After the FTC postponed enforcement of the Red Flags Rule seven times, Congress finally acted last week to exclude almost all physicians from its requirements. Pending President Obama’s expected signature, physicians and other health care providers that only extend credit “for expenses incidental to a service” they provide to a patient will not have to worry about the rule.

The rule will still apply to those that “regularly and in the ordinary course of business” “obtain or use consumer reports” or “furnish information to consumer reporting agencies” “in connection with a credit transaction.” The FTC will also be able to write rules to include other creditors that the FTC decides “offer or maintain accounts that are subject to a reasonably foreseeable risk of identity theft.” But it cannot extend to physicians who just bill patients and their insurance companies after the appointment.

Physicians should of course still be wary of circumstances that might indicate a patient is trying to use someone else’s health insurance or identity. But most won’t have to answer to the federal government for it.

The bill was passed by the Senate on November 30, 2010, by unanimous consent. The House agreed to it by a voice vote on December 7. It was presented to the President for his signature on December 8.

Text of S. 3987, the “Red Flag Program Clarification Act of 2010” (as passed by Congress) can be found here: http://www.gpo.gov/fdsys/pkg/BILLS-111s3987enr/pdf/BILLS-111s3987enr.pdf

AMA’s statement, “Congress clarifies red flags rule; AMA instrumental in outcome”: http://www.ama-assn.org/ama/pub/amawire/2010-december-08-general_news1.shtml

FTC’s statement on Congress’s passage of the Red Flags clarification law: http://www.ftc.gov/opa/2010/12/redflags.shtm
 

In a voice vote yesterday, the U.S. House of Representatives passed Senate legislation exempting physicians from identity theft regulations called "Red Flag Rules" that organized medicine has criticized as an unnecessary administrative burden.

The legislation, which awaits the signature of President Barack Obama, averts enforcement of the regulations in medical practices that would have taken effect January 1.

The Red Flag Rules implement portions of the Fair and Accurate Credit Transactions Act enacted in 2003. Under these rules, financial institutions and credit-extending businesses such as retailers and car dealerships must draft formal plans on how they will look out for warning signs, or red flags, of identity theft and then deal with any cases they discover.

The American Medical Association and the American Osteopathic Association sued the Federal Trade Commission earlier this year to spare their members from the regulations. According to their lawsuit, physicians are already addressing identity theft concerns under the Health Insurance Portability and Accountability Act. Besides creating needless administrative chores, the Red Flag Rules would interfere with the physician–patient relationship by forcing physicians to take a distrustful approach to new patients and their identity.

The medical associations also contended that physicians should not be viewed as creditors in the same vein as car dealerships simply because they allow patients to pay their bills after the time of service. The legislation approved by the House and Senate reflects this understanding of the term "creditor" and rewrites the Red Flag Rules to exclude any business that "advances funds on behalf of a person for expenses incidental to a service provided by the creditor to that person."

"We hope that the [Federal Trade Commission] will now withdraw its assertion that the red flags rule applies to physicians," American Medical Association President Cecil Wilson, MD, said in a press release issued today. For its part, the American Osteopathic Association stated that "this clarification of the definition of 'creditors' puts an end to the regulatory and legal wrangling that has plagued this important consumer protection since 2008."

SOURCE:  MedScape Medical News