BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 483
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|AUTHOR: |Beall |
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|VERSION: |April 22, 2015 |
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|HEARING DATE: |April 29, 2015 | | |
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|CONSULTANT: |Vince Marchand |
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SUBJECT : General acute care hospitals: observation services.
SUMMARY : Requires a general acute care hospital that provides
observation services in an observation unit, as defined, to
apply for approval from the California Department of Public
Health for observation services as a supplemental service, as
specified; limits observation services in an observation unit to
24 hours; requires observation services in an observation unit
to have the same staffing requirements as emergency services;
and, requires hospitals to report observation service data to
the Office of Statewide Health Planning and Development.
Existing law:
1.Licenses general acute care hospitals under the California
Department of Public Health (CDPH). Defines general acute care
hospitals as hospitals that provide 24-hour inpatient care,
including the following basic services: medical, nursing,
surgical, anesthesia, laboratory, radiology, pharmacy, and
dietary services.
2.Permits general acute care hospitals, in addition to the basic
services all hospitals are required to offer, to be approved
by CDPH to offer special services, including, but not limited
to, a radiation therapy department, a burn center, an
emergency center, a hemodialysis center or unit, psychiatric
services, intensive care newborn nursery, cardiac surgery,
cardiac catheterization laboratory, and renal transplant.
3.Permits general acute care hospitals to apply to CDPH for
approval of supplemental outpatient clinic services. Limits
the outpatient clinic services to providing nonemergency
primary health care services in a clinical environment to
patients who remain in the outpatient clinic for less than 24
SB 483 (Beall) Page 2 of ?
hours.
4.Requires CDPH to adopt regulations that establish
nurse-to-patient ratios by hospital unit for all general acute
care hospitals. Defines "hospital unit" as a critical care
unit, burn unit, labor and delivery room, post-anesthesia
service area, emergency department, operating room, pediatric
unit, step-down/intermediate care unit, specialty care unit,
telemetry unit, general medical care unit, subacute care unit,
and transitional inpatient care unit.
5.Establishes the Office of Statewide Health Planning and
Development (OSHPD), and designates OSHPD as the single state
agency to collect specified health facility or clinic data for
use by all state agencies. Requires hospitals to make
specified reports to OSHPD, including quarterly summary
financial and utilization data that includes the number of
discharges, the number of inpatient days, the number of
outpatient visits, total operating expenses, and inpatient and
outpatient gross revenues by payer.
This bill:
1.Defines "observation services" as outpatient services provided
by a general acute care hospital to patients, as specified,
who have unstable or uncertain conditions potentially serious
enough to warrant close observation, but not so serious as to
warrant inpatient admission to the hospital.
2.Defines "observation unit" as an area where observation
services are provided in a setting outside of an inpatient
unit of a general acute care hospital.
3.Requires a general acute care hospital that provides
observation services in an observation unit to apply for
approval from CDPH to provide the services as a supplemental
service, as specified.
4.Requires CDPH to adopt standards and regulations for the
provision of observation services as a supplemental service
under the general acute care hospital's license.
5.Permits observation services to include the use of a bed,
monitoring by nursing and other staff, and any other services
that are reasonable and necessary to safely evaluate a
patient's condition or determine the need for a possible
SB 483 (Beall) Page 3 of ?
inpatient admission to the hospital.
6.Limits observation services in observation units, as defined
by this bill, to a period of no more than 24 hours.
7.Limits appropriately licensed practitioners to ordering
observation services for only the following:
a. A patient who has received triage services in
the emergency department but has not been admitted as
an inpatient;
b. A patient who has received outpatient surgical
services and procedures;
c. A patient who has been admitted as an
inpatient and is discharged to an observation center;
or,
d. A patient previously seen in a physician's
office or outpatient clinic.
8.Requires observation services provided by a general acute care
hospital in an observation unit, including services provided
in a freestanding physical plant, to comply with the same
staffing standards, including licensed nurse-to-patient
ratios, as supplemental emergency services, notwithstanding
provisions of law ensuring outpatient services provided in a
freestanding building of a hospital are not held to higher
standards than clinics.
9.Requires a patient receiving observation services to receive a
written notice that his or her care is being provided on an
outpatient basis, and that this may impact reimbursement by
Medicare, Medi-Cal, or private payers of health care services,
or cost-sharing arrangements through his or her health care
coverage.
10.Requires observation units to be marked by signage
identifying the area as an outpatient area. Requires this
signage to use the term "outpatient" in the title of the area
to clearly indicate to all patients and family members that
the observation services provided in the center are not
inpatient services.
11.Requires observation services to be deemed outpatient or
ambulatory services that are revenue-producing cost centers
associated with hospital-based or satellite service locations
SB 483 (Beall) Page 4 of ?
that emphasize outpatient care. Specifies that identifying an
observation unit by a different name or term does not exempt
the hospital from the requirement to obtain approval from CDPH
to provide observation services as a distinct supplemental
service when observation services are provided in a setting
outside of an inpatient unit of a general acute care hospital.
12.Adds the number of observation service visits and number of
hours of observation services provided, as well as total
observation service gross revenues by payer, to the list of
summary financial and utilization data that hospitals are
required to report quarterly to OSHPD.
13.Excludes observation service visits from the number of
outpatient visits that hospitals are already required to
report to OSHPD, to ensure outpatient visits are counted
separately.
FISCAL
EFFECT : This bill has not been analyzed by a fiscal committee.
COMMENTS :
1.Author's statement. According to the author, the Patient
Protection and Affordable Care Act (ACA) imposes new
requirements that general acute care hospitals have to meet,
which will likely result in hospitals making significant
organizational changes in order to promote the goals of the
ACA to lower health care costs. These organizational changes
may range from reducing readmission rates, changing the ways
in which patient acuity is assessed, and making more efficient
use of bed space. The use of outpatient services is expected
to increase as hospitals adapt to payment models that
incentivize avoidance of hospital readmission. Trends in the
use of outpatient settings for the provision of acute care to
patients are already underway. More and more, hospitals are
placing patients who cannot be safely discharged to their
homes in "observation units" as an alternative to hospital
admission. In these settings, patients are sometimes placed
for prolonged periods of time, even longer than 72 hours.
Additionally, hospitals are not required to report data to the
state on observation service utilization, which leaves the
public with a dearth of information on how often and for what
reasons outpatient observation services are used. The
increasing use of these settings for patients in need of
inpatient care raises serious concerns about patient access to
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safe levels of care and service. SB 483 is needed to address
the problem of a lack of staffing and other standards in
observation units.
2.Existing regulations require patients who stay longer than 24
hours to be admitted. Existing California regulations that
govern health facilities include a definition of a patient. As
part of this definition, an "inpatient" is defined as "a
person who has been formally admitted for observation,
diagnosis or treatment and who is expected to remain overnight
or longer." An "outpatient" is defined as "a person who has
been registered or accepted for care but not formally admitted
as an inpatient and who does not remain over 24 hours.
According to CDPH, based on this regulation, unless it has
granted a hospital flexibility from this regulation, it would
not be legal for a hospital to keep a patient more than 24
hours without formally admitting that patient as an inpatient.
3.Medicare "2-Midnight Rule." On August 2, 2013, the Centers
for Medicare and Medicaid Services (CMS) issued a final rule
updating its Medicare payment policies. This rule, commonly
known as the "2-Midnight Rule," states that inpatient
admission, and therefore payment under Medicare Part A, is
generally only appropriate when the physician expects the
patient to require a stay that crosses at least two midnights
and admits the patient based on that expectation. If the
physician does not expect the patient to stay in the hospital
for at least two midnights, the expectation is that the
patient will be treated as an outpatient, under "observation,"
and Medicare will reimburse providers under Part B.
This has been very controversial within the hospital community.
The rule had been enforced by contractor audits that reviewed
records of patients, and revoked payment for inpatient stays
that did not meet the CMS 2-midnight rule. In response to
numerous complaints, in early 2014, CMS announced that it
would delay enforcement of the rule through September 2014,
and this delay was subsequently extended several times. Most
recently, as part of the "Medicare Access and CHIP
Reauthorization Act of 2015" that President Obama signed into
law on April 16, 2015, the delay on enforcement was extended
through September 30, 2015.
While enforcement through revenue recovery audits has been
suspended, the rule remains in place, and has had a number of
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repercussions. One issue that has been widely reported is that
in order to qualify for skilled nursing care, Medicare
beneficiaries have to spend three days in the hospital as an
inpatient. With CMS pushing hospitals to treat shorter-stay
patients as outpatients under "observation," many Medicare
patients are finding that one or more of their days spent in
the hospital was as an outpatient, and despite spending more
than three days in the hospital, are not qualified to receive
skilled nursing care upon discharge. Additionally, if services
received in a hospital are billed under Part B as an
outpatient, the Medicare beneficiary is likely to have to
shoulder much higher out-of-pocket costs. Finally, many
hospitals and other providers are reporting that observation
care is increasing across all types of payers, not just for
Medicare patients. Medicare is frequently a trend-setter, and
may be setting a trend of increasing use of outpatient
"observation care," even for patients who spend 48 hours or
more in a hospital.
4.Prior legislation. SB 1269 (Beall, 2014), was very similar to
this bill. SB 1269 was held on the Senate Appropriations
Committee Suspense File.
SB 1238 (Hernandez), would have required an outpatient to either
be discharged or admitted to inpatient status after no more
than 24 hours, but permitted an outpatient stay of longer than
24 hours when discharge was imminent under certain specified
circumstances, including when admission to inpatient status
would directly conflict with federal Medicare reimbursement
requirements. SB 1238 was held on the Senate Appropriations
Committee Suspense File.
SB 631 (Beall), of 2013, also contained provisions similar to
this bill, and was referred to Senate Health Committee, but
was never set for a hearing.
5.Support. This bill is sponsored by the California Nurses
Association (CNA) which states that because observation units
are considered an outpatient services, they are not subject to
many of the laws and regulations designed to ensure patient
safety and adequate staffing standards. According to CNA, many
patients are not aware that they are in observation, leaving
them to believe they are admitted as inpatients. CNA states
that this bill will address these concerns by requiring
observation units to meet the same staffing standards,
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including licensed nurse-to-patient ratios, as emergency rooms
or the applicable ratio wherever the observation bed is
placed. The California Labor Federation states in support that
the lack of guidance and regulation governing the use of
observation services has created a loophole that can be
exploited by hospitals to the detriment of patients. For
example, the California Labor Federation states that since
observation services are considered outpatient care, patients
can be billed for every individual service, test, and drug
provided, rather than just paying a single co-pay for
inpatient care that includes all services, and patients might
not even know they are in observation. The California Alliance
for Retired Americans states in support that the use of
observation status is an escalating abuse that puts patients
at health and financial risk, and is used increasingly to
avoid admitting patients in need of more specialized hospital
care. The Gray Panthers of San Francisco state in support that
patients held under observation for the entire duration of
their hospital stay who are then discharged to a nursing home
do not qualify for the same Medicare reimbursement, and can
face mammoth out-of-pocket costs.
6.Opposition. This bill is opposed by the California Hospital
Association (CHA), as well as a long list of individual
hospitals and health systems. According to CHA, this bill
would declare that any outpatient area in a hospital where
observation services are provided is an "observation unit,"
and would require hospitals to apply for a special permit from
CDPH to establish this observation unit. CHA states that it is
unclear how this new definition of "observation unit" differs
from the hospital's emergency department, where many
observation patients are seen. CHA states that every hospital
would have to apply for this new special permit, because every
hospital in California "observes" patients on an outpatient
basis. CHA also states that the prohibition on an observation
patient being in an observation unit for more than 24 hours
would conflict with high quality patient care. CHA also
states that the 24-hour cap on observation services conflicts
with the federal "two midnight" rule established by CMS, and
could cause California hospitals to lose millions of dollars
in payments from CMS due to payments for inpatient admissions
being denied. Finally, CHA states that this bill requires
hospitals to collect and process large volumes of data about
"observation" patients to OSHPD, yet there is no clear
demarcation between an emergency patient and an observation
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patient, and hospitals would not know which emergency
outpatient visits to report to OSHPD as observation visits.
This bill is also opposed by the California Chapter of the
American College of Emergency Physicians (CalACEP), which
states that this bill seeks to restrict observation services
to a period of no more than 24 hours, which is inconsistent
with the current federal "two midnights" rule and, therefore,
sets up a conflict between state and federal law.
Additionally, CalACEP states that because of the unique crisis
in psychiatric inpatient capacity, unlike patients with
cardiac, neurosurgery or other critical healthcare needs who
are able to be transferred within hours to receive further
specialty treatment, psychiatric patients commonly await
transfer in emergency departments for upwards of two to six
days. According to CalACEP, emergency physicians are currently
able to bill under observation status for the care provided
during these days. However, if this bill were to become law,
CalACEP states that they would only be reimbursed for the
first 24 hours of care they provide to these mental health
patients.
7.Policy comment and suggested amendment. The most recent
amendments to this bill apply the 24-hour time limit only to
observation services that are provided in an "observation
unit." This bill defines observation unit as "an area where
observation services are provided in a setting outside of an
inpatient unit of a general acute care hospital." According to
CDPH, an emergency department is not considered to be part of
an inpatient area of a hospital, which means that observation
services provided in an emergency department would be limited
to 24 hours. According to the author, one of the concerns
addressed by this bill is the practice of placing patients in
an "observation area," where the patient has not been admitted
to the hospital as an inpatient, but the patient is no longer
receiving the same level of service as a patient in the
emergency department. If the definition of "observation unit"
were revised to be "an area where observation services are
provided in a setting outside of an inpatient unit, and that
is not part of an emergency department , of a general acute
care hospital," this bill would still correct that problem,
while also resolving a concern from hospitals and emergency
physicians that patients could not be kept in an emergency
department for longer than 24 hours.
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SUPPORT AND OPPOSITION :
Support: California Nurses Association (sponsor)
California Alliance for Retired Americans
California Senior Leaders Alliance
California Labor Federation
Gray Panthers of San Francisco
National Union of Healthcare Workers
Oppose: Adventist Health
Adventist Medical Center - Hanford
Adventist Medical Center - Reedley
Adventist Medical Center - Selma
Alhambra Hospital Medical Center
Arroyo Grande Community Hospital
Association of California Healthcare Districts
Banner Lassen Medical Center
Barton Memorial Hospital
California Chapter of the American College of
Emergency Physicians
California Hospital Association
Cedars-Sinai Medical Center
Central Valley General Hospital
Citrus Valley Health Partners
Coalinga Regional Medical Center
Colusa Regional Medical Center
Community Hospital of the Monterey Peninsula
Community Hospital Long Beach
Cottage Health System
Delano Regional Medical Center
Dignity Health California Hospital Medical Center in
Los Angeles
Dignity Health Community Hospital of San Bernadino
Dignity Health Dominican Hospital
Dignity Health Glendale Memorial Hospital and Health
Center
Dignity Health St. Bernardine Medical Center
Dignity Health St. Mary Medical Center, Long Beach
Feather River Hospital
French Hospital Medical Center
George L. Mee Memorial Hospital
Glendale Adventist Medical Center
Good Samaritan Hospital
Hazel Hawkins Memorial Hospital
Hemet Valley Medical Center
Henry Mayo Newhall Hospital
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John Muir Health
Kern Valley District Hospital
Loma Linda University Health
Long Beach Memorial
Mad River Community Hospital
Marian Regional Medical Center
Menifee Valley Medical Center
Mercy General Hospital
Mercy Hospitals
Mercy Hospital of Folsom
Mercy Medical Center
Mercy Medical Center Mt. Shasta
Methodist Hospital of Sacramento
Miller Children's and Women's Hospital Long Beach
Natividad Medical Center
NorthBay Healthcare
Northern Inyo Hospital
Northridge Hospital Medical Center
Palmdale Regional Medical Center
Palomar Health
Parkview Community Hospital Medical Center
Pomona Valley Hospital Medical Center
Providence Health and Services
Providence Little Company of Mary Medical Center San
Pedro
Ridgecrest Regional Hospital
Riverside Community Hospital
Saddleback Memorial Medical Center
Salinas Valley Memorial Healthcare System
San Gabriel Valley Medical Center
San Gorgonio Memorial Hospital
Sequoia Hospital
Sharp HealthCare
Shasta Regional Medical Center
Sierra Nevada Memorial Hospital
Sierra View Local Healthcare District
Simi Valley Hospital
Sonoma Valley Hospital
Sonora Regional Medical Center
Southern Mono Healthcare District dba Mammoth Hospital
Southwest Healthcare System-Inland Valley Medical
Center
Southwest Healthcare System-Rancho Springs Medical
Center
Stanford Health Care
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St. John's Pleasant Valley Hospital
St. John's Regional Medical Center
St. Joseph's Behavioral Health Center
St. Joseph's Medical Center
Sutter Delta Medical Center
Sutter Health
Temecula Valley Hospital
Ukiah Valley Medical Center
Watsonville Community Hospital
White Memorial Medical Center
One individual
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