'The new paradigm is that it was hard to copy much data to a floppy disk, and we did not allow CD writers. Suddenly, though, comes the USB flash drive with enormous capacity, zero installation, etc. Very handy, very risky -- risky both as a way for data to leave, and a way for malware to arrive,' Goodman said. 'We had to do something.'

The result: Baptist Memorial created strict policies around the use of flash memory sticks, iPods and other portable storage devices by standardizing on USB memory sticks that have native encryption and password protection. 'HIPAA mandates that all health care organizations develop a methodology to account for all removable media,' Goodman said.

But with more than 42 million of Apple Computer Inc.'s iPods sold so far in the U.S. alone, the threat of data theft or loss from downloading information on a flash-memory device is growing exponentially, according to analysts.

'An iPod is just storage at the end of a wire,' said John Webster, a senior analyst and founder of Data Mobility Group in Nashua, N.H. 'You already see people running around with iPods, using them as backup devices. USB storage devices are a potential source of data leakage.'

In reaction to IT managers' concerns about data loss threats, IT vendors are offering security for flash memory devices.