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AI Hallucinations in Healthcare Law: Protect Your Practice

Managing Partner Erin Jackson
Last Updated November 26, 2025

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AI can make healthcare documentation faster — and riskier. This post breaks down how AI errors can expose your clinic to penalties and why legal review is critical.

Artificial Intelligence Is Not a Substitute for Legal Counsel

Artificial Intelligence (“AI”) can now do many tasks that used to require human judgment — like customer service, computer programming, and accounting.

But even with its growing abilities, AI cannot replace a licensed attorney. The systems themselves admit this.

When asked if AI tools should be used instead of legal counsel, ChatGPT explains that “legal advice requires understanding the full factual context, applicable laws, and jurisdiction-specific nuances — things AI tools can’t fully capture or verify.”

What Are AI Hallucinations?

AI systems tend to “hallucinate,” meaning they confidently produce false or misleading information. These hallucinations occur in two ways.

First, AI can get the law wrong or present incorrect facts. For example, it might say that Illinois allows nurse practitioners without full practice authority to prescribe medications without a doctor’s approval, which is not true.

Second, AI may make up sources, such as fake laws or court cases. An AI tool, for instance, might cite a non-existent federal “Telehealth Licensing Act,” making it seem like such a law exists.

The Legal and Professional Risks of Relying on AI

Several developers claim that their models do not hallucinate, but recent research has found otherwise. In fact, one study found that AI systems generated hallucinated legal information between 17% and 34% of the time, depending on the system used.

In the United States alone, there have been over 300 legal decisions where AI-generated fake or misleading content has been used, and this number does not include the wider universe of all fake citations or the use of AI in court filings.

AI’s rate of error is far too high for healthcare professionals to rely on it as a substitute for legal counsel, since even minor inaccuracies can expose you to compliance violations, financial penalties, or risks to patient care.

Legal Consequences of AI Misuse

Courts have already started addressing AI misuse. In Massachusetts, a lawyer was fined $2,000 for using AI-generated cases that turned out to be fake. In a recent case out of California, an attorney was fined $10,000 for filing an appeal containing hallucinations. These cases show that judges are losing patience with the misuse of AI.

In the Massachusetts case, the judge highlighted AI systems’ tendency to provide incorrect or misleading information and stressed the importance of reading, checking, and verifying the facts they provide.

Besides fines, relying on AI without verification could expose you to discipline from your licensing board or harm your professional reputation.

Why Human Oversight Matters in Healthcare Law

The risks of relying on AI are especially high in healthcare law, where precision is not just a matter of legal accuracy but of patient safety and regulatory compliance.

Healthcare regulations change rapidly and often differ between federal, state, and local levels. An AI system might miss small but important differences, such as state licensing rules, HIPAA privacy requirements, or scope-of-practice laws, leading to serious legal and operational consequences.

One wrong statement in an AI-generated policy or compliance memo could lead to penalties, loss of a license, or violations of patient privacy. For this reason, you should collaborate closely with licensed attorneys who can verify that any AI-assisted content is both accurate and aligned with your jurisdiction’s rules.

The risks stated above highlight the importance of human oversight in all AI-supported legal work. As U.S. Supreme Court Chief Justice John Roberts stated, “Legal determinations often involve gray areas that still require application of human judgment. Machines cannot fully replace key actors in court.”

While AI can be a valuable tool in improving efficiency, it must always be guided — never replaced — by human expertise, particularly when legal and healthcare compliance intersect.

Get Legal Support

If you are a healthcare provider considering AI for legal support, consulting with an attorney ensures that your AI-assisted decisions comply with state and federal regulations and protects your patients and your practice. If you’re located in one of the states where we have licensed attorneys, you can schedule a free consultation with one of our experienced healthcare lawyers.

This blog is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader. It should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.