How Hospitals Can Reduce Locum Agency Costs Without Compromising Care

NSW spends $240 million a year on locum doctors. Tasmania's locum bill tripled from $57 million to $182 million in three years. Nationally, locum costs rose 65 between 2020-21 and 2023-24. If you run a medical workforce, these numbers are not abstract -- they are your budget. Here is a data-driven look at where the money goes and what hospitals are doing to claw it back.

The Numbers: How Much Australian Hospitals Actually Spend

The most detailed public data comes from state-level disclosures and parliamentary reporting:

• NSW: The NSW Minister for Health confirmed the state faces a $240 million annual locum bill. Agency commissions alone hit $37 million in 2022-23, up from $20 million in 2020-21. The state has allocated $6.3 million in the 2024-25 budget to examine feasibility of a NSW Health Locum Agency.
  
• Tasmania: Locum costs tripled from $57 million to $182 million in three years. Medical locum costs alone went from $42 million in 2020-21 to $105 million in 2023-24. Agency nursing costs jumped from $14.6 million to $77 million in the same period. At this trajectory, Tasmania's outsourced health staffing costs are projected to hit half a billion dollars by the end of the decade.
  
• Queensland: The state's 16 HHSs reported a combined financial deficit of $960.6 million in 2024-25, the worst ever recorded, according to the Queensland Audit Office. HHSs exceeded their expenditure budgets by $1.72 billion. Locum costs are a significant component of that overspend.
  
• National: Locum costs rose 65% between 2020-21 and 2023-24, according to analysis reported by Medical Republic. Emergency medicine, psychiatry, general practice, and surgery were identified as specialties with the highest locum use, increasing with remoteness.
  

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Where the Money Actually Goes

Agencies typically charge hospitals 10-30% on top of the doctor's pay. On a seven-day rural FACEM locum shift advertised at $3,000 per day ($21,000 total), the agency margin looks like this:

• 15 per cent markup: doctor receives $17,850, agency keeps $3,150
• 20 per cent markup: doctor receives $16,800, agency keeps $4,200
• 25 per cent markup: doctor receives $15,750, agency keeps $5,250

Multiply that across hundreds of shifts per year and the costs compound fast. The 2023 Kruk Report identified that workforce shortages lead to the "overuse of higher cost services such as locums," a pattern that compounds year on year when unaddressed. For a deeper look at how agency fees affect doctors, see our breakdown of the real cost of locum agencies.

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Why Costs Keep Rising Despite Awareness

The drivers are structural, not cyclical:

Workforce shortages are deepening, not easing. ACEM's 2024 data confirms every state and territory has unfilled emergency specialist vacancies. GP shortages are projected to exceed 5,500 FTE by 2033. Psychiatry, anaesthetics, and obstetrics face similar gaps. When supply is tight, agencies hold the pricing power.

Bidding wars between public hospitals. The NSW Health review specifically flagged "untenable" bidding wars between public health services competing for the same locum pool. When Hospital A offers $2,800 per day and Hospital B counters with $3,200, rates ratchet upward with no mechanism to bring them back down.

Last-minute bookings cost more. Shifts filled within 48 hours routinely attract 20-40% premiums over shifts booked weeks in advance. Poor workforce planning directly translates to higher costs.

Post-COVID rates never reset. Pandemic-era premiums became the new baseline. Agencies have no incentive to reduce rates when hospitals continue to pay them.

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What Forward-Thinking Hospitals Are Doing

Building In-House Locum Coordination

NSW is leading the way here. The state government is actively developing a government-run locum agency to bring recruitment in-house and reduce the $37 million annual agency commission bill. The concept is straightforward: dedicated medical workforce coordinators manage a direct pool of pre-credentialed locum doctors. Every placement made directly is one where the agency margin -- often 15-25 per cent of the total shift cost -- is eliminated entirely.

Using Direct-to-Doctor Platforms

A growing number of platforms connect hospitals directly with locum doctors, replacing percentage-based agency markups with flat-fee or subscription models. The economics are simple: hospitals pay less, doctors earn more, and the intermediary margin that benefits neither party is removed. StatDoctor is leading the way in this field.

Creating Preferred Locum Panels

Hospitals that maintain a panel of pre-credentialed, returning locum doctors save on three fronts: faster deployment (no credentialing delays), lower rates (established relationships remove urgency premiums), and better clinical continuity (returning doctors know the department, the systems, and the team).

Forecasting Demand with Data

Predictive rostering based on historical patterns -- seasonal peaks, training rotation start dates, annual leave clusters -- means fewer last-minute bookings. Every shift booked four weeks in advance instead of 48 hours before costs measurably less. Some HHSs are now using workforce analytics to model demand across the calendar year.

Investing in Permanent Retention

The cheapest locum is the one you never need to hire. Competitive permanent salaries, flexible rostering, genuine professional development, and rural incentives (housing, relocation, training support) are not costs -- they are investments that reduce locum dependency over time.

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The Bigger Picture

Australia's healthcare staffing market was valued at USD $262 million in 2025 and is projected to reach $493 million by 2033. Locum use will continue to grow, particularly in rural and remote areas where permanent recruitment remains a systemic challenge. As ACEM has noted, sustainable workforce planning requires coordinated solutions -- not reactive hiring when gaps appear.

Hospitals that build direct relationships with doctors now, rather than relying solely on agencies as the middleman, will be better positioned as competition for clinical staff intensifies. Whether your team is permanent, locum, or a mix, understanding what drives doctors' career decisions is valuable -- our comparison of locum work versus permanent positions explores the factors in detail.

If your hospital is looking for a more cost-effective way to fill locum shifts, StatDoctor connects you directly with qualified doctors at a fraction of traditional agency fees. No inflated margins, no hidden costs. Visit StatDoctor to learn more.