New Bill Reclassifies Temporary Healthcare Providers as Independent Contractors: Tax Changes for 'Locum Tenens' Workers Start Now

The Health Care Provider Shortage Minimization Act of 2025 changes the employment status of locum tenens physicians and advanced care practitioners (like nurse practitioners and physician assistants). These healthcare professionals, who fill in temporarily at hospitals and clinics, are now considered independent contractors for tax purposes, not employees. This shift applies to services performed after the enactment of this Act.

Tax Time Twists

This bill means that neither the healthcare facility, the staffing agency, nor the locum tenens provider themselves will be treated as an employer under the Internal Revenue Code. This applies as long as the provider works at a single location for no more than one continuous year, has a written contract stating they won't be treated as an employee, and is legally allowed to practice in the state (SEC. 2). Think of a traveling nurse who takes a six-month assignment in a rural clinic – they'd be considered self-employed for that period, responsible for their own taxes.

Real-World Ripple Effects

This reclassification could make it easier for hospitals, especially in underserved areas, to fill temporary staffing gaps. By removing the employer tax burden, facilities might be more willing to hire locum tenens providers. For example, a small-town clinic struggling to find a temporary doctor might now have an easier time attracting someone, as the clinic won't have to pay payroll taxes on that provider.

However, it also means these healthcare workers lose the typical benefits and protections of employees, like employer-sponsored health insurance or unemployment benefits. A locum tenens physician working a 10-month contract would need to handle their own health insurance, retirement contributions, and other expenses typically covered by an employer. This law also does not protect anyone from misclassification.

The One-Year Itch

The one-year limit on this non-employee status is a key detail. While it aims to target temporary staffing needs, it might create challenges. For instance, a clinic that relies on a locum tenens provider for slightly longer than a year – say, 14 months – would suddenly face a shift in tax obligations and employment status for both the provider and the facility. This could lead to administrative headaches and potentially disrupt care continuity. It also raises questions about whether some facilities might try to game the system by cycling through locum tenens providers just under the one-year mark to continuously avoid employer responsibilities.