I think I discovered the issue with Scooby's skin. It is the flea and tick shampoo I am using!!! I took him for a walk today with Shaggy. Prior to walking I put the shampoo on both of them. They like to play in a steam nearby on the trail. I put it on so it had time to work before it got rinsed off in the water. It says to leave on for atleast 5 minutes. It takes about 5 minutes to walk to the stream.
We got to the stream and I rinsed them off. That is when I noticed the red splotches again. I figured it was old flea bites. Later, we continued walking and playing in the stream. That is when I noticed additional hair loss as well. It seemed where the shampoo was the "thickest" is where the hair was gone. By the time we got back to the car there was hair missing off his back end and a little on his tail!!!
The good news is that Scooby wasn't scratching the whole walk! Which was good. I also noticed the shampoo left a horrible smell afterwards. The dogs still smelled dirty like they hadn't had a bath. I don't think I will be using any more of the shampoo on them for a little while. I don't normally use Hartz products. My father had some left over and I had used it.
I think if I start using regular shampoo again without the flea stuff in it, the dogs should be okay. I was panicked for awhile over this.