ID theft rule decision offers doctors a way out

Physicians petition for exemption from the FTC's "red flags" regulation after a court ruling excused lawyers from the new requirement.

By Amy Lynn Sorrel — Posted Feb. 15, 2010

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

A recent federal court decision could offer physicians and other health professionals an avenue for relief from a Federal Trade Commission regulation requiring them to implement a formal identity theft prevention program or face penalties.

The Dec. 1, 2009, ruling by the U.S. District Court for the District of Columbia blocked the commission from applying the "red flags" rule to lawyers. The decision prompted the American Medical Association and others to petition the commission in January for a similar exclusion for physicians and other health care professionals.

The regulations, which have gone into effect but whose enforcement has been delayed until June 1, require entities that regularly extend credit or defer payment for services to adopt a formal policy for detecting and preventing identity theft. The FTC counts physician practices as creditors if they bill patients for past services or allow patients to set up payment plans.

But in a case brought by the American Bar Assn., the court found that the FTC exceeded its authority in applying that interpretation to attorneys.

"The court ruling sends a clear signal that the FTC needs to re-evaluate the broad application of the red flags rule," AMA President J. James Rohack, MD, said in a statement.

The AMA and other medical organizations said in a Jan. 27 letter that if the ABA litigation produces an exemption for lawyers, health care professions should be exempted, too. The American Osteopathic Assn., the American Dental Assn. and the American Veterinary Medical Assn. also joined the petition.

The FTC declined to comment on the request or on whether it would appeal the ABA ruling.

Concerns from organized medicine that the unfunded mandate posed by the identity theft rule would unnecessarily burden physician practices and increase health care costs have prompted several delays in the rule's enforcement. But with the FTC firm in its position that the health care industry falls under the regulations' scope, those delays do little to alleviate doctors' concerns, said Shawn Martin, AOA director of government relations.

"From our perspective, attorneys' offices and physician offices are no different as far as the business structure, and this [ruling] created a precedent for us to argue from," he said. "We will pursue all reasonable and feasible avenues to make sure our members can practice medicine in the least burdensome manner possible. This is a lot of hoopla for a $20 co-pay."

Pathway to a reprieve?

Legal experts said the ruling in favor of the ABA could be good news for the health care industry.

The court concluded that the Fair and Accurate Credit Transactions Act, which authorized the FTC to promulgate the red flags rule, was intended to regulate financial institutions and transactions, not the privileged attorney-client relationship and the services lawyers provide. Nor did the practice of invoicing a client after rendering services make the attorney a financial institution or a creditor.

"The same can absolutely be said that the long-standing, privileged relationship between a health care provider and his or her patient is very different from the relationship between a financial institution and a customer," said Lucy C. Hodder, chair of the health care practice group in Rath Young Pignatelli's Concord, N.H., office.

"The decision should force some kind of pointed discussion between the FTC and the provider community," and it could give health care professionals sound footing to bring similar action, she said. As of this article's deadline, no lawsuit had been filed by health care organizations.

Physicians also have a leg up on lawyers in that they already are subject to federal privacy and security regulations that have given doctors a heightened awareness of identity theft issues, Hodder added.

But doctors have characteristics that could bolster the FTC position to include them in the fight against identity theft, said New York City-based health care lawyer Charles E. Kutner. Unlike attorneys, "doctors are in a unique position because they are in possession of two forms of confidential information that are protected by federal law: health information protected by [the Health Insurance Portability and Accountability Act], and financial information protected by these regulations. ... The government is saying we're not really imposing any great burden."

Nevertheless, he agreed that the FTC may have overlooked existing efforts aimed, for instance, at protecting patient privacy and preventing Medicare fraud. "Identity theft is a major issue affecting all sectors of the economy, and what the FTC is trying to do is a worthwhile endeavor. But doctors shouldn't be a part of law enforcement. There are other ways."

The AOA's Martin suggested incorporating the red flags requirements into the forthcoming transition to electronic medical records, which will include heightened security and breach notification measures.

Meanwhile, unless the FTC alters the rules or legislative relief is secured, members of organized medicine are advising physicians to scope out warning signs of potential identity theft and be prepared to adopt a compliance plan by June 1.

Back to top


Case at a glance

Did the FTC exceed its authority in applying new identity theft regulations to attorneys?

A federal district court said yes, noting that the rule was meant for financial institutions. The court blocked the FTC from applying the regulations to lawyers.

Impact: Organized medicine and legal experts say the ruling could give the health care profession similar relief from a rule they say will strain physician practices and drive up health care costs.

American Bar Assn. v. Federal Trade Commission, U.S. District Court for the District of Columbia

Back to top

External links

Joint letter to the Federal Trade Commission by the AMA and other health care organizations challenging the "red flags" rule, Jan. 27 (link)

Back to top



Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story

Read story


American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story

Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story

Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story

Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story

Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story

Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story

Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story

  • Stay informed
  • Twitter
  • Facebook
  • RSS
  • LinkedIn