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Managing Evidentiary Consequences Of AI Use

April 8, 2026

Human resources and other business leaders, using or allowing workforce members to CHAT-GPT or other artificial intelligence (“AI”) tools to research, make decisions or to support other activities should ensure that their organizations and their teams understand and manage the resulting evidentiary consequences and responsibilities these activities create.

In today’s AI age, Human Resources directors and other business leaders in increasingly are encouraged to turn to AI tools for a quick understanding of the law, drafting of documents, and a host of other human relations and business functions traditionally performed with the assistance of legal counsel. Although AI tools can be valuable under the right situations and properly used, the use of AI tools, along side of or as a substitute for legal advice obtained within the scope of attorney client privilege can carry a number of inherent risks and challenges. Human Resources and other leaders and their organization should carefully evaluate and manage these consequences before using AI.

AI Searches May Be And Create Evidence

AI prompts, outputs, and related metadata often qualify as discoverable electronically stored information (“ESI”) in litigation, regulatory audits, and enforcement proceedings.

Under the Federal Rules of Civil Procedure, discoverable information includes electronically stored information (ESI”) relevant to claims or defenses. See Fed. R. Civ. P. 26(b)(1); 34(a)(1)(A). Once litigation is reasonably anticipated, organizations must preserve relevant ESI under Federal Rules of Civil Procedure. See e.g.,Hoffer v. Tellone, 128 F.4th 433 (2d Cir. 2025).

AI searches and other interactions and the information and other outputs they produce generally qualify as ESI for purposes of the Federal Rules of Civil Procedure, Federal Rules of Evidence, (hereafter collectively the “Federal Rules”) and comparable federal and state litigation procedural rules.

Likewise, federal and state regulatory and enforcement agencies tend to consider AI and other ESI evidence covered by document retention and discovery rules.

Where applicable, these Federal Rules and agency rules generally include AI and other ESI evidence organizations must preserve, identify, and subject to discovery or other production like traditional evidence in litigation and agency audits and investigations.

ESI evidence generally includes any data stored in electronic form—such as emails, texts, spreadsheets, social media, and Internet of Things (“IoT”) data. As broadly construed by the courts, courts already long have admitted:

Internet search histories;
Internal chats and Slack messages;
Draft documents; and
Deleted files.

AI searches are simply the next evolution of this evidence category. AI records and information considered ESI can include;

AI prompt histories;
Generated outputs;
Embedded AI-assisted drafts;
Platform logs (if accessible); and
Other records.

Organizations that fail to fulfill requirements for AI or other ESI early identification, data authentication and other requirements of Federal Rule of Evidence 902, the requirements of Federal Rule of Civil Procedure 37(e) regarding lost evidence, or other applicable requirements to preserve and produce ESI may result in sanctions, adverse inferences, and penalties under the Federal Rules. Similarly, organizations may incur evidentiary sanctions, regulator penalties, and other adverse consequences for failing to identify, retain and produce ESI from AI or other sources in government audits and investigations. Common sanctions include:

Monetary sanctions;
Evidence preclusion;
Adverse inference jury instructions; and
Other authorized sanctions.

See, e.g., Jones v. Riot Hosp. Grp. LLC, 95 F.4th 730 (9th Cir. 2024) (affirming dismissal as sanction for intentional destruction of ESI); Maziar v. City of Atlanta, No. 1:21-cv-02172, 2024 WL 197561 (N.D. Ga. June 10, 2024) (denying summary judgment and awarding fees based on loss of text messages); McBride v. Moore, No. 2:23-cv-02904, 2024 WL 1136429 (C.D. Cal. Feb. 23, 2024) (denying sanctions where ESI not shown lost or duty not triggered). Gregory v. State of Montana, No. 22-____ (9th Cir. 2024) (reversing sanctions imposed outside Rule 37(e); emphasizing Rule 37(e) as exclusive remedy for ESI spoliation); DR Distribs., LLC v. 21 Century Smoking, Inc., 513 F. Supp. 3d 839 (N.D. Ill. 2021) (recognizing financial prejudice from spoliation and awarding fees); Bistrian v. Levi, 448 F. Supp. 3d 454 (E.D. Pa. 2020) (Rule 37(e) provides exclusive framework for ESI spoliation); Fast v. GoDaddy.com LLC, 340 F.R.D. 326 (D. Ariz. 2022) (failure to preserve mobile device data warranted sanctions).

These and other related cases alert organizations that AI and other modern data sources are squarely within ESI. Courts treat AI, texts, mobile data, and app-based communications as discoverable ESI.

The precedent reflects that the best opportunity to position your organization to show the reasonability of the actions taken is through the existence and enforcement of policies before and during the use of the AI tool.ESI preservation obligations depend on foreseeability, control, and access to data. When deciding the consequences of the unavailability or failure to produce ESI, the determination regarding failure to take “reasonable steps” is fact-intensive. Of course, the failure to retain the documentation will be particularly likely to be found unreasonable where the party was under a statutory, regulatory, ethical, contractual, or other pre-existing obligation to preserve the evidence.

Also, courts require proof of intent to deprive before imposing the most severe adverse inference or dismissal sanctions, a lack of proof of intent to deprive the request requesting party of evidence does not mean there will not be consequences for the non-producing party. Negligent failure to retain and produce ESI and other evidence still carries consequences. Even without bad faith, courts may impose curative measures, fees, or evidentiary limitations.

Similarly, the U.S. Department of Justice Securities and Exchange Commission Department of Health and Human Services Office for Civil Rights Equal Employment Opportunity Commission and other federal and state government agencies are increasingly sophisticated in digital evidence collection.

Among other things, organizations should be prepared to routine and produce documentation and data obtained, utilized, or otherwise interacting with AI tools and it’s associated meta-data and other components to respond to litigation and regulatory request for a broad range of data and information. Optimally the data captured and retained should include, but it’s not necessarily limited to:

AI usage policies;
Employee and other agent AI interaction records;
Evidence of AI and other relevant governance and training; and
Data protection controls.

Consequently, failure to govern, identify, preserve and produce AI-generated and AI-assisted records appropriately can expose organizations to spoliation sanctions, adverse inference instructions, regulatory penalties, loss of privilege protections, and expanded liability exposure.

In recognition of the possibility that AI tool interactions may give rise to obligations to retain and produce ESI evidence created as a consequence of that interaction, or organization should work with legal counsel to develop an administer appropriate practices to monitor, identify, retain, manage, and where necessary produce this ESI evidence.

AI Tools Create Evidence

Beyond considering and meeting documentation and other evidently protection, preservation, and production responsibilities, organizations and their human resources and other leaders need to recognize that the use of the tool itself and its outputs creates evidence that may give rise to legal opportunities, risks, and obligations for the organization.

Organizations should keep in mind that the use of AI tools creates legal evidently risks because AI tools typically generate synthesized responses (not just links) that often incorporate user inputs into outputs that may reflect user intent, knowledge, biases and opinions, and decision-making. This often makes AI interactions particularly valuable evidence for:

Intent (e.g., “how to terminate employee without legal risk”) Knowledge (awareness of compliance obligations) State of mind (deliberate vs. negligent conduct);
Knowledge (awareness of compliance obligations);
State of mind (intentional, willful, or deliberate vs. negligent conduct)

The potential risks of this and other evidence is heightened by the fact that the evidence created may arise not only from the actions taken by the user of the AI tool, but also may be inherently built into the design of the AI tool itself or the databases or other reference materials that it accesses, not all of which may be transparent to the user or the organization that employs the user. These risks are further heightened when the AI tool use is not conducted internally within the organization by its employee, but rather is a tool utilized by a consultant or other third-party provider conducting activities of a sensitive nature on behalf of the organization, such as a recruiting company, investigation, company, or other service provider.

These unique characteristics of AI make it advisable that organizations recognize and manage potentially heightened exposures that employee or other agent use AI tools can produce for the organization in a wide range of sensitive areas.

Examples of queries that can become “smoking gun” evidence include but are not limited to:

In employment or other workforce administration searches, AI queries such as “How to terminate employee with medical condition,” ‘How to avoid claims when, terminating older, disabled, complaining, injured or other employee with protected status, or the like can be evidence of discriminatory or other adverse intent;” or “How to beat a union organizing campaign;”
Compliance & Regulatory searches such as “How to structure payments to avoid reporting requirements,” “HIPAA penalties for disclosure; searches about compliance or looking for compliance loophole; searches where company researched sanctions for noncompliance in areas involved in litigation or enforcement; or searches on risk management that could be evidence the organization saw but chose not to follow rules or standards or otherwise looked for or acted to circumvent compliance or disregarded interpretations less favorable to chosen challenged course of action;
Litigation or Other Defense Strategy searches or tools such as “How to defeat a whistleblower claim,” “Ways to minimize damages in lawsuit” “Protecting your assets from IRS or in bankruptcy,” “How to conceal” or How to hide” orthe like can harm the organization’s interest by showing adverse intent, willfulness, or other motive or state of mind;
Litigation case law, enforcement, argument drafting, or other actions that could reveal or provide insight on sensitive litigation strategies or their strengths or weaknesses;
Financial & Tax searches such as “Aggressive tax strategies unlikely to be audited,” or “contract terms to reclassify employee to contractor,” “Structure transaction to avoid disclosure” or the like; and
Other searches or tool uses that could reflect improper, intent, or document improper activities, such as how to hide evidence, how to create a bomb, how to poison somebody or that creates a record of conduct such as edits to revise data or documentation in reports or records, where the changes are tracked and retained.

Given these other risks, organizations should carefully consider and manage these and other risks when deciding whether, when, how and what AI tools their organizations allow their people to use, who gets to use what tools, designate and train those authorized to use these tools appropriately, and design and implement appropriate tools to track, capture, retain and manage these records of AI use and their implications. Optimally, the planning should identify and work to manage the creation and preservation of evidence and related AI ESI required or otherwise helpful to meet, applicable, regulatory, contractual, statutory, or other requirements in a manner that minimizes the creation of evidence that could call into question the compliance or other appropriateness of the organizations actors.

Privilege and Confidentiality Risks

Asking AI tools to answer legal questions or provide guidance in legal advice obtained within the scope of attorney. Client privilege also can enhance the exposure for the organization and it’s actors because of the implications of that Youts on the availability of attorney-client privilege for the activities and information obtained. Using AI tools and output also can have implications on the ability of an organization to protect legal advice and work product developed and shared within the scope of attorney privileges from discovery in judicial or regulatory actions. Organizations need to recognize risk to the confidentiality of legal advice or work product that entering sensitive legal questions or information into public AI tools not specifically designed and used outside the scope of the attorney-client relationship to avoid creating problematic evidence, disclosing discussions or work product that otherwise might qualify for protect against discovery in litigation or agency proceedings under the attorney-client privilege or attorney work product rules, or both.

Searches conducted by organization employees, consultants, or other agents or representatives about the law, strategies, or legal risks and consequences without or outside the scope of an attorney-client relationship generally can be discovered and used as evidence. Consequently, organizations should regulate the use by officers, directors, compliance officers, human resources directors, consultants, non-legal investigators and auditors and others of AI tools, internet or other searches to investigate the law or legal strategies independent of or outside the scope of attorney-client privilege.

Particularly risky scenarios include:

In-house counsel, Human Resources, risk management or compliance staff using public AI tools;
Employees seeking legal guidance outside approved channels;
Consultants, contractors, and other vendors use of AI in performing tasks or tools;
Embedded AI in software or other tools; or
Uploading contracts, PHI, or proprietary data into AI systems.

Additionally, organizations and others communicating or working with legal counsel on behalf of the organization within the scope of attorney-client privilege to design strategies or investigate or defend actions generally should not use AI tools to conduct their own legal research or analysis without authorization and direction of the legal counsel to avoid forfeiting attorney-client privilege and work product protections.

If the required confidentiality is preserved, the attorney-client privilege and work product privileges rules can protect confidential communications between a client and its attorney and work product prepared for risk management, defense or other purposes of the legal engagement against disclosure in litigation or other proceedings in many circumstances. However these protections are lost if the communication or work product is disclosed to or discussed with third parties outside the attorney-client relationship. Entering factual information, conducting legal searches, or using AI tools outside the attorney-client relationship, not specifically designed to preserve confidentiality, or both to draft or evaluate legal documents, research, drafts, or strategies generally is considered a third party disclosure that can waiver or undermine the privilege for the specific information input to the AI tool as well as potentially related communications or work product.

For these and other reasons, organizations and individuals generally should resist the temptation to use AI tools to evaluate legal strategies, advice or work product.

Trade Secret, HIPAA and Other Data Privacy and Use Exposures

Human Resources and other leaders also must keep in mind their organization’s responsibilities to respect other organizations, intellectual property, to safeguard the confidentiality and security of data, and their organization’s need to protect its own intellectual property.

AI tool enthusiasts promote AI tools as substitutes for legal advice and other paid services. While asking AI to write a “free” policy or contract may seem a great way to save legal or other consulting, licensing or other costs, human resources and other leaders and their organizations must keep in mind that not all data, information and resources obtained through a ChatGPT or other AI search is shareware. Most nongovernmental data bases, contractual firms, tools, templates and other materials accessed through AI searches are or incorporate materials owned or subject to copyrights or other intellectual property protections of third parties. Unlicensed use of these resources can expose their organizations to copyright and other intellectual property infringement liability.

Furthermore, human resources and other executives choosing to use materials drafted using AI tools or otherwise acquired off of the Internet or other sources without legal advice to recognize that acquired materials and resources may not be currently compliant, appropriately tailored to their use, or contain other deficiencies for utilization in their organizations. These deficiencies can arise from a number of sources. For one thing, the queries input by the user may not be sufficiently tailored to adequately represent all of the material considerations necessary to tailor he organizations, questions, and the AI response to the needs of the organization. Also, because AI databases often times include a broad range of historical data, AI responses may rely upon outdated, legal or operational presumptions incorporated into these historical policies when they no longer are appropriate for use in your organization. Additionally, the response of AI may draw from a wide range of sources, including many of which may be sample policies not drafted by qualified individuals with adequate expertise to fully understand the legal and operational implications of the policy and properly draft a policy appropriate for use in the organization, acquiring the form or materials off of the Internet.

Beyond suitability of the information where tool obtained through the AI search itself, unlicensed use of the response, may expose your organization to liability for violating other organizations or authors, intellectual property rights. AI searches can and often do access and incorporate data and other resources protected by third party copyright,trade secrets, HIPAA or other confidentiality, or other safeguards. Accordingly, accessing or using data bases, sample language or forms, or other materials without proper licensing or attribution may trigger liability to individuals and organizations for breaches of these intellectual property rights.

A separate concern arising from the use of AI tools in HR and other business operations to evaluate, formate or otherwise process sensitive data also creates potentially serious risks when theof these tools involves allowing the AI tool to access or uploading the confidential or other sensitive information into the tool. Human resources and other leaders must exercise care not to share inappropriately and to help their organizations use policies and processes to prevent their people’s use of AI tools to avoid violating statutory, regulatory or contractual confidentiality requirements, compromising confidential information, their own or business partner’s trade secrets, proprietary information and other intellectual property, or both.

Furthermore, uploading or sharing trade secrets, Health Insurance Portability and Accountability (“HIPAA”) protected health information, confidential employee, tax or other regulated information, trade secrets or other confidential or sensitive data into AI tools or searches without proper controls may itself breach of HIPAA, trade secret, federal or state privacy laws (e.g., biometric, consumer data laws) or other statutory, regulatory, ethical or contractual data privacy or confidentiality obligations. Additionally, allowing AI tools to access and interact with electronic data or systems frequently triggers data and systems security obligations under HIPAA, the Fair and Accurate Credit Transactions Act, Equal Employment Opportunity and other Human Resources and benefits data, electronic crimes, federal and state government contract, and a broad range of international, federal and state cybersecurity laws and regulations, and other government and private contractual and program participation, statutes, and regulations.

Given these concerns, organizations should avoid using AI tools that require uploading customer, financial, sales, or other data or information that the organization considers its own trade secrets or proprietary information into AI data bases or tools that do not adequately safeguard the ownership and confidentiality of that information.

AI Tool Hallucinations and Other Output Deficiency Risks

AI tools and the output they produce are not always reliable. Among other things, certain AI tools are known to:

Lack the ability to distinguish between more and less credible information sources;
Create plausible-sounding but entirely fabricated facts, news articles, legal authorities, or academic citations;
Create biased, false, incomplete, or inaccurate responses when models lack complete training data, are subjected to biased data, have limited context, ir under other circumstances;
Create false positives such as I dentifying a threat (e.g., in fraud detection) that is not actually present.
Fail to detect a real threat (e.g., in medical imagery) or report other false positives;
Fabricate non-existent, fake information or other incorrect or inaccurate information; and
Engage in hallucinations or other errors

The quality of the response, at best, often varies based on the quality and precision of the question asked. Lack of experience and careful structuring of the questions and inquiries made, lack of specialized knowledge necessary to structure the inquiry to be tailored to the specific needs at hand, and other limitations and concerns about the searches can undermine the accuracy, completeness and relevance of the AI tools output. Accordingly, response obtained by AI tools, often are unreliable and must be validated by a person experienced and skilled. The validation process should be conducted in such a matter that it preserves evidence that changes and responses are made based on thoughtful and reasonable determinations that the evidence obtained was not applicable or reliable, to minimize susceptibility to claims that decisions and actions were cherry picking based on improper intent rather than appropriate quality assurance processes. Organizations allowing the use of the tools and the individuals utilizing them need to understand and appropriately manage the very operational, legal in other risks of these deficiencies and error errors when utilizing AI tools.

Adopt And Enforce AI Policies To Manage AI Tool Use Responsibilities and Risks

Considering these and other responsibilities, human resources and other leaders and their organizations should use care to decide when, how, why, and by whom it allows AI tools to be used in or on behalf of its organization and provide appropriate steps to manage those uses in the resulting ESI to fill its legal obligations and manage its legal and operational risks. Because this process of itself could be evidence impacting, the organizations, legal exposures, organizations generally should work with qualified legal counsel within the scope of attorney-client privilege to work define and enforce policies and practices, to promote the organization’s legal and operational interests and manage the resulting legal obligations.

The author of this update, Cynthia Marcotte Stamer has decades of experience advising and representing governmental and private entities, AI and other technology, workforce and other legal and operational compliance, risk management and other operational and enforcement matters. If you have questions or need advice or help evaluating or addressing these or other compliance, risk management, or other concerns, contact her.

For More Information

We hope this update is helpful. For more information about these or other legal, contractual or operational compliance or risk management, please contact the author Cynthia Marcotte Stamer via e-mail or via telephone at (214) 452-8297.

Solutions Law Press, Inc. invites you receive future updates by registering on our Solutions Law Press, Inc. Website and participating and contributing to the discussions in our Solutions Law Press, Inc. LinkedIn SLP Health Care Risk Management & Operations Group, HR & Benefits Update Compliance Group, and/or Coalition for Responsible Health Care Policy.

About the Author

Recognized by her peers as a Martindale-Hubble “AV-Preeminent” (Top 1%) and “Top Rated Lawyer” with special recognition LexisNexis® Martindale-Hubbell® as “LEGAL LEADER™ Texas Top Rated Lawyer” in Health Care Law and Labor and Employment Law; as among the “Best Lawyers In Dallas” for her work in the fields of “Labor & Employment,” “Tax: ERISA & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine, Cynthia Marcotte Stamer is a practicing attorney board certified in labor and employment law by the Texas Board of Legal Specialization and management consultant, author, public policy advocate and lecturer widely known for her more than 35 years of health industry and other management work, public policy leadership and advocacy, coaching, teachings, and publications including leading edge work on workforce and other risk management and compliance.

Ms. Stamer’s work throughout her career has focused heavily on working with businesses domestically and internationally on employment, benefits, technology, data confidentiality, privacy, and security, and other Federal Sentencing Guidelines and other workforce management, regulatory and public policy and other legal and operational concerns.

Author of many highly regarded compliance, training and other resources on these and other operations, risk management, compliance and government affairs concerns, Ms. Stamer is widely recognized for her thought leadership and advocacy on these matters.

In addition, Ms. Stamer currently or previously served as the American Bar Association (“ABA”) Joint Committee on Employee Benefits OCR annual agency scribe and a Council Representative, International Section International Employment Law Committee Chair and International Life Sciences and Health Committee Chair, ABA TIPS Medicine and Law Committee Chair, ABA Health Law Section Managed Care & Insurance Interest Group Chair, former Vice President and Executive Director of the North Texas Health Care Compliance Professionals Association, past Board President of Richardson Development Center (now Warren Center) for Children Early Childhood Intervention Agency, past North Texas United Way Long Range Planning Committee Member, and past Board Member and Compliance Chair of the National Kidney Foundation of North Texas, and a host of other professional and civic leadership roles. She is a Fellow in the American College of Employee Benefit Counsel, the American Bar Foundation and the Texas Bar Foundation, Ms. Stamer also shares her extensive publications and thought leadership as well as leadership involvement in a broad range of other professional and civic organizations.

For more information about Ms. Stamer or her health industry and other experience and involvements, see www.cynthiastamer.com or contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

About Solutions Law Press™

Solutions Law Press™ provides health care, human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on health care, leadership, governance, human resources, employee benefits, data security and privacy, insurance, and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press™ resources.

NOTICE: These statements and materials are for general information and purposes only. They do not establish an attorney-client relationship, are not legal advice or an offer or commitment to provide legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation considering the specific facts and circumstances presented in their unique circumstance at the particular time. No comment or statement in this publication is to be construed as legal advice or admission. The author reserves the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues. Because the law constantly and often evolves, subsequent developments that could impact the currency and completeness of this discussion are likely. The author and Solutions Law Press, Inc. disclaim and have no responsibility to provide any update or otherwise notify anyone of any fact or law specific nuance, change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

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©2026 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™ For information about republication, please contact the author directly. All other rights reserved.

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6th Risk Analysis Settlement & Other OCR Actions Warn Health Plans & Other HIPAA-Regulated Entities To Tighten Risk Analysis

April 14, 2025

The $350,000 paid by Northeast Radiology, P.C. (“NERAD”) provides the latest warning to health plans, health care providers, healthcare clearinghouses (“Covered Entities”) and their business associates (collectively “Regulated Entities”) they risk costly fines and other costs for failing to maintain the up-to-date risk assessments required by the Health Insurance Portability & Accountability Act (“HIPAA”).

Following up on the five other previous Risk Analysis Initiative enforcement actions and settlements recently announced by the U.S. Department of Health and Human Services (“HHS”) Office for Civil Rights (“OCR”) and OCR’s publication of proposed rules to significantly tighten HIPAA’s Risk Analysis and other requirements, the settlement with medical imaging center NERAD sends a strong warning to health plans and other Regulated Entities to clean up and strengthen their Risk Analysis and other HIPAA Security Rule compliance.

$350,000 NERAD Risk Analysis Settlement Latest Product Of New Enforcement Initiative

The sixth Risk Analysis Initiative enforcement action announced by OCR in recent months, the NERAD settlement resolves an OCR Risk Analysis Initiative enforcement action arising from OCR’s investigation of a breach of ePHI stored on NERAD’s Picture Archiving and Communication System (“PACS”) server for storing, retrieving, managing, and accessing radiology images.

OCR initiated its investigation of NERAD after receiving a NERAD breach report about a breach of unsecured ePHI in March 2020. NERAD reported that between April 2019 and January 2020, unauthorized individuals accessed radiology images stored on NERAD’s PACS server. NERAD notified the 298,532 patients whose information was potentially accessible on the PACS server of this breach. OCR’s investigation found that NERAD had failed to conduct an accurate and thorough Risk Analysis to determine the potential risks and vulnerabilities to the ePHI in NERAD’s information systems.

To avoid potentially much greater HIPAA civil monetary penalties under the terms of the resolution agreement, NERAD paid OCR $350,000 and agreed to implement a corrective action plan that OCR will monitor for two years. Under the corrective action plan, NERAD will take steps to improve its compliance with the HIPAA Security Rule and protect the security of ePHI, including:

Conducting an accurate and thorough Risk Analysis to determine the potential risks and vulnerabilities to the confidentiality, integrity, and availability of its ePHI;
Developing and implementing a risk management plan to address and mitigate security risks and vulnerabilities identified in its Risk Analysis;
Developing and implementing a written process to regularly review records of information system activity, such as audit logs, access reports, and security incident tracking reports;
Developing, maintaining, and revising, as necessary, its written policies and procedures to comply with the HIPAA Rules; and
Augmenting its existing HIPAA and security training program to all of its workforce members who have access to PHI.

OCR Turns Up Heat On HIPAA Risk Analysis Requirements & Enforcement

The HIPAA Privacy, Security, and Breach Notification Rules set forth the requirements that Regulated Entities must follow to protect the privacy and security of protected health information. Since the HIPAA Security Rule first took effect, risk analysis is one of the four required implementation specifications the Security Rule requires to fulfill its Security Management Process Standard’s requirement that regulated entities “[i]mplement policies and procedures to prevent, detect, contain, and correct security violations.”

Written Risk Analysis Longstanding Requirement

Although OCR only recently formally adopted a Risk Analysis Initiative, OCR’s regulatory guidance and enforcement actions have communicated clearly the necessity for each Regulated Entity to possess and maintain an adequate documented Risk Analysis. OCR guidance since has required Regulated Entities to conduct and document the required Risk Analysis to safeguard ePHI and avoid liability under the HIPAA Rule. The importance of fulfillment of the Risk Analysis requirement is driven home by OCR’s recent identification of Risk Analysis inadequacies as a basis for its assessment of civil monetary penalties or required resolution payments to settle HIPAA Security Rule violations following a breach of ePHI.

While the Security Rule does not currently dictate how frequently a regulated entity must perform Risk Analysis, a proposed rule published by OCR on December 27, 2024 seeks to amend the existing Security Rule to expand the requirement to require regulated entities to develop and revise a technology asset inventory and a network map that illustrates the movement of ePHI throughout the regulated entity’s electronic information system(s) on an ongoing basis, at least once every 12 months and in response to a change in the regulated entity’s environment or operations that may affect ePHI. Although OCR has not adopted this and other changes contained in the proposed rule, substantial evidence exists that it already regularly administers the Risk Analysis requirement with the expectation that regulated entities will perform Risk Analysis at least this frequently. For instance, current OCR resolution agreements require impacted organizations to conduct Risk Analysis to identify and address vulnerabilities at least annually, and more frequently as needed in response to signs of potential breach or susceptibility.

To fulfill the “Risk Analysis” implantation specification, the Security Management Process Standard requires Regulated Entities maintain appropriate administrative, physical, and technical safeguards for the confidentiality, integrity, and security of electronic protected health information (“ePHI”) based on an up-to-date conduct of an up-to-date accurate and thorough assessment of the potential risks and vulnerabilities to the confidentiality, integrity, and availability of ePHI held by that organization (“Risk Analysis”).

The Security Rule requires Regulated Entities to document each Risk Analysis in writing, to maintain their Risk Analysis documentation for six years, and to make available Risk Analysis documentation to OCR upon request.

Among other things, the Risk Analysis implementation standard requires regulated entities adequately to:

Identify where ePHI is located in the organization, including how ePHI enters, flows through, and leaves the organization’s information systems.
Integrate Risk Analysis and risk management into the organization’s business processes.
Ensure that audit controls are in place to record and examine information system activity.
Implement regular reviews of information system activity.
Utilize mechanisms to authenticate information to ensure only authorized users are accessing ePHI.
Encrypt ePHI in transit and at rest to guard against unauthorized access to ePHI when appropriate.
Incorporate lessons learned from incidents into the organization’s overall security management process.
Provide workforce members with regular HIPAA training that is specific to the organization and to the workforce members’ respective job duties.

OCR Heightens Risk Analysis Enforcement While Proposing Heightened Risk Analysis And Other Security Requirements

The proposed rule published by OCR on December 27, 2024 seeks to significantly broaden these original requirements of the Risk Assessment implementation standard. Under the proposed rule, a Regulated Entity’s Risk Analysis also would be required to include:

Require the development and revision of a technology asset inventory and a network map that illustrates the movement of ePHI throughout the regulated entity’s electronic information system(s) on an ongoing basis, at least once every 12 months and in response to a change in the regulated entity’s environment or operations that may affect ePHI.
Require greater specificity for conducting a risk analysis, including a written assessment that contains, among other things:
- A review of the technology asset inventory and network map;
- Identification of all reasonably anticipated threats to the confidentiality, integrity, and availability of ePHI;
- Identification of potential vulnerabilities and predisposing conditions to the regulated entity’s relevant electronic information systems;
- An assessment of the risk level for each identified threat and vulnerability, based on the likelihood that each identified threat will exploit the identified vulnerabilities; and
- A review of the technology asset inventory and network map.

Other changes included in the proposed rule would further heighten the Risk Analysis and other Security Standard requirements for Regulated Entities. For instance, the proposed rule would require Regulated Entities:

To establish written procedures to restore the loss of certain relevant electronic information systems and data within 72 hours;
To perform an analysis of the relative criticality of their relevant electronic information systems and technology assets to determine the priority for restoration;
To establish written security incident response plans and procedures documenting how workforce members are to report suspected or known security incidents and how the regulated entity will respond to suspected or known security incidents;
To implement written procedures for testing and revising written security incident response plans;
To conduct a compliance audit at least once every 12 months to ensure their compliance with the Security Rule requirements;
To require business associates to verify at least once every 12 months for covered entities (and that business associate contractors verify at least once every 12 months for business associates) that they have deployed technical safeguards required by the Security Rule to protect ePHI through a written analysis of the business associate’s relevant electronic information systems by a subject matter expert and a written certification that the analysis has been performed and is accurate;
To encrypt ePHI at rest and in transit, with limited exceptions;
To establish and deploy technical controls for configuring relevant electronic information systems, including workstations, in a consistent manner including deployment of anti-malware protection, removal of extraneous software, and disabling network ports in accordance with the regulated entity’s risk analysis;
Use of multi-factor authentication, with limited exceptions;
Vulnerability scanning at least every six months and penetration testing at least once every 12 months;
Network segmentation;
Separate technical controls for backup and recovery of ePHI and relevant electronic information systems;
To review and test the effectiveness of certain security measures at least once every 12 months, in place of the current general requirement to maintain security measures;
Business associates to notify covered entities (and subcontractors to notify business associates) upon activation of their contingency plans without unreasonable delay, but no later than 24 hours after activation;
Group health plans to include in their plan documents requirements for their group health plan sponsors to: comply with the administrative, physical, and technical safeguards of the Security Rule; ensure that any agent to whom they provide ePHI agrees to implement the administrative, physical, and technical safeguards of the Security Rule; and notify their group health plans upon activation of their contingency plans without unreasonable delay, but no later than 24 hours after activation.

To help Regulated Entities understand and fulfill these responsibilities, OCR alone and in conjunction with the Office of the National Coordinator for Health Information Technology (“ONC”) also has published guidance like the HIPAA Security Risk Assessment (SRA) Tool. OCR guidance reflects that fulfillment of the Tool can help Regulated Entities may help defend but does not guarantee fulfillment of the Risk Assessment requirements, as the adequacy of the Risk Assessment always depends upon the unique facts and circumstances of the Regulated Entity at a particular time. This guidance confirms the importance of conducting timely and appropriate Risk Analysis in a manner that shows the Regulated Entity appropriately evaluated the risks to its e-PHI and acted reasonably in designing, administering, and updating that Risk Analysis to reasonably defend its e-PHI against breaches or other susceptibilities.

Recommended Actions For Health Plans & Other HIPAA-Regulated Entities

With the continued explosion in ransomware and other cyberthreats heightening the risk of experiencing a breach or other incident likely to draw the attention of OCR, each health plan or other Regulated Entity should take assess and confirm the adequacy of their current Risk Analysis, both to protect its ePHI and to promote its ability to defend its compliance with the HIPAA Security Rule’s Risk Analysis and other requirements in light of OCR’s heightened emphasis on Risk Analysis compliance and enforcement. For purposes of conducting this analysis, Regulated Entities generally will want to use a process like the following to structure their evaluation of their existing Risk Analysis to take advantage of the opportunity to use attorney-client privilege and other evidentiary rules to help protect discoverability of sensitive discussions about possible deficiencies in their existing Risk Analysis and discussions about potential tradeoffs considered in current or future Risk Analysis response:

Engage legal counsel experienced with HIPAA and other cybersecurity-related risks and liabilities to advise and assist your organization in designing and administering your Risk Analysis processes and response within the scope of attorney-client privilege;
Appoint and designate leadership and technical leadership for team responsible for design and administration of your organization’s initial and ongoing cybersecurity Risk Analysis and response (“Cyber-Risk Team”) and process for board and senior management reporting of the Cyber-Risk Team;
Select and engage outside consulting service providers, cyber-liability insurers and other risk service providers expected to participate in the process; work with qualified legal counsel to contract with these business associates to include the business associate agreement and other reassurances required by the HIPAA Privacy, Security and Breach Notification Rule and other performances, cooperation to provide and back services in accordance with agreed-upon protocols in the contract;
Train Cyber-Risk Team in the appropriate processes for working with internal teams, outside service providers, leadership, and designated legal counsel to conduct Risk Analysis, investigation and response using attorney-client privilege and other evidentiary tools and processes to maximize defensibility;
Require the Cyber-Risk Team conduct an updated, document assessment of cyber-risk within scope of attorney-client privilege and work with legal counsel to develop a documented cyber-risk policy that captures analysis and determinations for your justification for the size, scope and timing of your periodic Risk Analysis and rules and processes for interim risk identification, reassessments and response in reaction to potential cyber-risk signs between periodic Risk Analysis for presentation and approval by the Board taking into account the insights from published final and proposed guidance, enforcement actions and industry standards;
Require, oversee and enforce Cyber-Risk Team’s documented administration of the initial and subsequently required Risk Analysis and response pursuant to the adopted cyber-risk policy to identify vulnerabilities and work with legal counsel within the scope of privilege to document your analysis and justifications for addressing identified vulnerabilities and other required actions in response to identified susceptibilities or event;
Review adequacy of incident detection and response arrangements, including reporting and response mechanisms, insurance and indemnification protection, and other critical elements for mitigation and recovery; and
Other actions as warranted based on advice of counsel taking into account emerging threats, guidance, and risk susceptibility.

The author of this update, Cynthia Marcotte Stamer is an American College of Employee Benefits Counsel Fellow and attorney board certified in Labor and Employment Law by the Texas Board of Legal Specialization, nationally known and celebrated for her experience providing advice and representation on HIPAA and other risk management and compliance to employers and other health plan sponsors, health plans, health plan fiduciaries and administrators, health and other insurers, third party administrators, health care and other managed care providers and organizations, human resources and health plan technology, and other businesses about health plan design, administration, and other compliance, risk management and operational matters. If you have questions or need advice or help evaluating or addressing these or other compliance, risk management, or other concerns, contact her.