Dermatologists readying for enforcement of ‘red flags rule’

April 30, 2009

Beginning May 1, the Federal Trade Commission (FTC) was to begin enforcing a rule requiring certain kinds of businesses, including most doctors? practices and hospitals, to develop written plans for identifying and responding to warning signs ? red flags ? of identity theft. And while many healthcare providers view the Red Flags Rule as another time-consuming, expensive federal mandate they have to follow, dermatologists who have prepared for it say it need not be either.

Healthcare providers, including dermatologists, are being recruited into the battle against identity theft.

Beginning Aug. 1, the Federal Trade Commission (FTC) is to begin enforcing a rule requiring certain kinds of businesses, including most doctors’ practices and hospitals, to develop written plans for identifying and responding to warning signs - red flags - of identity theft. And while many healthcare providers view the " Red Flags Rule " as another time-consuming, expensive federal mandate they have to follow, dermatologists who have prepared for it say it need not be either.

More than 8.3 million Americans are victims of identity theft each year, of which the FTC estimates 4.5 percent, or 373,000, experience medical identity theft - someone pretending to be another person in order to use that person’s health insurance.

Steven Kern, a partner in the law firm Kern Augustine Conroy & Schoppmann P.C. in Bridgewater, N.J., explains that compliance with the rule requires a program that will identify and detect relevant red flags and mitigate the consequences of identity theft if it does occur. In addition, red flags programs must be updated periodically and be approved by the business’s board of directors, shareholders or - as is the case with most medical practices - senior partner. Businesses found not complying with the rule could face fines or other civil penalties.


Warning signs of identity theft

In its guidelines for complying with the rule, the FTC lays out four general categories of warning signs of identity theft. These include alerts (warnings from a consumer reporting agency), suspicious documents, suspicious forms of personal identification and notifications from customers, victims of identity theft or law enforcement authorities about possible identity theft.

The commission’s recommended steps for preventing or mitigating theft include increased monitoring of customer accounts and account numbers to prevent misuse, contacting the payer or law enforcement agencies if theft is suspected, tightening database security or a combination of these steps.

Naomi Lefkovitz, an attorney in the FTC’s division of privacy and identity protection, says businesses do not need to submit their plans to the commission." If we are called in to investigate a case of identity theft, at that point we would probably ask to see the written program," she explains.

Michael Goldfarb, M.D., a dermatologist with a solo practice in Dearborn, Michigan, prepared a red flags manual for his employees using information he obtained from the American Medical Association (AMA) Web site.

The main change from the office’s current procedures will be to require patients to show a driver’s license when they come in. " In the past, we always asked for it with new patients but weren’t as rigorous about it with returning patients," he says.

The one exception will be for patients with chronic conditions who he sees frequently. " But if it’s been a while since we’ve seen them, or I can’s t recognize them on sight, we’s ll ask for a license. " Researching the rule and preparing the office manual took “a couple of hours,” he adds.

Anjali Baxi, an attorney with Healthcare Law Associates law firm in Plymouth Meeting, Pa., notes that improved patient care is among the benefits of reducing identity theft. " If someone comes in to a doctor pretending to be someone else and is treated for a disease the true patient never had, and later on the true patient is treated for something, it could pose a real problem in terms of the treatment the true patient receives."


Medical Societies Protest

Following the lead of the AMA, more than two dozen medical societies, including the American Academy of Dermatology (AAD), have protested the FTC’s decision to apply the Red Flags rule to medical practices.

"The AAD feels strongly that it is inappropriate and inconsistent with the intent of the regulations to include most practicing physicians as ’creditors, ’" says Jack Resneck, chair of the AAD’s Council on Government Affairs, Health Policy #38 Practice. "The academy does not see many parallels between the financial operations of physicians’ offices and banks, mortgage brokers or automobile dealers."

In the meantime, Resneck adds, "The academy has been creating resources to help its members comply with the regulations with as little disruption as possible to their practices. "

Dr. Goldfarb says in his nearly 25 years of practice, he is not aware of anyone who has attempted to obtain care under someone else’s name. "But I certainly think that in these times, with people losing jobs and the cost of coverage going up, it’s becoming more of an issue, " he says. DT