FTC Postpones Enforcement of “Red Flag” Rule Against Physicians

By July 6, 2010No Comments

On June 25, it was announced that the Federal Trade Commission had reached a joint legal stipulation with the AMA and two other medical societies that it would not pursue enforcement of the “Red Flags” Rule against physicians until after the U.S. Court of Appeals in Washington reviews a trial court decision in which the American Bar Association successfully blocked implementation of the Rule for attorneys.

The lawsuit brought by the medical societies seeks to block application of the Rule to physicians. It was filed on May 21 by the American Medical Association, the American Osteopathic Association and the Medical Society for the District of Columbia. The lawsuit contends that the FTC, by concluding that physicians are covered by the Rule, has exceeded its statutory powers and acted in a way that is “arbitrary, capricious, and contrary to the law.”  The FTC was due to file an answer to the lawsuit by July 20, but that date has been put off until 60 days after the case is reinstated on the active case docket.

In November 2007, the Federal Trade Commission issued a set of regulations known as the “Red Flags Rule” (the Rule) requiring that certain entities develop and implement written identity theft prevention and detection programs to protect consumers from identity theft.  The FTC has taken the position that healthcare entities, such as physician practices, are included in the definition of “creditors” subject to the Rule if they defer payment for services beyond the date the services are rendered.  Not demanding payment in full at the time of service, including through the billing of insurance, makes practices “creditors,”  according to the FTC’s position.

Due to wide confusion over who must comply with the Rule, the FTC has postponed enforcement of the Rule multiple times.  On May 28, 2010, the FTC announced it would delay enforcement of the Rule through December 31, 2010 while Congress considers legislation that would exempt certain entities, including physicians, from having to comply with the Rule.

For more information, contact Jim Pyles at jim.pyles@ppsv.com.

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