BILL ANALYSIS AB 542 Page 1 Date of Hearing: April 28, 2009 ASSEMBLY COMMITTEE ON HEALTH Dave Jones, Chair AB 542 (Feuer) - As Amended: April 22, 2009 AS PROPOSED TO BE AMENDED SUBJECT : Adverse medical events. SUMMARY : Requires the Department of Managed Health Care (DMHC) to adopt regulations establishing uniform policies and practices governing the nonpayment of hospitals for substantiated adverse events by public and private payers, consistent with those developed by the federal Centers for Medicare and Medicaid Services (CMS), and revises and expands the existing requirements for hospitals to report specified adverse events. Specifically, this bill : 1)Requires DMHC, in collaboration with Department of Public Health (DPH), Department of Health Care Services (DHCS), the California Public Employees' Retirement System (CalPERS), and the California Department of Insurance (CDI) to adopt and implement regulations that establish uniform policies and practices governing the nonpayment of hospitals for substantiated adverse events, as follows: a) On or before September 1, 2010, adopt regulations for nonpayment polices and practices consistent with those developed by CMS pursuant to the Deficit Reduction Act of 2005 (DRA), that have the following characteristics: i) Are high cost, high volume, or both; ii) Are not present on admission; and, iii) Could reasonably have been prevented through the application of evidence-based guidelines. b) Synchronize definitions, coding, and practices, to the extent feasible, with CMS regarding nonpayment for substantiated adverse events; and, c) By January 1, 2012, and annually thereafter, update payment policies and practices regarding nonpayment for substantiated adverse events to reflect changes made to those developed and implemented by CMS. AB 542 Page 2 2)Authorizes DMHC and other departments involved to consult with individuals with relevant clinical expertise to assist in the development of the regulations. 3)Following the adoption of the regulations by DMHC, requires the collaborating agencies listed in 1) above to adopt regulations that are identical or substantially similar to those promulgated by DMHC. 4)In accordance with the DMHC regulations, prohibits a hospital from charging a patient or payer and exempts a patient or payer from being required to pay for substantiated adverse events. 5)Requires contracts between hospitals, and health plans and health insurers, to be consistent with the DMHC nonpayment regulations. 6)Requires the adoption of the nonpayment policies by the Healthy Families Program (HFP) administered by the Managed Risk Medical Insurance Board, and by Medi-Cal, administered by DHCS, and to the extent feasible, all other programs administered by DHCS, but limits the implementation of the nonpayment policies for state and local government programs to the extent federal financial participation for those programs is not jeopardized. 7)Prohibits a hospital from billing a HFP enrollee, a Medi-Cal recipient, or an enrollee of a health plan or health insurer for care and services denied as a result of the nonpayment regulations. 8)Requires a hospital to exclude from specified Medi-Cal cost reports costs related to adverse events subject to the nonpayment regulations. 9)Revises the existing adverse event reporting requirements applicable to hospitals, adds additional reportable events in compliance with reportable events developed by CMS, applies the reporting requirements to surgical clinics, and requires DPH to determine whether an adverse event reported by a hospital was substantiated or not. 10)Requires hospitals to report annually to the hospital board AB 542 Page 3 of directors, or other similar governing body, the following: a) The number of adverse events that occurred in the facility in the most recent 12-month period; b) The outcomes for each patient involved; and c) A comparison to comparable institutions of rates of adverse events, if this data exists and is publicly available. EXISTING LAW : 1)Establishes state licensing and federal Medicare and Medicaid program certification requirements for health facilities, including general acute care hospitals. Requires DPH to administer licensing and certification requirements for California health facilities. Requires health facilities to pay annual licensing fees, describes specified hospital fees, and requires the fees to be adjusted annually, as directed by the Legislature in the annual Budget Act. 2)Requires every health facility for which a license or special permit has been issued to be periodically inspected by a representative or representatives appointed by DPH, depending upon the type and complexity of the health facility or special service to be inspected. Requires inspections to be conducted no less than once every two years and as often as necessary to insure the quality of care being provided. 3)Requires general acute care hospitals, acute psychiatric hospitals, and special hospitals to report an adverse event, as defined, to DPH no later than five days after the event has been detected or in the case of an urgent or emergent threat, no later than 24 hours after the adverse event has been detected. Reportable adverse events are: a) Surgical i) Surgery performed on the wrong body part; ii) Surgery performed on the wrong patient; iii) Retention of a foreign object in a patient after surgery or other procedure; and, iv) Intraoperative or immediately post-operative death in a normal, healthy patient. AB 542 Page 4 a) Product or device i) Patient death or serious disability associated with the use of contaminated drugs, devices, or biologics provided by the health care facility; ii) Patient death or serious disability associated with the use or function of a device in patient care in which the device is used or functions other than as intended; and, iii) Patient death or serious disability associated with intravascular air embolism that occurs while being cared for in a health care facility. b) Patient protection i) Infant discharged to the wrong person; ii) Patient death or serious disability associated with patient disappearance for more than four hours; and, iii) Patient suicide or attempted suicide resulting in serious disability while being cared for in a health care facility. c) Care management i) Patient death or serious disability associated with a medication error; ii) Patient death or serious disability associated with a hemolytic reaction due to the administration of ABO-incompatible blood or blood products; iii) Maternal death or serious disability associated with labor or delivery on a low-risk pregnancy while being cared for in a health care facility; iv) Patient death or serious disability associated with hypoglycemia, the onset of which occurs while the patient is being cared for in a health care facility; v) Death or serious disability associated with failure to identify and treat hyperbilirubinemia in neonates; vi) Stage 3 or 4 pressure ulcers acquired after admission to a health care facility; and, vii) Patient death or serious disability due to spinal manipulative therapy. d) Environmental i) Patient death or serious disability associated with an electric shock while being cared for in a health care facility; ii) Any incident in which a line designated for oxygen AB 542 Page 5 or other gas to be delivered to a patient contains the wrong gas or is contaminated by a toxic substance; iii) Patient death or serious disability associated with a burn incurred from any source while being cared for in a health care facility; iv) Patient death associated with a fall while being cared for in a health care facility; and, v) Patient death or serious disability associated with the use of restraints or bedrails while being cared for in a health care facility. e) Criminal i) Any instance of care ordered by or provided by someone impersonating a physician, nurse, pharmacist, or other licensed health care provider; ii) Abduction of a patient of any age; iii) Sexual assault on a patient within or on the grounds of a health care facility; and, iv) Death or significant injury of a patient or staff member resulting from a physical assault that occurs within or on the grounds of a health care facility. FISCAL EFFECT : This bill has not been analyzed by a fiscal committee. COMMENTS : 1)PURPOSE OF THIS BILL . The author states this bill is necessary to improve health care practices and protect patients by shielding them from having to pay for medical errors. The author states that while California passed legislation (SB 1301 (Alquist), Chapter 647, Statutes of 2006) making California the 24th state to require reporting of "never events," California did not join with the 11 other states where billing for such events is prohibited. The author argues that this bill will protect patients who have been harmed by medical errors from also being responsible for paying the bill for those errors. The author contends that making health care providers financially responsible for the commission of medical errors will provide a greater incentive to ensure such grievous and devastating errors never occur. 2)FEDERAL PAYMENT POLICY FOR ADVERSE EVENTS . The federal AB 542 Page 6 Centers for Medicaid and Medicare Services (CMS) are implementing a provision of the DRA dealing with nonpayment for specified adverse events. The DRA required hospitals to begin reporting secondary diagnoses that are present on admission, starting with discharges on or after October 1, 2007. Since October 2008, CMS will not reimburse hospitals for the added cost of care for ten conditions including three serious preventable events, unless the conditions are present on admission. The categories are: a) Foreign object retained after surgery; b) Air embolism; c) Blood incompatibility; d) Stage III and IV pressure ulcers; e) Falls and trauma; f) Manifestations of poor glycemic control; g) Catheter-associated urinary tract infection; h) Vascular catheter-associated infection; i) Surgical site infection following coronary artery bypass graft (CABG), mediastinitis, bariatric surgery and orthopedic procedures; and, j) Deep vein thrombosis (DVT)/pulmonary embolism (PE) following total knee replacement and hip replacement. 3)HEALTH INSURRER PAYMENT POLICIES FOR MEDICAL ERRORS . On April 3, 2008, Anthem Blue Cross (the new trade name for Blue Cross of California) along with other regional licensees of the Blue Cross and Blue Shield Association nationwide, announced steps that it said are aimed at reducing serious medical errors at its hospital network. According to Anthem, the policy is aimed at ensuring that members will not be charged if any of these three events occur: a) Surgery performed on the wrong body part; b) Surgery performed on the wrong patient; and, c) Wrong surgery performed on a patient. In addition, Anthem announced steps to ensure that "only the appropriate payment is made and no additional charges [will be] incurred" if any of eight other events occur. Aetna also recently announced that it will not pay for charges directly and solely related to eight serious reportable events, including an extended length of stay in the hospital due to the event. 4)INSTITUTE OF MEDICINE REPORT . In 1999, the Institute of Medicine (IOM) released a call to action in the report titled, "To Err Is Human: Building a Safer Health System." The report is well known for its release of startling statistics, AB 542 Page 7 such as that between 44,000 and 98,000 Americans die each year as a result of medical errors, that more people die in a given year as a result of medical errors than from motor vehicle accidents (43,458), breast cancer (42,297), or AIDS (16,516), and that total costs of preventable adverse events are estimated to be between $17 billion and $29 billion, half of which are health care costs. The report addresses patient safety and quality, and establishes a national agenda for the reduction of medical errors. The report contains several recommendations including the following: a) Establishing national focus to enhance the knowledge base about safety; b) Identifying and learning from errors through immediate and strong mandatory reporting efforts and encouraging voluntary efforts; c) Raising standards and expectations for improvements in safety through oversight, actions by purchasers and professional organizations; and, d) Creating safety systems inside health care organizations. 5)NATIONAL QUALITY FORUM . In 2003, The National Quality Forum (NQF) published a consensus report titled "Serious Reportable Events in Healthcare." In that report, the NQF noted the historic lack of any national reporting system of health care errors and adverse events, and the lack of a standard definition of what constitutes an error or adverse event. Consequently, the objective of the project the NQF undertook was to "establish agreement on a set of serious preventable adverse events that might form the basis for a national state-based event reporting system and that could lead to substantial improvements in patient care." The NQF report identified 27 serious adverse events, that are serious, largely preventable and of concern to both the public and health care providers. The "Never 27" events are grouped into six categories-surgical events, product or device events, patient protection events, care management events, environmental events, and criminal events. 6)HOSPITAL ADVERSE EVENT REPORTING REQUIREMENTS . Effective July 1, 2007 in California, hospitals are required to report "adverse events" to DPH within five days of their discovery. Events that are ongoing, urgent, or emergent threats to the welfare, health, or safety of patients, personnel, or visitors AB 542 Page 8 must be reported within 24 hours. California's definition of "adverse events" was borrowed from the list of events developed by the NQF in conjunction with CMS. Adverse events include a wide array of medical, pharmaceutical, and nursing care errors, as well as criminal acts. DPH is required to investigate all adverse event reports, and if substantiated, the reports and outcomes of the investigations and inspections become public information. DPH must make an onsite inspection within 48 hours for ongoing urgent or emergent threats of imminent danger or serious bodily harm. DPH must complete other investigations where there is no threat of imminent danger or serious bodily harm within 45 days. In addition, before making the report, hospitals must inform affected patients about the report. 7)PREVIOUS AND RELATED LEGISLATION . a) AB 2146 (Feuer), similar to this bill, would have prohibited hospitals and health care professionals from billing a patient or a payer, as defined, for care or services provided during which occurred or that resulted in specified adverse events. AB 2146 was held on the Senate Appropriations suspense file. b) SB 1058 (Alquist) enacts the Medical Facility Infection Control and Prevention Act to ensure that standards for protecting patients from exposure to pathogens in health facilities, including Methicillin-resistant Staphylococcus aureus (MRSA), are adequate to reduce the incidence of antibiotic-resistant infection acquired by patients in these facilities. SB 1058 is pending in the Senate. c) SB 1301 (Alquist), Chapter 647, Statutes of 2006, requires general acute care hospitals, acute psychiatric hospitals, and special hospitals to report an adverse event to the Department of Health Services (DHS now DPH) no later than five days after the event has been detected or in the case of an urgent or emergent threat, not later than 24 hours after the adverse event has been detected. d) SB 1312 (Alquist), Chapter 395, Statutes of 2006, authorizes DHS to assess administrative penalties on hospitals based on deficiencies constituting immediate jeopardy to the health and safety of a patient. Requires inspections and investigations of long-term care facilities AB 542 Page 9 certified by the Medicare or Medicaid program to determine compliance with federal standards and California statutes and regulations. Eliminates existing law that provides an exemption for specified health care facilities from periodic inspections by DHS. 8)SUPPORT . The Service Employees International Union (SEIU) and CALPIRG support a prior version of this bill. SEIU argues that this bill operates on the simple premise that doctors and hospitals should be paid for doing the right thing, not the wrong thing. CALPIRG maintains in support of the prior version that this bill offers protections to the consumer and will help reduce the incidence of adverse events by properly placing the responsibility of cost on the party able to prevent the mistakes in the first place. Blue Shield of California supports the prior version of this bill stating that it seems like common sense that a provider should not bill a patient or the patient's health plan for a medical error, but it happens. 9)OPPOSE UNLESS AMENDED . The California Hospital Association (CHA) is opposed to a prior version of this bill unless amended. CHA maintains that, while they agree with the principles of this bill and take the position that health care providers should not bill patients or other financially responsible parties for charges resulting from their preventable errors, CHA contends that this bill should be amended so that the prohibition on provider billing applies only to preventable errors that are the responsibility of the provider. Physician representatives oppose the prior version of this bill stating that the list of conditions for which nonpayment is proposed goes far beyond medical errors and contains complications and conditions that, despite best efforts, patients who are ill, frail, or otherwise compromised can develop. The California Medical Association (CMA) points out in opposing the prior version of this bill that this bill imposes nonpayment standards for "substantiated" events but does not include a definition of what substantiated would mean. According to CMA, the prior version established a framework inconsistent with federal law so that, under the federal Patient Safety Act, the goal is to encourage providers to voluntarily undertake efforts to identify and reduce patient care risks and hazards. CMA states that the federal patient safety organizations are designed to make it clear that patient safety information should not be used for AB 542 Page 10 external purposes. 10)POLICY QUESTION . Scope of this bill . This bill would result in nonpayment of unspecified adverse events or medical errors based on broad criteria intended to reflect the criteria used by CMS in establishing nonpayment policies for hospitals under Medicare, which pays using a payment methodology based on the diagnosis of the patient. Given the wide variation in payment methods among all of the public and private programs affected by this bill, the author may wish to more explicitly deal with how the regulations developed by DMHC should address nonpayment by various payers. REGISTERED SUPPORT / OPPOSITION : (Prior version) Support American Federation of State, County and Municipal Employees, AFL-CIO Blue Shield of California California School Employees Association Congress of California Seniors Health Access California Service Employees International Union Opposition California Orthopaedic Association California Society of Anesthesiologists Oppose Unless Amended Adventist Health Anaheim Memorial Medical Center Bakersfield Memorial Hospital Barton HealthCare System California Association of Professional Liability Insurers California Chapter of the American College of Emergency Physicians California Children's Hospital Association California Hospital Association California Medical Association Catholic Healthcare West AB 542 Page 11 Centinela Hospital Children's Hospital Central California Children's Specialty Care Coalition Chino Valley Medical Center Community Hospital of the Monterey Peninsula Community Memorial Health System Cottage Health System Delano Regional Medical Center Desert Regional Medical Center Desert Valley Hospital Doctors Hospital of Manteca Eden Medical Center Enloe Medical Center Fountain Valley Regional Hospital & Medical Center Garden Grove Hospital Medical Center George L. Mee Memorial Hospital Glendale Adventist Medical Center Good Samaritan Hospital, San Jose Henry Mayo Newhall Memorial Hospital Hoag Hospital Huntington Beach Hospital JFK Memorial Hospital John Muir Health Kaiser Permanente Kaweah Delta Health Care District La Palma Intercommunity Hospital Lakewood Regional Medical Center Little Company of Mary Hospital Lodi Memorial Hospital Long Beach Memorial Medical Center Los Alamitos Medical Center Memorial Hospitals Association Mercy Hospitals of Bakersfield Mercy Medical Center Mt. Shasta Methodist Hospital of Southern California (2) Mission Hospital in Mission Viejo Montclair Hospital Medical Center North Sonoma County Healthcare District NorthBay Healthcare Oak Valley Hospital Orange Coast Memorial Medical Center Professional Liability Insurers Saddleback Memorial Medical Center San Dimas Community Hospital Sequoia Hospital AB 542 Page 12 Sharp Grossmont Hospital Sharp HealthCare Shasta Regional Medical Center Sherman Oaks Hospital Sierra Nevada Memorial Hospital Sierra View District Hospital Sierra Vista Regional Medical Center Sonoma Valley Hospital St. Helena Hospital St. Joseph Hospital/Redwood Memorial Hospital Sutter Amador Hospital Sutter Delta Medical Center Trinity Hospital Twin Cities Community Hospital University of California West Anaheim Medical Center Analysis Prepared by : Deborah Kelch / HEALTH / (916) 319-2097