Court decision ends Red Flags Rule dispute, AMA says

A recent federal appeals court decision--which dismissed a suit focusing on the Federal Trade Commission's (FTC) so-called Red Flags Rule--"validates" its long-standing argument that physicians who bill after providing services are not subject to that rule as creditors, the American Medical Association (AMA) said Monday.

In its Friday ruling, the U.S. Court of Appeals for the District of Columbia said in the American Bar Association v. FTC that Congress clarified who must comply with the Red Flags Rule when it passed a bill in December exempting physicians and lawyers.

"The enactment [by Congress] of the Clarification Act moots this case," wrote Judge Harry Edwards in the court's opinion. "Because the new legislation has clearly altered the posture of the case, there is no longer a live 'case or controversy' before this court."

Under the "Identity Theft Red Flags Rule," the FTC initially had said that professionals--such as healthcare providers--would need a written identity theft prevention program designed to detect the warning signs--or "red flags"--of identity theft in their day-to-day operations.

The appellate court's decision "reinforces the intent of a new law clarifying the scope of the Red Flags Rule and helps eliminate any further confusion about the rule's application to physicians," said AMA President Cecil Wilson, MD, in a statement.

The lawsuit filed by the Litigation Center of the AMA and the State Medical Societies, the American Osteopathic Association, and the Medical Society of the District of Columbia--and joined by 26 national medical specialty societies--will now formally end.

For more details:
- see the appellate court decision (.pdf)
- read the AMA statement
- read the FTC statement