Expert tips for evaluating PSA from locums agencies

As a physician, taking on locum tenens assignments can offer many benefits, such as greater flexibility, the chance to experience different work environments, and exposure to diverse patient populations. However, before you sign a Professional Services Agreement (PSA) with a locum’s company, there are a few key things you need to look for. 

Some suggest that you need an attorney to review these agreements, but if you read them carefully, you should be able to understand them fully and not require a costly attorney. In this article, we’ll discuss the five essential elements you should consider reviewing in PSA with a locum company to ensure that the terms are fair and reasonable and that your interests are protected. Remember, the confirmation letter from a locum’s agency about a new assignment should also be treated as a legal contract and will provide additional details about what each side agrees to.  

1. Malpractice Insurance Coverage

Ensure it is apparent within the PSA if the locum’s company provides a claims-made or occurrence-based policy. Over 90% of locum agencies will have a claims-made policy. Thus, it’s preferred that you have the locum’s company add to the PSA, “Infinite tail insurance shall be provided in the event that the claims-made policy is canceled.” In theory, you will be covered if a claim is filed after the claims-made policy is terminated. With that said the legal grounds the locum agency will have if they shut down the agency or file for bankruptcy need to be clarified. If the locum’s agency provides an occurrence-based policy, then make sure the words “occurrence-based” are written into your contract.

Some locum agencies have been known to use twisted language to make you believe that it is an occurrence-based policy when it is not. If it is not stated “occurrence-based” in your PSA, then it is not. Moreover, it’s wise to add language to your PSA if they offer an occurrence-based policy. Something like this would be wise to protect you if the locum’s company changes to a claims-made policy. For example, “In the event that the occurrence-based malpractice policy is canceled, then the locum’s agency agrees to provide infinite tail insurance if they were to change to a claims-made policy.”   

2. Restrictive covenants and non-competes

It’s not uncommon for locum companies to have excessive non-competes and restrictive covenants in their PSAs. It would be best if you negotiated this element of any PSA to have it edited or removed. One caveat is that these factors may be dependent on the contract the locum’s agency signs with the facility, which supersedess anything a physician would agree to with the locum’s company. Either way, each physician should negotiate for terms that are fair to them.

Most locum companies will require that the non-compete with a facility be at least two years. It’s good practice to have non-compete and restrictive covenants removed or lessened to 1 year. Physicians should only agree to non-competes and restrictive covenants that are placed upon the facility where they work. Locum companies may include language to enforce a non-compete across an entire healthcare system and other facilities they contract with.

Don’t allow this type of language in the PSA as 1) it’s not fair to any physician and 2) its legality is questionable. More so, do not allow any language in the PSA that would force you, the physician, to pay a fee if, for some reason, these terms are violated. Only the facility, not the physician, should be held financially responsible for breaking a non-compete or restrictive covenant.      

3. Termination clauses

All PSAs with a locum’s company should include detailed information about how you can terminate the PSA or a locum’s assignment. Most physicians should agree to have a 30-day notice. This allows physicians to cancel a locum’s assignment with only a 30-day notice without punishment. If your contract does not include language about how much notice is required to terminate the PSA or locums’ assignment, ensure it is added. If the PSA has a 60, 90, or 120-day notice, consider editing it to a 30-day one. In no event should you sign a PSA in which you could be financially responsible for covering shifts or finding a replacement in the event that you have given enough notice.  

4. Indemnification clauses

Indemnification is a fancy legal term for “hold harmless.” Basically, a facility and locums’ agency (the indemnified party) could indemnify itself from any action against them that involves the contracted practitioner (the indemnifying party). In these cases, the physician could be on the hook for the facility/agency’s legal fees and financial losses in which an action is brought against the physician.

In addition, the physician may be on the hook if the agency or facility agrees to monetary losses if they choose to settle a claim rather than fight it. These clauses can be wordy and purposefully confusing. Often, these clauses benefit the facility and locum agency, not the physician. The physicians must understand this clause and its meaning and review it with an attorney if need be. You want to avoid being held financially responsible for an agency’s or facility’s financial losses. 

The best option is to negotiate to have the indemnification clause removed. If the locum’s agency refuses to remove the clause, consider how you might ask them to edit. Below is an example of a reasonable indemnification you should review for future usage. (Review with an attorney) 

“Each Party shall indemnify, defend, and hold the other Party harmless from all liabilities, costs, and expenses (including, without limitation, attorney’s fees) arising from the indemnifying Party’s gross negligence, willful misconduct, sexual assault, or criminal acts during the performance of its obligations under this Agreement.” 

5. Buyout fees and payment of missed shifts

Do not agree to any language in which the locum’s agency requires you, the physician, to pay a fee for violating the PSA. Most notably, the physician should not be held financially responsible for breaking the non-compete or restrictive covenant. The facility, NOT the physician, should pay for those fees. More so, make sure that there is no language that you will be held financially responsible if you show up late or must cancel shifts due to travel-related issues or illness.

Suppose you cancel a shift without providing appropriate notice. In that case, it may be reasonable that the locum’s agency requires you to reimburse them for losses, but if there were good reasons for showing up late or canceling at the last minute, you should be covered. Review the following language to include in your PSA. Review with the attorney if you have questions. 

“The physicians must, in good faith, show up on time to agree upon shifts. The physician agrees to assist the agency in procuring a replacement if less than 30 days notice is provided to alter or cancel the assignment. Except in unforeseen emergencies such as last-minute travel disruption or illness, the physician will pay the agency any expenses incurred by the facility in providing a substitute for the physician.” 

Final thoughts 

Taking on a locum tenens assignment can be an exciting and rewarding experience for physicians. However, before you sign a PSA with a locum’s company, it’s essential to ensure that you read and understand it to know that your interests are protected. Know what to negotiate for and what to edit in a PSA. If you have any concerns about the PSA, speak with colleagues or hire an attorney. By being aware of the items listed in this article, you should feel more confident about reviewing a PSA from a locum’s agency.