Lone wolf: The pros and cons of life as an independent contractor

Working with veterans has always been a dream for Nicole Webb, DO. After completing her residency in 2011 at Rowan University School of Osteopathic Medicine, the self-described “self-starter” got into locum tenens work initially as a means to an end.

“My original intention with locum work was to get my feet wet and see if certain locations would work for me,” Dr. Webb says. But after helping care for an ailing parent, the flexibility of working as an independent contractor suited her lifestyle needs. Today, Dr. Webb is still an independent contractor, working as a locum tenens psychiatrist for the Department of Veterans Affairs in Des Moines, Iowa.

“I enjoy the flexibility of it,” says Dr. Webb. “If I’m not happy, I can leave, and if I’m happy, I can stay.”

Independent contractor work is not for everyone, but if you’re considering a lifestyle with more flexibility—such as a telemedicine position—it pays to know the facts before weighing your options.

The differences

The choice of working as an employee versus an independent contractor often breaks down to control versus autonomy, and stability versus flexibility.

An employee is typically guaranteed a regular wage or salary on an annual basis, while an independent contractor is generally paid by the project or by time. An employee will also receive benefits from the employer, such as health insurance, retirement benefits and malpractice insurance. A physician employee is paid on a W-2, just like a resident or fellow.

As an independent contractor, or freelancer, you basically sell your services to the practice or hospital, but you don’t have any legal connection to the practice other than as a service provider. Since you are self-employed, you are paid on a 1099.

Telemedicine

Telehealth companies, especially those with multi-state footprints, typically look to an independent contractor model when developing their network of physician providers.

Many physicians who are practicing telemedicine are doing so on a part-time or moonlighting basis in addition to their primary job, says Nathaniel Lacktman, chair of the Telemedicine & Digital Health Industry Team at Foley & Lardner LLP.

“Either their main, full-time employment allows that to be done or prohibits them from being employed by another medical service company but would allow them to work on a time-limited, independent contractor basis.”

For Griffin Mulcahey, co-founder of telemedicine physician staffing company Enzyme in Austin, Texas, the ideal job candidate is “the young doctor up to their eyeballs in debt looking to make money on the side.” Clients also include new parents wanting to go back to work without committing to a full-time position at a hospital or health system, or an experienced physician looking to semi-retire.

“It’s really just people looking for flexibility,” says Mulcahey. “A lot of the physicians are really burned out on traditional EMRs. They want to work from home and not have to be involved in medical reimbursement and dealing with insurance. That is a big benefit of telemedicine.”

For those interested in telemedicine work, Mulcahey suggests updating your CV and making sure your licensure and board certifications are up-to-date. “And the more states you’re licensed to practice in already, the better. That is a huge benefit.”

Pros and cons

The advantages of working as an independent contractor are the same as those of any freelancer. You typically have the freedom to work as much or as little as you’d like, take vacations when you want, choose an insurance policy according to your needs, and decide how to invest for retirement.

Of course, the downside of being an independent contractor is that you receive no benefits or insurance from an employer, no paid vacation or sick time, malpractice insurance, disability insurance or other benefits. The exception to this might be locum tenens contracts, which typically offer some benefits, including malpractice insurance.

The cost of medical malpractice insurance varies depending on your specialty, location and other factors. Surgeons and ob-gyns typically pay more than any other specialty. Rates for internal medicine physicians in 2014 ranged from $3,500 to $48,000, according to the insurer Gallagher.

To compensate for the lack of benefits, an independent contractor should be paid more than an employee.

The IRS definition

Simply signing a contract as an independent contractor doesn’t mean that that’s what you are. What really matters is how the IRS sees your employment.

The IRS uses a specific test, called the IRS 20-factor test, to make this assessment.

“If you look at any one of these 20 factors in isolation, that itself is not definitive [of an employee or contractor relationship],” says Lacktman. “You need to look at the overall structure of the arrangement.”

If you’re unsure of whether you are an employee or an independent contractor, you can fill out IRS form SS-8 to help you determine your worker status.

If you’re an independent contractor and wish to find out what your tax obligations are, visit the IRS Self-Employed Tax Center.

Keep in mind that labor and employment laws vary by state and things like anti-discrimination laws, for example, might not be the same for a contractor versus an employee.

For Dr. Webb, being an independent contractor has given her opportunities she feels she wouldn’t otherwise have had. “Being a locum has made me a better doctor and given me an incredible resume that I don’t think I would have gotten otherwise,” says Dr. Webb of her VA stints in California and Iowa. “I wouldn’t be where I am today if I didn’t Google ‘physician contractor’ one day. It changed my life for the better.”

Further reading:

Is locum tenens work right for you?

5 tips for landing your first job after residency