The American Medical Association on Monday announced that it will drop its lawsuit against the Federal Trade Commission over “red flags” rules for healthcare providers.

The move comes on the heels of Friday’s U.S. Court of Appeals decision in a similar lawsuit filed against the FTC by the American Bar Association. Both the lawyers and doctors groups argued that the rules, which require businesses that can be considered a “creditor” to establish stringent identity theft and privacy measures, should not apply to lawyers or to healthcare providers.

The Washington D.C. Circuit court ruled that the recently passed “Red Flag Program Clarification Act” (McKnight’s, 12/14/10) makes the ABA lawsuit obsolete.

In light of the D.C. Circuit court’s ruling, “the FTC’s assertion that the term ‘creditor,’ as used in the red flags rule and the FACT [Fair and Accurate Credit Transactions] Act, includes ‘all entities that regularly permit deferred payments for goods or services,’ including professionals ‘such as lawyers or health care providers, who bill their clients after services are rendered,’ is no longer viable,” the AMA said in its statement.