Strategies for Physician Owners to renegotiate Provider salaries (temporarily)

I was fortunate to receive the PPP loan mid-April and used those funds almost exclusively for payroll. Therefore, I have paid the providers at 100% salary throughout the entire pandemic. I had numerous discussions about adjusting salary to meet the hours worked, and was finally successful last week getting my providers to accept around 10% in salary for a 10% decrease in their hours. (I had no catastrophe clause in their contract so to my understanding I had to compensate at contracted rate despite changes in patient flow.)
My question is:
How were other Pediatrician owners successful in directing a renegotiation of their provider contracts?
How many discussions/weeks did it take to get a provider to agree to changes?
Is there legal protection for an employer if they need break an employment contract in order to avoid financial ruin for the clinic and/or bankruptcy?

I’d love some coaching on this so I can continue to serve our kids and families without having to sacrifice my personal financials to honor a provider contract.

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This is a contractual issue if you have a valid contract in place. It’s also an issue of understanding on the part of the employed provider. I have no shame in telling a provider that if they are not willing to be flexible, they are not being fair to the practice. There always has to be some give-and-take.

This, to me, boils down to communication with the provider. Help them understand the reality of the situation. If you want to go “all in”, share with them the numbers so they can see the financial impact of the pandemic. If they don’t budge, you may need to consider replacing them in the future- which comes with a variety of issues.

Last bit: I suspect there is a strong correlation between those providers not willing to be flexible now and providers who have been a persistent source of friction in the past.


You got it! Sharing the numbers and visits seen every two weeks for three months fell on deaf ears. I’m offered the part-time Pediatrician abbreviated hours instead of furlough. She had to “think about it” and whether it was worth accepting less hours or seeking part time employment elsewhere. She previously worked 2 1/2 days per week and I was offering to start back at two half days per week. I’m becoming more wise to her demands for flexibility for her needs (took off 60 clinic days last year alone) are not ever going to be reciprocated for the clinic’s needs and perhaps amicable parting is the most feasible (yet painful) decision.

Thanks for your thoughts!
Kristi Machemer

I had a frank talk with all of my staff at the beginning regarding the dire nature of the finances. (After Pauli and Chip recommended clear communication). I have four midlevels and one doc. They volunteered to work less and be paid less. Then PPP came thru and we didn’t have to cut back.

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It’s amazing how well people WILL behave when they understand.

It’s time for me to take on difficult conversations regarding dissolving contracts of those who have continued their difficult behaviors during a time of crisis. When they can’t commit to returning for an abbreviated schedule (hourly provider), then I can’t commit to fulfilling my end of the contract.

It’s time to build and create a team that stands with me and behind me.

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Bravo. If you’re going to own and run your own business, it’s your imperative to do it the way that suits you best.

We also had a sit down with all providers (only one is an employee, the rest of owners) and staff to let them know how dire everything was and how we all needed to work together to stay afloat. I think (for the most part) people understood and have been more than willing to step up to the plate. All of the owners cut down on our days (for now) and 30% salary cuts across the board. So, if those providers aren’t willing to be team players, then some reality checks may be in order.

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This is the topic I was looking for. We our on the outside of our PPP loan window and still struggling. We need to have a discussion with our providers about reducing their hours and salary. I recall on a weekly webinar someone discussing that even without catastrophe clauses we can write a negotiated decrease in salary, with both parties being willing participants, if it contains a sunset date. I think there were more details to her advise, but I cannot locate it on other posts. I have been scanning the chat & comments from those webinars. Could someone help or advise me where to look?

Honest conversations with contracted employees/providers would be prudent…while many contracts do not have provisions to address the situation we are in, open communication is more effective that wrangling over what is (or is not) in an existing contract. If the relationship is such that one needs to point out terms and conditions within a contract as the reason they should be willing to help save on expenses, I would question the validity of an effective working arrangement.

Just sit down and talk through things (honestly)…if neither side is willing to have empathy, then it might be time to unwind the relationship sooner than later…

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We just want to ensure that we follow the law in regards to what we are asking them to do, reduced hours & reduced pay. We do feel all of our providers will be open to this discussion and willing to help the practice stay out of financial trouble.

For me, this was all about how to approach these conversations with the providers. I had shared the data and discussed the shortfall issues for almost 3 months with the resistance to negotiate continuing. I guess the thought process was PPP provided the protection, so why consider any salary reduction. It took 4 weeks after our last PPP payment to get an agreement on 10% reduction in salary for 10% reduction in hours. I have gently let go of the provider relationships that were no longer workable. Money is still going to be tight and we will need to keep applying for grants while maintaining an open office on a more limited provider coverage. It’s getting trickier. Kristi Machemer, MD

We have one employed physician under contract. I presented an addendum to her contract for a specific time period, including the statement that all other terms of the contract remain in tact. (80% pay for 80% work hours) Our original time frame was for 2nd QTR because she had already been paid for March when our down turn hit. We are signing a monthly agreement at the beginning of each month… at this point we will probably do the same for July.

Cheryl Arnold
Central Arkansas Pediatric Clinic

Yes, that’s right being open and honest with providers is key especially in relationships you want to preserve. In addition, and this likely goes with out saying, but I’ll say it anyway :)…make sure that you are presenting all your employed physicians with like contract addendum. The last thing the practice needs is an illegal discrimination claim.

Thanks so much for your input!