Moonlighting & Outside Income — When Partners Work Elsewhere

The letter from the hospital is gracious. It thanks the practice for a partner’s service as medical director of the newborn nursery, describes the role as invaluable to the community, and mentions the stipend in passing. It is also the first the other partners have heard of any of it. Nobody has done anything wrong, exactly. The agreement says nothing about directorships, so there was no approval to seek and no disclosure to make—and now three partners have to decide, retroactively and in front of each other, whose money that is.

Outside professional income is a growing source of governance tension, and it grows for good reasons. Physicians are asked to serve as directors, advisers, consultants, and speakers more than they were a generation ago; telehealth makes clinical work elsewhere frictionless; and industry has become adept at compensating clinical opinion. Every one of those arrangements raises the same three questions, and an agreement that answers them in advance converts a potential grievance into a form.

The first question is which activities require approval at all. Answer it by category rather than by dollar amount:

• Clinical work outside the practice: urgent care shifts, locum tenens, telehealth for another employer, hospital coverage the practice does not itself hold.
• Medical directorships: schools, camps, early intervention programs, home health agencies, hospitals, and payers.
• Industry consulting, advisory boards, and speaking engagements, including those compensated in equity rather than cash.
• Expert witness work and independent medical examinations.
• Teaching, research, and clinical trial participation.
• Board service, compensated or not, where it consumes practice time.
• The community contracts pediatric practices uniquely hold—school, camp, and athletics coverage—which sit in a category of their own.

That last one deserves a line. Pediatric practices are asked to cover schools, camps, and sports programs constantly, and those relationships almost always arrive through the practice rather than through the individual. Practice revenue is the sensible default there, with any individual arrangement disclosed and priced, and drafting it that way closes the seam through which the most awkward version of this conversation usually arrives.

The second question is whose income it is. State the rule one way or the other, because the default in silence is that whoever holds the check keeps it, and that default will eventually be applied to a substantial directorship stipend by a partner whose colleagues covered his Thursdays. The workable formulation follows the fiduciary logic the agreement already carries elsewhere: income from work performed during practice time, using practice resources, or arising from a relationship the practice holds belongs to the practice; income from work performed on a partner’s own time, disclosed and approved in advance, belongs to the partner. That is the corporate opportunity principle applied to a paycheck—an opportunity that arises from practice business belongs to the practice first and reaches a partner personally only after the partnership has declined it in a documented vote.

The third question is the one that carries regulatory weight. A medical directorship or consulting arrangement paid for by an entity that receives referrals from the practice sits squarely in the territory the federal physician self-referral law—the Stark Law—and the Anti-Kickback Statute govern. Compliant arrangements in that space are conventionally built to satisfy an applicable exception or safe harbor, which turn on features like a written agreement, a set term, compensation set in advance at fair market value, and compensation that does not vary with the volume or value of referrals. Whether any particular arrangement fits an exception or a safe harbor is a question for healthcare counsel, evaluated before the engagement begins rather than after a payer audit asks about it. The partnership agreement’s contribution is procedural: require that any arrangement with a referral source be disclosed, documented in writing, and reviewed by counsel as a condition of approval.

Malpractice coverage is the exposure partners underestimate most. A practice’s policy generally responds to services rendered on behalf of the practice, which means outside clinical work may sit entirely outside it, and a partner moonlighting at an urgent care on weekends may be personally uninsured for that work without knowing it. Require proof of coverage for any approved outside clinical activity, name who pays for it, and address the tail. And put the practice’s own carrier in the conversation: a call before each new engagement, confirming that the practice’s coverage is unaffected and learning what the carrier wants documented, costs minutes and converts a potential coverage dispute into an underwriting note.

Time is the quieter cost. A directorship described as four hours a month becomes a half day a week, and the partners who absorb the resulting schedule gaps rarely say so directly. Cap the commitment in days per year, state how outside time interacts with call and clinic obligations, and state what the compensation formula does when a partner’s clinical production drops because of approved outside work. A cap that everyone agreed to in advance is a boundary. The same conversation held afterward is an accusation.

Then require disclosure, annually and in writing, of all outside professional income above a stated threshold, filed alongside the practice’s conflict of interest policy. Disclosure does most of the work here. Few partners are willing to write down an arrangement they would not defend out loud, which means the form prevents more problems than any prohibition would—and a practice that knows about its partners’ outside relationships can manage them, while one that does not will learn about them from a letter.

Red flags. Outside consulting income treated as personal without any partner discussion. A directorship paid by a referral source with no written agreement and no counsel review. Outside clinical work performed without confirmed malpractice coverage. No disclosure requirement of any kind. Speaking fees from a device company that never reach a conflict of interest file. And a school or camp contract signed personally by one partner for a relationship the whole practice built.

Outside income without governance creates outside conflicts—with inside consequences. The form takes 10 minutes a year. The argument it prevents takes months.