Bill Passes Likely Exempting HealthCare Entities from Red Flags Rule

December 17, 2010, 4:51 PM

Already passed by the Senate at the end of November, the United States House of Representatives on December 7, 2010, passed the Red Flag Program Clarification Act of 2010. The bill will now be sent to President Obama for signature.

The bill provides language that suggests that healthcare providers shall be exempt from the Red Flags identity theft prevention rule (the Rule). Prior to passing the bill, the definition of creditor within the Rule was broad enough to include any physician group or other healthcare provider that provided services without collecting payment for those services at the time that the services were rendered. The bill, however, redefines creditor to limit and specifically carve out from the definition of creditor persons (to include healthcare providers) who advance funds by providing services prior to receiving payment for those services. This provision should effectively exclude healthcare providers from the definition of creditor and therefore allow healthcare providers to escape the application of the Rule. There is a provision in the bill that allows the applicable government agencies to designate certain persons as creditors that will be subject to the Rule if the government agencies determine that such persons maintain credit accounts with a reasonable risk of identity theft.

The Kaufman & Canoles Health Care Practice Group will continue to monitor the developments with this newly passed bill and its effects on the application of the Rule to healthcare entities and will keep our clients informed of the ultimate outcome. The good news for now is that it appears that healthcare entities will be carved out of the application and scope of the Rule. --Aaron J. Ambrose