Heads Up for Health Care Professionals: AI Monitoring Tools Could Be a Legal Minefield

AI is changing the game in patient care. From wearable sensors that track vitals to predictive alerts that flag early signs of deterioration, these tools are helping clinicians intervene faster and smarter. But here’s the catch: as AI becomes more embedded in your workflow, your liability risk is quietly growing.

These systems are impressive. They can detect subtle changes in heart rate, breathing, or movement and send alerts before a human might notice. But what happens when those alerts are missed? Or when a clinician relies too heavily on the algorithm and skips their own judgment? That’s where things get tricky.

In the United States, the legal landscape for AI in health care is still evolving. There are several important regulations that must be considered:

•  Health Insurance Portability and Accountability Act (HIPAA): HIPAA governs the privacy and security of patient health information. Its privacy rule sets standards for protecting medical records and personal health information, while the security rule requires safeguards for electronic health data. Any AI tool handling protected health information (PHI) must comply with these requirements.
•  Health Information Technology for Economic and Clinical Health Act (HITECH): HITECH reinforces HIPAA by promoting the adoption of electronic health records and increasing penalties for data breaches. It also established breach notification requirements, meaning healthcare providers and their AI vendors must promptly report unauthorized disclosures of health data.
• U.S. Food and Drug Administration (FDA): The FDA regulates software that acts as a “medical device,” including certain AI-powered clinical decision support tools. The FDA is also developing new rules for adaptive AI systems that learn and evolve over time.

Additionally, the Federal Trade Commission (FTC) monitors deceptive claims from vendors, and prohibits any misleading statements or exaggerations about treatment efficacy, medical outcomes, or health risks.

At the state level, malpractice laws remain in effect, which can be unforgiving regarding technological errors. Additionally, all 50 states have their own data breach notification laws that apply to any unauthorized disclosure or mishandling of PHI and other data.

We are already seeing lawsuits where hospitals are held accountable for ignoring AI-generated alerts. For example, one hospital failed to respond to a sepsis warning, leading to a patient’s death. The family sued, arguing that the hospital did not act on a clear signal.

Even contracts with vendors can be a weak spot. If your AI system fails and the indemnification language is unclear, you may be left responsible for the consequences.

What Can You Do?

• Vet your vendors thoroughly. Ensure their tools are validated, their algorithms are transparent, and their data handling practices are robust.
• Train staff to understand what the AI is communicating and what it isn’t.
• Document everything: when alerts arrive, how they are managed, and what decisions are made.
• Test for bias. If your system performs differently across patient populations, that’s a major concern.
• Monitor regulatory developments. Congress is considering bills requiring impact assessments for high-risk AI systems, and states such as California are expanding privacy laws beyond HIPAA.

In this shifting landscape, understanding and complying with HIPAA, HITECH, FDA, FTC, and state regulations is crucial for healthcare professionals using AI, not only for legal protection, but for the safety and trust of the patients they serve.

If you’re using AI for patient monitoring, now is the time to review your policies, update your contracts, and make sure your team knows how to respond when the system alerts or doesn’t.

Contact Walt Green, Beau Haynes, Emma Looney or any member of Phelps’ health care, artificial intelligence or cybersecurity, privacy and data protection teams if you have questions or need compliance advice and guidance.