Reprinted from MedPage Today

By Emily Walker, Washington Correspondednt, MedPage Today
May 29,2010

WASHINGTON -- The Federal Trade Commission (FTC) will not enforce its "red flag
rule" until 2011, giving doctors an extra seven months until they have to comply with
the antifraud measure

The FTC announced Friday it would delay enforcement of the rule until Jan. 1, 2011,
after several members of Congress requested more time to decide which entities
should be covered by the rule. This is at least the third time the agency has delayed
enforcement of the red flag rule, which was originally scheduled to go into effect May
1, 2009.

The most recent delay would have expired at the end of this month and would have
required medical providers starting June 1 to examine their institution's risk for
insurance fraud and to put in place a tailored program meant to respond to "red flags"
that alert them to the possible breaches in the privacy of patient data. Doctors would
face fines of up to $2,500 per violation for failure to comply.

The rule stems from a 2003 law which is aimed primarily at financial institutions but is
worded broadly to include all businesses that extend credit to individuals.

The American Medical Association (AMA), along with the American Osteopathic
Association (AOA) and the Medical Society of the District of Columbia filed a lawsuit
against the FTC last week, charging that the physicians are unfairly being targeted to
participate in enforcing the red flag rule.

The groups argue that physicians shouldn't be considered "creditors" under the law
because they submit claims to health insurance carriers, which should be considered
the creditors.

"The FTC's decision to apply the rule to physicians is both misguided and
inconsistent with its regulatory power," said AOA President Larry A. Wickless, DO.

But the FTC said physicians are creditors because they extend credit to patients
when they bill them and do not require upfront payment. Under the law, a deferral of
debt is considered "credit," even though doctors' offices don't charge interest, and,
therefore, physicians should be subject to the law's provisions.

The AMA welcomed the most recent delay in enforcement of the rule.

"For two years, the AMA has made the case to the FTC that physicians are not
creditors like banks and lenders, and the misguided red flags rule should not apply to
them," said Cecil Wilson, MD, president-elect of the AMA, in a statement. "We hope
this latest extension will be long enough for the FTC to take a good, hard look at the
rule and finally exclude physicians from this unjustified and burdensome regulation of
medicine."

The rule also applies to lawyers and accountants, who will also not have to adhere to
the rule until 2011. The American Bar Association and the American Institute of
Certified Public Accountants have both filed lawsuits to prevent the FTC from
applying the provisions to their respective fields.

The House of Representatives voted 400 to 0 to pass a bill in October 2009 that
would exempt healthcare providers, accounting firms, and legal practices with 20 or
fewer employees from the red flag rules. The Senate never took up the measure.

If Congress passes a bill limiting the scope of the red flag rule before Dec. 31, 2010,
the FTC will begin enforcement of of the rule immediately, according to a release
from the commission.

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