Legal Risks of AI in Healthcare Compliance
Artificial intelligence (AI) seems to be infiltrating every area of our lives, and healthcare compliance is no exception.
As new technologies emerge to help with billing, documentation automation, and more, healthcare entities must stay abreast not only of the opportunities presented by AI, but also the potential legal challenges.
The healthcare transaction attorneys at Daniels, Porco & Lusardi, LLP can help hospitals, medical practices, and other healthcare organizations stay compliant.
AI’s Expanding Role in Healthcare Compliance
Healthcare providers in New York are increasingly using AI to:
- Automate Compliance Audits: AI can help flag inconsistencies or errors in billing, coding, and documentation.
- Monitor Patient Data: AI is now used to look for HIPAA violations and unauthorized access.
- Streamline Reporting: AI can report to state and federal agencies like Medicaid and Medicare, as well as many others.
- Predict Regulatory Risks: AI is trained to look for regulation-based risks based on historical data and real-time analytics, though the accuracy of these predictions may be inconsistent as compared to an experienced human analyst.
- Support Clinical Decision-Making: Some AI purports to help doctors make clinical decisions, while ensuring compliance with treatment protocols.
New York’s Push for AI Regulation
In early 2025, New York introduced the NY AI Act (Bill S01169), which regulates algorithmic decision-making tools. These regulations also apply to healthcare settings. The bill aims to prevent algorithmic discrimination and requires transparency in how AI systems operate.
As a result of these changes, healthcare organizations must now think about:
- Disclosure Obligations: Explaining how AI tools make decisions
- Bias Mitigation: Ensuring algorithms do not discriminate based on race, gender, or other protected categories
- Audit Trails: Maintaining records of AI-driven decisions for legal review
As with any new legislation, it’s important to consult an attorney to understand how this law—and any future changes to it or additional legislation— impacts the risks posed by your current or future use of artificial intelligence.
Legal Risks Associated With AI and Healthcare Compliance
Despite its benefits, AI introduces legal risks for healthcare providers as well. These include:
1. Liability for Algorithmic Errors
AI tools use algorithms and language learning models (LLMs) to do their thinking, which means they could easily provide false or inaccurate information that leads to misdiagnosis or other mistakes. This could create medical malpractice claims, even if it was the AI AI that recommended a particular course of treatment.
2. Data Privacy and HIPAA Violations
AI systems use large datasets to make their decisions and recommendations. Providers must be careful in how they handle HIPAA-protected information in the context of AI tools. Improperly disclosing such information could create HIPAA penalties.
3. Failing to Comply with Regulations
AI tools have to follow both federal and state regulation, including Center for Medicare & Medicaid Services guidelines and New York’s evolving AI laws. Failure to keep up with these laws could result in legal action and civil fines.
4. Unclear Accountability
Relying on AI to make decisions creates questions about who is legally responsible. Ultimately, however, compliance requirements likely rest with the human and legal entities that use the AI.
Best Practices for AI Compliance in New York Healthcare
Healthcare organizations should do all of the following to help prevent liability and ensure compliance:
- Conduct AI risk assessments before using it
- Document decision-making processes for all AI tools
- Train staff on AI limitations
- Train staff about their oversight responsibilities
- Review vendor contracts to clarify liability
- Know your compliance obligations
- Monitor regulatory updates from New York State and federal agencies
Stay Healthcare Compliant With Sound Legal Counsel
As AI continues its march forward, New York and the federal government will likely expand their regulatory oversight of it. Healthcare providers have to be proactive and not reactive in these situations. AI can be useful, but you need to ensure it complies with complex regulatory law and compliance requirements. That is where an experienced healthcare transaction attorney can step in to help.
The attorneys at Daniels, Porco & Lusardi, LLP help healthcare organizations work with AI and still remain compliant with all of their duties. Contact us today for a consultation.