate and receives roughly half of what the facility pays.
The last group is worth dwelling on because it is growing. Interest in locum work is at a ten-year high, at least partly because 45 percent of physicians report being very or extremely concerned about the economic climate and are seeking income flexibility. Supply is expanding. It is being routed through an intermediary layer whose margin does not fall as supply grows.
Why nobody has built the alternative
The obvious business objection: if this margin is so large and the trust problem is solvable by peers, why has nobody done it?
Several reasons, and they are worth naming honestly.
The incumbents will not. Agencies will not build a peer exchange that removes their own margin. This is not cynicism, it is arithmetic.
Conversion clauses are structural. Industry sources describe contracts preventing direct hiring of a placed physician for 12 to 24 months without a buyout typically in the 20 to 30 percent range. Once a relationship is brokered, it is contractually locked for a period.
The paperwork is genuinely hard. Anyone building an alternative must actually solve privileging, malpractice, and licensure, not merely introduce two willing parties. Introduction alone is worth little, which is why simple marketplace approaches have limited traction.
Trust does not scale to strangers. A peer exchange works because a physician will cover for someone they trained with or someone vouched for by a colleague. Extended to strangers, it becomes a marketplace with the same verification burden agencies already carry, and their pricing starts to look reasonable.
The regulatory surface is real. Medical staff bylaws, state temporary privileging rules, Stark and anti-kickback considerations in any arrangement involving referral-generating physicians, and malpractice underwriting all constrain the design. These are navigable and they are not trivial.
Newer entrants have compressed markups toward the 15 to 22 percent range by operating leaner marketplaces. That is real progress and it is a different thing from a peer exchange, because a marketplace still has to solve trust with strangers.
What would actually work
The design follows from the four locks.
Start with existing trust, not with a marketplace. The residency and fellowship cohort is the natural seed: people who trained together already know each other's competence at a level no credentialing file captures. The published referral research suggests co-training is medicine's strongest durable trust edge, and it should be the first place a coverage request is routed.
Pre-stage the paperwork. The reason coverage cannot be arranged quickly is that credentialing starts from zero every time. A physician who maintains current, verified credentials, active licenses, and pre-arranged coverage documentation can be privileged in a fraction of the time. This is the single highest-leverage piece and it is boring administrative work rather than technology.
Solve malpractice as a product. A group policy or rider designed specifically for peer coverage, arranged with a carrier partner, removes the barrier that individual physicians cannot solve alone.
Publish rates. The information asymmetry is doing enormous work here. A crowdsourced index of bill rates versus pay rates by specialty and state would change negotiating positions immediately and costs nothing to produce.
Map temporary privileging by state and facility type. Nobody has assembled this. It is a public-records exercise and it would tell a physician exactly how fast coverage could be arranged where.
Keep the guardrails explicit. Compliance with medical staff bylaws, state temporary privilege rules, and Stark and anti-kickback requirements. No patient data on any platform. Clear contracting so that a favor between colleagues does not create unexpected liability for either.
What you can do now
If you need coverage
Ask your cohort first, and ask early. Before calling an agency, ask the people you trained with. The published data says the majority of locum work is local and gap-filling, which means the person you need may be nearby.
Find out what your facility's temporary privileging process actually is. Most physicians have never asked. The answer determines whether a peer arrangement is possible in three weeks or three months, and it varies enormously.
Ask the agency what they bill. You are entitled to know, and the negotiation changes once you do.
If you cover
Know your own numbers. If you are receiving $280 an hour, find out what the facility is being billed. Physicians consistently report surprise at the gap.
Maintain your credentials continuously. Current licenses, an updated credentialing file, and awareness of your malpractice position make you the person who can say yes in two weeks rather than two months. That availability is worth real money.
Consider the compact. If you qualify, multistate licensure through the Interstate Medical Licensure Compact substantially widens where you can work and how quickly.
If you run a facility or a group
Build a local coverage roster before you need one. Identify physicians within a two-hour radius, in your specialties, who could be privileged quickly. Pre-credentialing a handful of local physicians is far cheaper than emergency agency placement and is almost never done.
Fix your temporary privileging process. If it takes ninety days, you have guaranteed that every coverage need becomes an agency placement. This is entirely within your control.
Treat maternity and medical leave coverage as a planning problem. With protected leave appearing in only 30 to 50 percent of female physicians' contracts, this is a retention issue disguised as a staffing issue, and it is predictable months in advance.
Frequently asked questions
How much do locum tenens agencies take? Industry sources report agencies retaining roughly 30 to 50 percent of the bill rate, with an observed range of 15 to 60 percent. For a hospitalist assignment billing $540 to $600 an hour, the physician typically receives $240 to $360. Hard costs including malpractice, credentialing, and travel are estimated at roughly 10 to 15 percentage points of the markup.
How big is the locum tenens market? Approximately $9.6 billion in the United States in 2025, projected at around $9.9 billion for 2026 according to Staffing Industry Analysts, with roughly 57,000 physicians, about 8 percent of the workforce, currently working locums.
Do most locum physicians travel far? No. CHG research found 58 percent of locum physicians work in their own community, and 67 percent of placements are gap-fills until a permanent hire. The image of the travelling locum is not representative of most of the market.
Why can't physicians just cover for each other directly? Four barriers, each controlled by a different institution: state licensure, facility-specific privileges, malpractice coverage that does not extend beyond the employer, and credentialing verification that the receiving facility trusts. Agencies exist largely because they are the only entity that assembles all four.
How long does temporary privileging take? It varies substantially by facility and state, and typically takes weeks even under expedited pathways. Because credentialing usually starts from scratch for each arrangement, the timeline rather than the willingness is what makes peer coverage impractical in most urgent situations.
Is peer coverage legal? Arrangements between physicians for coverage are common and lawful, subject to proper licensure, privileging, and malpractice coverage, and subject to compliance with medical staff bylaws and applicable regulations including Stark and anti-kickback requirements where referral relationships are involved. Specific arrangements should be reviewed by counsel.
The bottom line
There is a $9.6 billion market whose central product is knowing which physician is available and being trusted by both sides. Roughly a third of the money goes to the intermediary, and by industry estimate most of that third is not paying for services rendered but for the matching and the trust.
Meanwhile a majority of the physicians being placed are working in their own communities, and a substantial share of the placements are simply filling a gap until someone permanent arrives.
The physician who needs two weeks covered and the physician ninety miles away who would happily cover it are separated by four pieces of paperwork and a verification problem. Everything else about the transaction, including the willingness on both sides and the trust between people who trained together, is already there.
The agency is not selling access to scarce physicians. It is selling the resolution of an administrative problem that peers could solve between themselves if anyone had built the mechanism.
Nobody has, because the only organizations positioned to build it are the ones whose revenue depends on it not existing.
Part of a series on the missing professional infrastructure of healthcare. Previously: Twenty-Four New Doors
Evidence note: market sizing comes from Staffing Industry Analysts as cited in industry reporting, since the primary report is paywalled. Margin figures come from industry and physician community sources including DirectShifts and Physician Side Gigs and represent typical rather than universal terms. Workforce and behavior figures come from CHG's State of Locum Tenens research and Weatherby survey data. Contract conversion clause terms are drawn from industry sources and are identified as such. Maternity leave contract prevalence comes from published survey research. Nothing here is legal advice; coverage arrangements should be reviewed by counsel and against medical staff bylaws.
